Family Bonds

Taking over a 74-year-old family business isn’t going to be easy anytime, but Alexandra Lebenthal took the helm of retail municipal bond specialist Lebenthal & Co. in the midst of a tumultuous bond market. When her father, James Lebenthal, took on the chairmanship and named her CEO in 1995, bonds were just recovering from a disastrous ’94 market. While stocks were beginning the most recent spurt in the remarkable 17-year bull market, muni bonds remained mired that year in the turmoil that’s dogged them since the Tax Reform Act of 1986 reduced the incentives for tax-sheltered investments.

Lebenthal’s challenge has been to move her $19 million company from its traditional base selling individual bonds to a more diversified mix of financial products and services without ruining the customer trust built by her grandmother and father under the Lebenthal brand. She also hopes to grow the customer base, seeking to attract a younger audience and reach out to what she feels is the untapped potential of increasingly wealthy female investors.

To make that transition, Lebenthal has been introducing a series of bond and equity mutual funds to make the firm more attractive to younger investors. At same time, she needs to convince longtime brokers at the firm to continue thinking beyond the sale of an individual bond to customers. The company will benefit if it can sell its existing customer base additional products. She’s hoping that it will be her second successful pitch to the staff, after winning their confidence by easing concerns about whether she could run the company.

Lebenthal demonstrated to her 104-employee staff that, despite her age, 35, she had gained experience running the sales department that would make her a solid leader. “I knew what their daily activities, challenges, and struggles were,” she says. It also helped that she didn’t make radical changes right away.

But the changes have come and will continue. Margins on the sale of individual bonds have plummeted by almost 78 percent in recent years-a major reason that Lebenthal has successfully reduced the firm’s reliance on them from 95 percent of its revenues five years ago to 55 percent today. Currently, the firm makes 15 percent of its money from various management fees it collects for overseeing its own bond funds. Lebenthal wants to increase that portion to 50 percent of revenue within five years-a move that will further position her company as a service provider, rather than a retailer.

But she doesn’t plan on ignoring the transactional side of the business. Lebenthal is looking to expand beyond the company’s New York base with branch offices in Florida and New Jersey. At the same time, she wants to do a better job tapping on-line distribution possibilities.

Although the company was relatively advanced in the financial services industry-having had a Web site since ’95-Lebenthal has watched larger organizations attack the Net with a fury in the last two years. She has acquired four domain names she hopes to leverage in future on-line efforts. Competitors have been impressed with her moves. “She’s done a wonderful job keeping the family history going,” says Dominick Antonelli, CEO of Roosevelt & Cross, a New York municipal bond boutique brokerage. Calvert Group CEO Barbara Krumsiek agrees. “I see many small firms that have had to take the route of merger and acquisition, and Alexandra has steered a separate course for a small firm.”

With $4.5 billion in customer assets, Lebenthal & Co. has had to fight to keep its niche against enormous competitors like Merrill Lynch, whose customer assets number in the trillions. Lebenthal has done so, in part, by taking over her father’s role as company spokesperson in humorous television interviews.

What really seems to draw admiration is that Lebenthal manges to balance her CEO role with that of working mother. Lebenthal has two children —ages five and three-with whom she and husband Jeremy Diamond, president of Grant’s Financial Publishing, spend the bulk of their time away from the office. And beyond her nuclear family, Lebenthal has the task of juggling family politics at work. “I view having business relationships with your family as being a combination of trying to make your own path, while at the same time having a very healthy dose of elder respect,” she says. And that’s a formula that could keep Lebenthal & Co. going for another 74 years.

ALEXANDRA LEBENTHAL

Chief Executive Lebenthal & Co.

Having business relationships with family is a combination of making your own path and elder respect.

Age: 35

Birthplace: New York, NY

Family: Husband: Jeremy Diamond; children: Benjamin, 5, and Charlotte, 3

Education: B.A. in history, Princeton

University, 1987

First Job: Assistant on the institutional bond market desk at Kidder Peabody

Grandmother’s hiring advice: “It doesn’t matter if someone is man, woman, or beast as long as they can do the job.”

Hobby: Collecting sea-smoothed glass at the beach and sorting it by color into bowls with the kids (see photo).