Beacon Trust Co., a subsidiary of Provident Bank, plans to acquire MDE Group, an independent advisor shop.
After the deal is complete, which is expected in the second quarter pending regulatory approval, Morristown, N.J.-based Beacon will have about $2.5 billion in assets under management. Parent company Provident has about $8.4 billion in assets.
Beacon Trust has been on a growth trajectory in recent years, quadrupling in size from $300 million in AUM in just six years, says President James Nesci. The firm looks for opportunities via acquisition as well as organic growth. Acquiring new market share is the more expensive method of the two, at least in the short-term, Nesci says. But it also has a higher success rate since there is a track record to analyze first, as opposed to hiring new advisors. New advisors can take up to two years to find their stride, and in that time the return-on-investment for the bank is very uncertain. (He guessed that 50% of new hires become successful.)
The cultural fit is another major issue when a bank buys an RIA, he says, since the two business models feel very different. Compensation is different, as well as simpler day-to-day aspects, such as work space layouts and work hours. To meet these challenges, Nesci says that Beacon works to keep the advisory business separate from the bank. The advisors are not housed in the bank branches, but instead work in a separate local office.
Beacon's 50 or so advisors often schedule visits to the branches, as well as other states, particularly Florida, where the firm has a number of clients. The bank's physical presence is only in New Jersey and New York.
The deal will increase earnings growth in addition to market share, the company said in the press release on the deal. The acquisition price was not disclosed.