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Financial Planning > College Planning

The American College Talking To Buyers For Its Campus

By Warren S. Hersch

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The American College is in active discussions with prospective buyers for its 35-acre Bryn Mawr, Pa., campus.

The college intends to use capital generated by a transaction to pursue key objectives, including a revamping of its course curriculum, the hiring of new faculty and online content experts, and the promotion of its insurance and financial services designations through an aggressive marketing campaign.

“We want to focus more on education and less on the burdens of being a landlord,” says American College President and CEO Larry Barton. “We don’t need to own a campus to do that, especially since less than 1% of our students study on-site. Our mission is to be a citadel where the financial services industry can turn to for teaching and learning.”

Efforts to sell the campus have not passed without criticism. Chief among the accusations, which first surfaced in a series of Probe newsletter articles in December and January, is that the college–in particular Barton and the board of trustees–jeopardized the institution’s fiscal health through financial mismanagement, thus necessitating the sale.

The decision to explore a sale, made last December, would encompass six buildings located on the campus, including the 50-room Gregg Conference Center that provides lodging for attendees. As part of its agreement with the buyer, the college intends to lease back one or two buildings, including the MDRT Foundation Hall, an office building that houses faculty, editorial and administrative offices.

The college is in discussions with nearly 30 prospective buyers, including educational, health care and for-profit entities, says Barton. He adds the college has no preference as to a buyer; while a university “would be ideal,” co-locating with another organization would also yield synergies. He observes, for example, that a health care consortium might help conduct or support gerontology studies of interest to faculty in the college’s chartered advisor for senior living (CASL) program.

“Monetizing” the property was the best of three options the college had considered, says Barton. The other two–merging with another college and transitioning from a non-for-profit to for-profit institution–had less appeal.

Barton cannot say what price the college may secure from the sale or the savings resulting from a lease. He notes only that overhead costs on the property exceed “several million dollars” per year.

CB Richard Ellis, an El Segundo, Calif.-based real estate services firm, is representing the college in the marketing effort. The college earlier tapped the management consulting firm McKinsey & Co., New York, to assess and validate objectives that a sale would enable.

Chief among these is renewal of the college’s educational designations, including LUTCF, CLU, ChFC, FSS and others. While the college updates these programs annually to reflect current tax laws, Barton says that “it has been years” since the college last revised its curriculum.

A second objective is to hire new staff, including curriculum designers and digital technology experts who will deliver educational content online, plus “several dozen” faculty members who will provide in-classroom instruction at sites nationwide. Barton says that some of the educational programs, in particular the new financial services specialist designation, have been hobbled in recent months owing to a lack of qualified professionals willing to deliver the instruction on a volunteer basis.

The college additionally intends to promote its educational designations through an enhanced marketing campaign. Barton observes that the marketplace’s 43,000 chartered financial consultants are almost as numerous as the 48,000 practicing certified financial planners. But because CFP stakeholders have promoted the CFP marks more aggressively, the designation has enjoyed wider industry recognition than ChFC, Barton says.

Critics of ChFC question whether the designation is also at a disadvantage relative to CFP because, in the case of the former, The American College is both the accrediting institution and sole content provider. As regards CFP, market-watchers note, these functions are divided between an independent CFP Board of Standards and, on the content side, the College for Financial Planning and other institutions of higher learning.

Barton rejects any suggestion that ChFC is handicapped because of the college’s dual role.

“We are the largest provider of CFP education in the country,” he says. “Of the approximately 220 colleges and universities that deliver the curriculum, we have a 29% market share–virtually a third. Also, whereas in years past people would progress in their coursework from LUTCF to CLU and ChFC, now many of our students start with CFP and proceed to our other designations. So, our large CFP market share is, indirectly, helping us boost interest in all our designations, including ChFC.”

The competitive threat facing the college, and the industry at large, is the proliferation of educational designations generally, Barton adds. He claims that some of the new designations offer less than rigorous academic standards. He believes the financial services community should organize a summit to address the issue.

Barton says the college is aiming to conclude a sale in 2006, then implement its objectives within three to five months following a transaction. He adds the college cannot attain its goals expeditiously without the cash infusion resulting from a buyout.

The Probe authors, most of whom contributed anonymously but included William Rabel, a retired senior vice president of LOMA’s education and training division and former dean of The American College’s Huebner School of CLU studies, specifically charge the college spent too much money on a new information technology system when, they assert, a lower cost upgrade of legacy systems would have sufficed.

To pay for the new IT solution, the college borrowed $10 million from an area bank via a bond issue the campus used as collateral for the loan. The college remains in breach of two of the loan’s covenants.

The college’s deteriorating financial position, the Probe contributors allege, additionally is reflected in the institution’s decision to sell collections of Steuben glass and donated artwork; employee terminations, including one that led to a “substantial” out-of-court settlement stemming from a lawsuit; and the freezing of a defined benefit plan for remaining staffers.

The contributors charge, too, that the college over-promoted new advisor designations at the expense of others, resulting in declining student enrollment, and is to be faulted for fiscal deficits that reportedly ranged from $4.5 million to $7 million for the three years ending in 2003, plus fund balances that declined from $10.7 million to a negative $226,563 over the same period.

Barton does not dispute the numbers, but he says the college already is returning to the black, thanks in part to the staff reductions (mainly service personnel), which Barton acknowledges were “painful,” as well as to the pension suspension and phase-out of medical subsidies for retirees in 2004 and 2005, respectively.

Bolstering the institution’s financial position is a $28 million endowment, plus an estimated $24 million in life insurance death benefit proceeds the college expects to receive from alumni-owned policies naming the college as a beneficiary.

Barton says the $10 million bond issue, of which the college only has used $7 million, was necessary because the previous IT systems–17 in all–did not interoperate. Because of their advanced age, they also were no longer serviceable. The new system, a PeopleSoft solution, eliminates interoperability issues by consolidating all functionality onto a single platform.

Implementation of the PeopleSoft software, says Barton, is “85% complete.” He adds that the loan covenant breaches notwithstanding, the college remains on “perfectly good terms” with the bank.

Barton attributes the fall in student enrollment since 1995 to a decline in the number of career agents industrywide, and to mergers and acquisitions. He says his goal is to boost enrollment by 10% over the next 18 months.

Barton notes that renovation of a foyer in the Gregg Conference Center and thefts on campus forced the sale of the Steuben glassware and artwork, but only those art pieces donated to the college by the MONY Corporation. Accusations that the college intends to sell other artwork and papers of the founder, Solomon Huebner, are false, he says, adding that, as a non-for-profit educational institution, the college cannot protect highly valuable collections.

“We’re not the Guggenheim,” he says. “We’re a very open facility. We don’t have the state-of-art security systems of many museums.”

Barton rejects one other charge of critics: that his continuing work as a crisis prevention and management consultant has diverted him from the higher priority task of advancing the college’s mission. He says he fully disclosed his consulting practice to the trustees prior to joining the college and that, as an academic, it’s important that he continue “scholarly pursuits.”

Charges aside, Barton notes that college stakeholders–alumni, society chapters, trustees and others–fully back the institution’s current direction.

“When people hear the business case [for selling the campus] as I’ve explained it, they get it and support it,” he says. “They understand that the college is making the right and smart choices.”

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