Alexandra Lebenthal is as excited as she is frustrated: "This is an entrepreneurial oxymoron!" she exclaims. "The Lebenthal name in a startup company! I feel this is something like my grandparents must have felt in 1925!"
That was the year Louis and Sayra Lebenthal founded the municipal bond business that bore the family name until 2005. And ironically, the new wealth management and municipal bond firm recently founded by Ms. Lebenthal and her father, James, will bear only their first names as a result of mergers and acquisitions earlier in the decade that landed the name Lebenthal in the possession of Merrill Lynch--which has chosen not to use it at all. Alexandra & James is the broker/dealer unit of Israel Discount Bank of New York.
"But [Lebenthal] is a name people know and trust, no matter whether you use it or not," Lebenthal adds, pointing to a story in that day's Wall Street Journal about her and other professionals who are no longer permitted to use their names in business. "Parts of the story are sad, frustrating. But there's also a silver lining," she muses, "-- an opportunity to start anew."
At this particular moment in Lebenthal's life, the silver lining is Family Wealth Management, the multi-family office component of Alexandra & James that launched, quietly, last fall. Lebenthal, 43, is president and CEO of the firm; her longtime friend Michelle Smith, 42, is co-founder and director of Family Wealth Management. Two years ago, Lebenthal and Smith--who is a CFP and a CDFA (Certified Divorce Financial Analyst)--made a wish list for a small, high-quality financial advisory firm that, in Smith's words, would "fill a void in the interaction between advisors and clients."
"We're talking about clients with investable assets of between $2 million and $30 million--$20 million to $30 million on the high end. There's a void in that sector; I don't care if [the advisor is] Bessemer or UBS," says Smith who has been a retail advisor at PaineWebber, Merrill Lynch and Wachovia Securities over the past 20 years.
"A lot of different people want to do it, to truly deliver the services these clients need like reminding them when to pay state income tax or the insurance premiums on their trusts. The needs of these clients are different," she adds, "but the firms are all alike. When you lift up the hood, they all have the same engine!"
"A lot of this comes from my own personal to-do list," says Lebenthal. "That came about in the 10 months of my non-compete. Those 10 months of not working made me realize there are a lot of people like me--not just women," she adds," but busy men, too."
In addition to offering "a step-up in truly open architecture," Family Wealth Management is designed to respond quickly and easily to the high-net-worth marketplace, to implement needs as simple as bill paying or as tedious as getting back late fees on bounced checks--and medical claims: "Millions of dollars are lost through unfilled medical claims," Lebenthal adds. "We want to take the to-do list off your desk!"
"Many people who come to an advisor are in major transitions," says Smith. "They may be selling a business, getting a divorce. That's when they take a hard look at the future, when they take stock."
There is no question, the women agree, that a big component of the company will be divorce financial planning. It is Smith's specialty, and matrimonial lawyers often call on her to serve as an expert witness. And, by default, she points out, there is a large female component to divorce. "Divorced women lose access to their husbands' advisors. So do widows," she adds, "--though not as much if the advisor makes a real effort to keep them."
In fact, client retention is one aspect of the business where FWM is determined to excel.
"It's pretty easy to get clients in our business, but it's hard to keep them," says Lebenthal. "Eighteen months later, service is not about how much money you made or lost them, but whether you returned their calls, whether clients feel they still matter."
Smith cites a study naming "17" as the number of times per year HNW clients expect to hear from their financial advisors--contacts obviously not limited to financial advice. "But the question is, how do you want to be contacted, how do you want to be communicated with? We want to be the ones who know you exist!" And she believes that, "We are uniquely situated for this. It's so important to have a real service process. We're also very aware of our own customer service experience," she adds. "We actually hired a vendor we were dealing with because we felt she was so good at it!"
Customer service, she emphasizes, is not about getting a 10 percent return. "Investing is dealing in intangibles," says Smith, who joined her mother in the financial planning business. "When things go bad, you pick up the phone and commiserate. We can't guarantee past performance as an indicator of the future," she laughs, "but we can guarantee putting our money where our mouth is!"
Over the next five years, FWM expects to hire from 75 to 100 advisors to create a boutique firm with a broad, deep advisor pool. "This was my dream company five years ago," Lebenthal says, referring to roughly the point when the MONY Group acquired the family firm with the understanding that she would build a separate advisory group within their Advest brokerage unit. But that was then (before the French firm AXA acquired MONY in 2004 and, a year later, sold it to Merrill Lynch) and this is now.
Says Lebenthal: "We haven't started marketing yet. We're still in the building stage. And we're not actively recruiting; we're kicking tires, looking for an entrepreneur with the right mindset, someone who is not just a financial advisor on their business card, but someone who actually wants to be a financial advisor. We need to want you," she adds. "We want to enjoy the people we work with." At the moment, the business has an in-house counsel who is a CPA as well as a JD, another CPA and a bookkeeper.
Alexandra & James will also tap the Lebenthal roots in municipal bonds. "We don't want to leave that component behind and besides, it's such a core of high-net-worth portfolios," Lebenthal says. In fact, she plans to take the muni-bond business into the 21st century. "We're going to be building a municipal bond asset management component. In fact," she adds, "we've been looking at the ETF market at this time." The firm has already hired a few industry people and several professionals--including Lebenthal's former head muni-bond trader who has "trading floor" space on the premises.
Lebenthal, who became president and CEO of the family firm in 1995 at the age of 31, envisions a more global focus, which would conceivably eliminate much of the tax advantage associated with municipal bonds. "It's for the new $20 million customer who may have more interest in an alternative investment," she says. "Still, you're also looking at the safety of return of principal. So while it carries more risk than the old mom and pop muni-bond market, it's a more conservative alternative in the alternative market."
The concept would still be a shock to her grandparents, who dealt in municipal bonds because they were "tax-free, safe and didn't fluctuate," she admits. And her ideas are also generating some debate between herself and her father, James, the company's creative director. While there's no question that her pioneering grandmother Sayra was a significant role model, Alexandra Lebenthal cites her father as "a huge component in my career, the person who really encouraged me.
"And he has the title 'creative director,' for good reason," she adds. "That's just what he is."
Nancy Mandell (firstname.lastname@example.org) is managing editor of Wealth Manager.