Branding — some say it's all about branding in this new economic world where style can mean more than substance and marketing is all that matters.
So when you look at Peapack-Gladstone Bank — a venerable institution in the heart of Somerset County that has grown tremendously in people, product and profit since Doug Kennedy took over as chief executive in October of 2012 — you could be clever and say the bank is an overnight sensation that was 93 years in the making.
But that's not what's going on here — not the reason why the bank reported total assets of $2.40 billion as of June 30, up from approximately $1.58 billion when Kennedy arrived.
It's about finding a market no one else really is in (individuals with $1 million to $10 million in investable assets) and servicing them in a way no one else does (with a private banker).
“We have this macroeconomic trend where the number of millionaires is going to double in the next 7-8 years,” Kennedy said. “Who is going to serve them? We offer an alternative to what the larger institutions won't do and the community banks can't do.”
Peapack-Gladstone offers a brand that is so much more than a slogan or a logo: It's their way of doing business.
“We are truly New Jersey's private bank, and have been for a number of years. I don't know that we've marketed it. We're basically positioning this institution to capture that.”
An interesting concept to say the least. That's why NJBIZ Editor Tom Bergeron sat down with Kennedy and John Babcock, the bank's president of wealth management.
[Doug Kennedy is the president and CEO of Peapack-Gladstone Bank; he is responsible for leading the company's wealth, lending and deposit solutions and directing the bank's overall strategic vision.]
[John Babcock is a senior executive vice president of Peapack-Gladstone Bank and president of its wealth management business. He is responsible for all of the company's wealth management activities.]
NJBIZ: So let's start with the idea that you're doing something new — something that has helped you produce such great results in your first seven quarters.
Doug Kennedy: If you go through and look at what we're doing, we're not doing anything different, as crazy as it may sound. We're just leveraging a brand that always was there. We were already in the commercial lending business, but not in a big way. We were in the commercial real estate lending business, but not in a big way. We were in the wealth business, but not in a big way.
NJBIZ: That being said, we've heard about the five-year plan when you arrived — how the 17 verticals you spelled out in a six-page memo were extrapolated into a 200-page document that has been your roadmap. How you truly identified an untapped market. What is the vision — how are you getting into it “in a big way?”
DK: On the individual side it's $1 to 10 million in investable assets. On the business side, it's $10 to 100 million in revenue for privately owned businesses. This is a space we can go after and be very unique. The small banks, our peer banks, don't have the wealth business that's been built the last 50 years so they don't have the people the products and the reputation. At bigger banks, you better have $10 to 15 million in assets or you're going to get the JV team, a model portfolio and an 800 number.
If you look at the depth of the landscape around the region, there's really nobody that's stepping into that space. That's why we like the $1 to 10 million range, where we can custom-manage wealth, person-to-person, and give our clients a real relationship with a private banker.
NJBIZ: “Custom-manage wealth with a private banker” — that's a great phrase. But to the business owner who has accumulated that wealth it just sounds like something on a website, another person who is there to take a cut of their money, no different than a money manager, investor, adviser or any other name you want to use. How are you different?
John Babcock: When we talk about wealth, it's not just liquid wealth, it's the wealth you've created in your business or outside your business for you and your family and your grandchildren and the charities you'd like to support. We're all centered around that conversation about wealth. We're small enough where we don't have multiple layers of management hierarchy.
We appreciate the client's needs. One to 10 million … the lower end (he asks rhetorically — and incredulously)? Here's a person who spends their whole life building a business, supporting their family and they have $3 (to) 4 million and it's their life's worth. To us it's important and it's a lot of money. And it takes sophisticated planning to get through all of the issues, and at the large institutions you're not going to get that team of people who can help you navigate them.
We're about providing ideas, advice and consultation to people who are navigating their wealth — how do I keep it, how do I transfer it to the next generation.
NJBIZ: It all makes sense. And $1 to 10 million sounds like a lot of money to us. Why hasn't anyone served this space before?
