Why Lebenthal's wealth management venture didn't make it

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Forget about the Olympics. The wealth management business is where the really fierce competition can be found.

"We probably were just not competitive enough in terms of what we could offer," says Alexandra Lebenthal, CEO of Lebenthal Holdings, describing why she decided to shutter 2½-year-old Lebenthal Wealth Advisers. "We didn't pay any upfront money. I know for a whole population that certainly cut us out."

Too many of the wealth managers Lebenthal attracted "didn't bring over enough assets," Lebenthal explains.

"It just got to the point where looking at the resources we put into the business, and resources we weren't putting into the other two [asset management and broker-dealer] businesses, we just had to say this isn't really working," she says. "We had to make the decision to end this."

Indeed, the demise of the wealth management arm of one of the financial service's industry's most venerable names has underscored the fiercely contested battle for high- and ultrahigh-net-worth clients and the advisers who can work with them.

Read More: Can Cantor Fitzgerald make it in wealth management?

A team of Lebenthal's most successful advisers, have, in fact, launched a new RIA in the heart of one of the wealthiest regions in the United States—the fabled Hamptons on the East End of Long Island, home to hedge fund managers and rock stars alike.

Read more: Lebenthal loses $750M elite advisers, execs to Dynasty

YorkBridge Wealth Partners, which will be affiliated with Dynasty Financial Partners, has opened for business in Bridgehampton, N.Y., as well as in Manhattan.

Founders and managing directors Carrie Gallaway and Andrew Stern are being joined by five other Lebenthal alumni—Jeffrey Lane, Barbara Doran, Leigh Moglia and Virginia Urdaneta. The team says it's bringing along more than $700 million in client assets.

In addition to Dynasty, YorkBridge will also work with Schwab Advisor Services and Fidelity Institutional Services.


Lebenthal, well known for its long history in the bond business, opened its wealth management business in early 2014 with "a great amount of optimism," according to Alexandra Lebenthal.

The effort generated much fanfare when it attracted Frank Campanale, a former star executive at Smith Barney (who also tried—unsuccessfully— to revive E.F. Hutton as a wealth management power), as chairman and chief executive, but Campanale didn't last long and left last year.

He was replaced by Barbara Yastine, another Wall Street veteran, but organic growth lagged. The firm hoped to quickly reach $5 billion in assets under management, but AUM never cracked $1 billion, and was only $940 million in June, according to the firm's most recent Form ADV filing with the SEC. By mid-year, the firm had less than one dozen advisers.


Not enough scale, capital and time sealed Lebenthal's fate.

"The value and power of scale has become a primary driver of the business," says David DeVoe managing partner of the eponymous San Francisco-based research and consulting firm, which just issued its mid-year review of mergers and acquisitions. "Firms can't grow fast enough without it."

Read more: Why fewer breakaway brokers are joining RIAs

The difficulty of succeeding in the ultrahigh-net worth market can't be understated, noted Brian Hughes, president and founder of Philadelphia-based advisory consultant Hughes Growth Strategies.

"Firms must be long in both patience and capital, and not expect any real results for at least 36 months," Hughes maintained when commenting last year on the prospects of Cantor Fitzgerald, another venerable Wall Street firm that has stumbled in its wealth management endeavors. "Even then they should only be measuring leading indicators, like qualified prospects in the pipeline, the number of client referral meetings or centers-of influence partner meetings."

Lebenthal was philosophical about the wealth management unit's closing.

"For every entrepreneur, there is a trail of things that didn't work out the way they wanted," she says.

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