When the going gets tough, the tough go shopping, really. Alexandra Lebenthal, for instance, bought back from Merrill Lynch the rights to her iconic family-owned-company name. Then she built a new firm in the worst business climate since the Great Depression.
Now president and CEO of Lebenthal Holdings, on Park Avenue in New York City, she is bringing fresh ideas to RIAs and entrepreneurial financial advisors: the firm’s nine-month-old Lebenthal Wealth Advisors division offers an open platform to a broad range of products, high payouts and partner participation.
A Princeton grad, Lebenthal, 50, has led her new enterprise to become the nation’s No. 1 woman-owned firm in corporate debt and equity underwriting; Crain’s New York Business named it the top woman-owned financial services company in New York in 2011.
At 31, Lebenthal took the reins of the family’s municipal bond brokerage business from her father, Jim Lebenthal, of “Built by Bonds” TV and radio ad fame. The company was founded as municipal bond specialists by Alexandra’s grandparents, Sayra and Louis Lebenthal, in 1925.
Alexandra joined in a sales capacity in 1988 after working in the muni bond department of Kidder Peabody. By 1995, she was helming Lebenthal.
The firm’s new and expanded incarnation focuses on personal wealth management, high-net-worth family offices, and corporate debt and equity underwriting.
Wealth Advisors caters to clients with $2 million to $20 million to invest. Leading the division are Jeffrey Lane, formerly of Bear Stearns Asset Management, Neuberger Berman, Lehman Brothers and Smith Barney; and Frank Campanale, previously of First Allied Wealth Management, Smith Barney and E.F. Hutton.
Andrew Grillo, earlier at Smith Barney too, is Wealth Advisors' president. James B. Lebenthal, who started at Goldman Sachs and joined sister Alexandra in 2007, is CIO and market strategist.
Alexandra, a former treasurer of the Securities Industry and Financial Markets Association (SIFMA), and her father co-founded the new firm in 2006. Five years before, the famed family company had been sold to AdVest, which, in 2005, was acquired by Merrill Lynch. At that juncture, the Lebenthals opted to exit.
ThinkAdvisor recently chatted with Alexandra, the mother of three, about launching a business in stormy weather, what makes Wealth Advisors unique and the art of recruiting female advisors. She declined, however, to discuss her work with the secret, elite Wall Street society, Kappa Beta Phi, because, well, that’s a secret.
ThinkAdvisor: On one hand, you’re a New York society woman, on the boards of cultural institutions and attending galas in super-fancy designer gowns; on the other, you’re a high-profile working woman running a business. That’s a rare combo!
Alexandra Lebenthal: Yes, it is; and whenever the press refers to me as a socialite, I want to scream because, obviously, that’s not who I am at all. But I do enjoy going out. Dressing up and looking pretty takes away a lot of the stress of dealing with money and investments.
Why did you start Wealth Advisors?
So many financial advisors at big firms are utterly miserable, but they don’t want to take a big check to go to another firm because they know they’re just going to another miserable situation. They’re looking for a place where they can have full, open architecture and be a partner.
We have a much higher payout than other firms. It averages about 60% as opposed to 40%, or what advisors are earning now.
What do you have against paying “a big check” upfront?
It doesn’t make economic sense for a company to do that. But the big firms have to; otherwise, they’ll lose more people than they’ll get. It’s this circle they all go in.
What makes Wealth Advisors unique compared with other firms?
The open architecture. There’s a huge range of choices, with opportunities to choose from any number of different managers and platforms to pick what’s right for clients. At the big firms, there’s a lot of talk about open architecture, but it’s sort of a pre-fab house. Also, our brand is very well known but not one that you’ll see on Page C1 of the Wall Street Journal [as being involved in] scandals. It’s a pristine name and almost 90 years old.
What’s your business plan for Wealth Advisors?
Over the next five years, the goal is to get to $25 billion in AUM. That’s modeled on about 100 individual brokers, though some [with us now] have partners.
You already had a wealth management business. Why start Wealth Advisors?
It was small. I consider that to be the seed that Wealth Advisors will grow from. Those are our in-house portfolio managers, and we have added to them by bringing in the international equity team of Heckman Global Advisors.
You’re targeting what you call “the lost affluent.” Who are these folks?
A lot of people want somebody to handle everything with a dollar sign in front of it – not just investments but bill paying, tax work, health insurance [admin]. That exists if you have $100 million but not $2 million to $20 million. So I’ve described these people as “lost” because there wasn’t a place for them before.
Is your father, who is now chairman emeritus, still active in the company?
He’s 86 and comes in every day. He’s active in a number of different things – not operationally involved but still a municipal bond cheerleader and an important part of the fabric of the company.
Does he give you business advice?
Once in a while. I don’t usually ask him. This morning he told me I was amazing, which made me really happy. But of course, in my typical way, I said, “No, I’m not” and walked out the door.