JB: It wasn't always this way. Make no mistake — the Midlantics and the UJBs, and the Summits used to, but all those banks were acquired and now the new account manager is in Charlotte or Boston or somewhere else. People were looking for local people, looking for a one-on-one personal relationship.
NJBIZ: For much of the bank's history it has been based on the geographic area it serves, Somerset, Hunterdon and Morris counties — that's why it was founded: to give wealthy people in those areas a convenient place to bank. And you're well known there, but does the Peapack-Gladstone name resonate outside that area?
DK: The answer is mixed. Some have heard of us outside our area, many have not. But our approach is not a retail approach, it's a wholesale approach. We're calling on people. And the truth is, if you know the person on the other side of the table — or if you've known the accountant or the lawyer that they've known for years — you're credible. The fact we've been the same institution since 1921, the fact that we've got fourth generations of families that we're managing wealth for, the fact that their current bank is not servicing them — that's our opportunity.
NJBIZ: Well that explains your nearly 100 hires with a net headcount gain of more than 50 positions. Is the next step a massive upgrade in branches (you currently have only 23) to push into these markets?
DK: No. The economics of that business model are significant. Rather than building out five branches in Bergen County and then slugging it out the next three to five years, we'll go into a building and create a boutique-looking space for $200,000 rent and then do $100 million in deposits in less than 12 months, as we did there. That works better than building five branches at 2 million a pop and then hiring all the people you need to work in them. For the longest period of time, geography has been a differentiator. Now there has been consolidation and the world has moved so quickly on the technology side, just differentiating yourself on where you sit physically, probably, is not going to do it anymore.
NJBIZ: We get the technology, we've heard the commercials: You can pay a bill while eating lunch. That makes sense for the little stuff. But you're dealing with life savings — the wealth clients are depending on for their future generations? Wouldn't those individuals — especially older individuals — want more branch time?
JB: Studies show 56 percent of high-net individuals say their primary way of communication with their wealth advisers is through technology. And for people 40 and under, it's 77 percent. You don't need brick and mortar. We have clients in Wyoming, in Florida. So you don't need an office to serve clients.
DK: Technology has become an enabler, allowing us to expand geographically and have products a bank our size wouldn't historically have.
NJBIZ: So are you worried about other banks your size copying your model, or should the big banks — the ones with the branches on every corner and commercials on every medium — be worried about you?
DK: The barriers to entry are significant. The smaller banks are not going to be able to acquire the talent or the business platform in wealth and commercial to be able to replicate it. To build the team that we've put together on the commercial side — these are not journeymen or junior officers. The people you're finding here were the top performers at larger institutions. This is like the New York Yankees. On the wealth side, it's the same thing. These are real-deal people from larger institutions. We know what they're offering. The opportunity is to go after the low end of these larger institutions.
We're not going to put them out of business; we're not going to take them down. The market is so deep that even a fractional percentage will enable our company to grow at 10 to 15 percent a year. And they're not going to change their business model because Peapack-Gladstone has decided to compete aggressively at that lower end. We end up being a brand of one.
NJBIZ: So you're roughly 18 months into a five-year plan. Is it too soon to judge its success?
DK: I think we're now at a point between pipelines and business booked that we can declare victory and say that it's no longer an idea, but it's actually got traction in the market. Where we are now is basically execution. And there's a lot of momentum. Based on 36 years of doing this, it's about as robust a pipeline of new business as you could possibly get. If you look at every product, there's probably the potential of new business approaching a billion dollars.
NJBIZ: Sounds like you want to make the Peapack-Gladstone brand known far outside your traditional area?
JB: The team we've built is too big, too fast and too good to just compete in the geographies where we've normally competed. So we will continue to expand our reach, whether it's with physical presence or where we're covering (without a branch). We think we can achieve profitable growth in other markets.
DK: We're going to take what we've learned in our little market and take our mojo and go into Greenwich, Conn., go into Westchester, Manhattan, Rumson, Princeton and Bergen County and start working our brand.
NJBIZ: There's that brand word again. Sounds like it defines who you are.
DK: I think the concept of being New Jersey's private bank gives us a position that's very unique.
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