Peoples Security Bank building up investment services division

Jan. 23--Peoples Security Bank & Trust purchased Gilmartin Associates in Scranton as part of a strategy to break into retirement plan administration and beef up its investment services division.

Last year the Scranton-based bank brought on Brad Grubb to head its Wealth Management Group and grow the division. The acquisition of Gilmartin would be the first of several, he said, noting he has evaluated more than a dozen offers.

"We will do it at the right price and with the right partner," Mr. Grubb said.

The move by Peoples signals a continued push into the competitive area of wealth management where independent practices vie alongside banks and national financial institutions for investment dollars. With the addition of assets under Gilmartin's management, Peoples administers about $700 million of investments on behalf of clients. Gilmartin had approximately $120 million in assets at the time of the acquisition, about 80 percent of that employer 401(k)s, Mr. Grubb said.

"Our commercial client base has grown, from Binghamton to the Lehigh Valley," he said. "We want to build out the largest locally based third-party administration firm."

The other goal of the effort is to increase the bank's non-interest sensitivity fee income, Mr. Grubb said. To put it another way, Peoples wanted income that's not directly dependent on actions of the Federal Reserve or interest rate margins. Years of historically low-interest rates have crimped margins for all lenders and forced them to look beyond razor-thin margins of lending.

Edward J. Gilmartin Sr., who is 70, will stay on with Peoples as managing director of retirement plan services for at least three years and "hopefully for 30," Mr. Grubb said. That's an important part of the transition, he said, since financial services rely on personal relationships. Mr. Grubb said an institution is capable of engendering the same trust and confidence that an individual might.

"We wouldn't do an acquisition without a principal able to stay on at least one year and have skin in the game," he said.

The bank's leap into retirement investments is a sound, if uncommon, strategy, said Wilson Smith, a banking analyst with New Paoli, Pa.-based Burlington Consulting Corp. To be successful, the bank will have to pay the right price for the financial adviser's business and back its retirement plans with solid marketing, he said.

"I don't know that you can go up against Merrill Lynch," he said. "But a well thought-of banking organization with good people and a track record may be an attractive option for a business looking for a plan administrator."

Mr. Grubb will continue to look for acquisition opportunities, noting that the average age of independent financial advisors is between 58 and 60, and most of them have not developed an exit plan for themselves or a succession plan for their business or clients' investments.

"They advise everyone else about planning for future and succession but often don't consider their own," Mr. Grubb said. "It's like the cobbler's children not having shoes."

Peoples will be working with Boston-based LPL Financial, one of the largest independent broker dealer firms in the nation, which will provide the technological platform to handle investments and access to markets.

The bank's acquisition of Gilmartin Associates will have no effect on Gilmartin Insurance Agency, which remains at 1440 N. Washington Ave., Scranton.

Contact the writer: [email protected]

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