Yours was an historic family company; yet you sold it. Why?
There were a number of reasons. Family shareholders were looking for an exit. It was an opportunity that was hard to pass up. Whether or not it was the right decision, who knows. But we’re here now.
You had to comply with a yearlong non-compete. What did you do between 2005 and 2006?
I went to Bergdorf Goodman every day! I played with my puppy. I enjoyed myself. But I always knew I’d start a new company. I definitely got restless.
You were determined to have the rights to the Lebenthal name returned to you. Was it an ordeal?
Stan O’Neal [former Merrill CEO-chairman] told me “No”; but I didn’t give up. I didn’t like the fact that I couldn’t use my last name and knew that Merrill Lynch wasn’t making use of it anyway.
You paid only a token $1,000 for the rights. But launching a new firm is hard, to say the least. Describe that experience.
I was somewhat naïve in thinking that it would be easy and a straight path upward. But it’s been just about the most difficult thing anyone could imagine. You’ve got to build revenues and manage expenses. You’ve got to have enough capital when you’re in the brokerage business. And as a new company, you’re untested.
Was starting the Wealth Advisors division just as challenging?
That’s actually been really, really fun. I feel that my perseverance over the previous seven years led to where we are now. We’ve got great prospects. Another RIA and two financial advisors will be joining us in the next month or so, and we’re excited.
You’re making a big effort to attract women advisors. What’s your ideal female recruit?
We’re looking for women that are already in the business and have about $150 million in AUM.
Are they difficult to find?
Not entirely. Even though the percentage is small, there are 89,000 female financial advisors. And there are [lists] like Barron’s Top 100 Women Financial Advisors. So we know who and where they are.
Though many firms bemoan the lack of female advisors, it seems they’re only paying lip service to hiring more. But that’s not you.
Obviously, since our firm is led by a woman, there’s a great opportunity to attract female advisors. There still aren’t enough women in the business. They’re so good when it comes to dealing with investors and their money.
Why don’t more women want to be advisors?
There aren’t a lot of very well known role models to inspire girls to think, while growing up, “Hey, this is the job I want to do and can do.” Another reason is that the atmosphere in many branches is still very male-dominated. That’s often not the type of environment that a woman wants to be in, feels comfortable in or can grow in. And, too, so many women have been brainwashed into thinking they aren’t good at numbers that they feel they don’t belong in a business dealing with numbers.
There aren’t enough people at senior management level reaching out to women who are in the business to help, sponsor or encourage them to stay even if they get pregnant or may think of leaving for other reasons.
Does recruiting women require a special strategy versus recruiting male advisors?
It’s a different process. It takes longer to recruit women. There has to be a softer approach. Every major firm is upset that they don’t have more women, but it’s not only up to the person who runs wealth management or the CEO. It’s got to go down to the branch level, where the manager is actually recruiting.
What methods are you using?
We’ve had a lot of calls from all the press we’re getting. We use [outside recruiters]. And we know a lot of people.
You’ve described your broker grandmother, Sayre -- who retired when she was 93 -- as tough. Are you?
No, though once in a while, somebody will say, “You know, you’re very intimidating.” I always laugh because I don’t think I am at all. My grandmother had a rough edge to her, like Maggie Smith’s character on [TV’s] “Downton Abbey.” She said whatever was on her mind. I have a softer edge. I rarely get angry. When I do, it’s not pretty -- but it’s rare.
What’s your key strength?
Perseverance. I started this business from scratch during a not-great economic time. But I’ve always taken the tack that you have to keep going forward. If I hear the word “No,” I just keep going until I get to “Yes.” And I usually do.
How did the financial crisis affect your company?
Those days when the markets were down 500 or 600 points were pretty terrifying. We were a small company, so access to capital was tough. But we held on. I felt like I had set out in a small sailboat and all of a sudden saw ocean liners sinking next to me: “Oh, God! Here I am in my little boat! Look what’s happening to those gigantic boats!”
You felt that you were in jeopardy?
Yes. That was [right] after the Lehman and AIG [debacles]. My husband [Jay Diamond] and I were feeling numb with what was happening and the implications to the economy.
That would not be a good thing. I wouldn’t want to work with my husband. I love him dearly, but it just wouldn’t work.
You wrote a novel, “Recessionistas” (Grand Central-2010) and sold the TV rights to Sony. Now you’re working on a how-to book for women investors. Will it discuss investing approaches specifically for women?
It’s the same information [as for men]. But women want to be educated before they talk to a financial advisor. They want to feel like they’ve got some armor when they go to meet with them and can say, “I’ve read this, and I know everything.”
In college, you aspired to be an actress, then got interested in Wall Street. Do you ever get that thespian yen?
When it came right down to it, I wasn’t that good an actress. But if my novel gets made into a TV series, I’d love to have a cameo!
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