Newborn Lebenthal RIA triples its assets but expects more to come

The investment bank's wealth manager wants $5 billion in AUM by year's end

Mar 27, 2014 @ 1:01 pm

By Trevor Hunnicutt

Lebenthal Holdings stands to triple the size of its new wealth management unit with the acquisition of the business of two Morgan Stanley brokers who manage $1.2 billion in assets. But that's just the beginning, if the CEO has his way.

If a newly hired team of New York-based advisers known as the Gallaway Stern Group brings all its client assets to the unit, Lebenthal Wealth Advisors, the all-equity deal will nearly triple the more than $600 million already under its umbrella, and that's just the beginning, according to Frank L. Campanale, chairman and chief executive of Lebenthal's wealth unit.

By the end of 2014, the firm expects to have $5 billion in assets under management, an estimate Mr. Campanale terms “pretty conservative.”

The two brokers will be joined by three client relationship managers, according to Lebenthal. Christine Jockle, a Morgan Stanley spokeswoman, confirmed the departure of brokers Carrie S. Gallaway and Andrew L. Stern and said the team's senior member and director, John Sorensen, along with a number of supporting staff members, remain with the wirehouse.

Lebenthal Wealth Advisors includes financial services industry veterans such as Mr. Campanale, former president and chief executive of Smith Barney's Consulting Group, the now-defunct brokerage's investment management consulting business; Andrew J. Grillo, president and a former regional director at Smith Barney; and Jeffrey B. Lane, chairman of the parent company, who formerly ran Neuberger Berman Inc., the asset management unit of The Bear Stearns Cos. Inc., and was a vice chairman of Lehman Brothers Holdings Inc.

The parent company, Lebenthal Holdings, founded in 1925, is a boutique investment bank specializing in debt and equity capital markets.

“It's not a shell to pass through commissions … we're a true capital markets firm,” Mr. Grillo said.

He said Lebenthal expects to draw a third of its new advisers from wirehouses, with the remainder coming from other independent firms.

“We're not in the business of competing with the wirehouses, paying 300% of trailing 12 months; it's just irresponsible,” Mr. Campanale said. And he rejected the notion that his firm might compete with firms such as Dynasty Financial Partners. “We're more like a really good regional firm like a Baird,” he said, referring to Robert W. Baird & Co. Inc.

But Lebenthal has designs on greatness if its office is any hint. It has signed a lease to move into 42,000 square feet of space in the iconic Helmsley Building in Midtown Manhattan next month, Mr. Campanale said. (The building's owner, Monday Properties, declined to comment.)

The firm says it's offering clients concierge-style family office services, trust services, and in-house asset management, built on the acquisition last month of equity research firm Heckman Global Advisors Inc. It works with custodians Pershing and RBC Capital Markets, as well as third-party providers Envestnet Asset Management Inc. and Fortigent.

“They are looking to target not just highly successful breakaway groups, but independent firms that are looking to leverage the brand of a firm that's been around for a while,” said third-party recruiter Nicholas Gudz of StarPoint Consulting Group. “It goes to show there's other unique options available to advisers that are unknown amongst the adviser community.”

Lebenthal in 2001 was sold for $25 million to The MONY Group Inc. and joined its Advest brokerage unit. In 2004, financial giant Axa SA acquired MONY, and in 2005 sold The Advest Group Inc., including Lebenthal, to Merrill Lynch & Co. Inc. Merrill didn't use the Lebenthal brand, which was sold back to the Lebenthal family in 2007 for $1,000.

Both Mr. Campanale and Mr. Grillo were working to relaunch a new version of E.F. Hutton & Co. when Mr. Lane approached them with the proposal to build the advisory business at Lebenthal.

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