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LENOX ADVISORS A Band of BrothersThat Get It Done Right L- R: Greg Large, Michael Book, Rick Van Benschoten, Tom Henske, Greg Olsen, Tom Carstens By James Manouse, Editor-in-Chief
It’s 6:00 a.m. and standing on a Connecticut commuter rail platform, Michael Book, Tom Carstens, and Tom Henske, three of the six partners that make up Lenox Advisors, wait for their morning train into Mid-Town Manhattan. A little further down the line, as they reach Greenwich, Ct., they’ll meet up with another partner, Greg Large (the last two partners, Rick Van Benschoten and Greg Olsen will meet them at the office), and so begins a typical morning for this close-knit ‘Band of Brothers.'
Working out of offices on exclusive 5th Avenue in New York City, the center of the financial world, where the smell of money is always in the air, and with in excess of $1 billion in assets under management, you would think that there would be a whiff of elitism about Lenox, but what you encounter is something quite different. It's a lack of ego and pretense that is replaced by youthful energy, education, experience, and a down-to-earth quality rarely accompanied by this kind of success. Such is the refreshing quality of Lenox and it comes through loud and clear.
Lenox Partner, Tom Henske, a graduate of the University of Virginia where he was a member of three NCAA National Championship soccer teams, immediately points out the importance of not having egos and how teamwork and a fraternal relationship between the Partners are really the core principles upon which this firm is built. It is this bond that lays the foundation for a relationship of trust that has ultimately led Lenox to such great success, a success that Henske points out “That I never take for granted.”
As it is, seemingly with all successful enterprises, this one was started on a relatively simple idea: Start out with an established firm, sell your financial planning services to a large institutional client that could provide dozens, if not in fact, hundreds of potentially qualified, high-net-worth, individual clients, and call upon the “deep bench” (as Henske puts it) of your affiliated firm to provide the talent in the specific areas of financial planning where it would be needed, such as life insurance planning and asset management. Then go after the ancillary, additional sales on the group benefit and retirement plan's side. Thereby, in essence, becoming the only financial advisor they will need.
That’s a great plan, for sure, but to take this from merely a good idea, to a great one, and one that will produce real revenue for the firm you need two more pieces to complete the puzzle: Have the ability to get in the door in the first place, and have a belief in yourself that allows you to close the deal. Pull that off, and now you’ve got something.
Such was the starting point for two young guys right out of college; Michael Book and Greg Large. Shortly after graduation they both had landed with Cowan Financial, an established firm in New York founded in 1985 by Howard Cowan, a prosperous and nationally recognized authority on financial planning and insurance.
Underneath Cowan Financial, Book and Large teamed-up and formed B&L Advisors. Starting with one room and a shared employee, Book and Large were able to put their plan into action and, shortly thereafter, landed a large financial institution as a client.
Now that they had landed their large institutional client, they found that it came with an unusual problem. “We had the reverse problem that firms usually have when they start out. We had too many potential clients” points out Henske. Now, if you’re going to have a problem, that is the problem to have, and Large and Book managed it by drawing on talent from Cowan.
Enter the third partner; Rick Van Benschoten, another young advisor who had also joined Cowan in the same ‘Freshman Class’, so to speak. As Henske adds: “It made sense for Rick to join since they were all fishing off of the same pier and he had joined Cowan at about the same time (as Book and Large)”.
On the employee benefits side, in order to help handle the group enrollment process in its entirety, they were able to bring in 12 additional individuals from Cowan. It was this alliance that allowed them to seek out and land some of the largest corporations in the country (some of which are a part of the Fortune 500).
As the firm grew, critical cultural decisions had to be made. One decision arrived at was that each partner would focus on their specific area of expertise encompassing some aspect of the financial needs of corporate executives, first, and group benefits for the employees, second. They would trust the other partners to take care of their own areas and they would communicate with each other constantly.
A second decision, and perhaps the real secret weapon for Lenox’s success, was to go after people that would be willing to put the team, first. You hear this a lot and it seems simple (everyone says they are a ‘Team Player’) but, as Henske explains: “It can be difficult to find skilled people (in New York City) to play in a team environment, who also have the educational back-ground and who are not all about ‘Me, Me, Me’. When you take ego out of it, and you realize that you can take your career further, and even faster, within a team environment, then the possibilities are limitless.”
With the large financial institution on-board, with the now-defunct firm of DLJ (Donaldson, Luffkin, and Jenrette) also on board that Van Benschoten had landed, and now called Lenox Advisors, the firm was well on its way. Already heavy with experience in several areas, usch as life insurance planning, Lenox added another Partner, Tom Carstens, to run the critical area of asset management.
Wanting to grow from both organic, same-store-sales and via acquisitions from the outside, Lenox took the unusual step of agreeing to be acquired by successful industry consolidator, NFP. Seeking to expand and acquire other firms by being acquired seems counter-intuitive to say the least, but as Henske explains, he’s proof that it works. “I was a sub-acquisition of Lenox through NFP.
National Financial Partners, or NFP, (NYSE: NFP) a very successful industry consolidator started in 1998 and run by Jessica Bibliowicz, the daughter of then-Citigroup CEO & Chairman, Sandy Weill, was capitalized with $125 million from Apollo Management, L.P., a private equity and investment firm founded by Leon Black, a former managing director of Drexel Burnham Lambert. These funds would be used to acquire various, smaller financial planning practices, benefits firms, firms specializing in insurance, and investment advisory firms. Upon acquisition (sales price of which was based on an economic formula based on a multiple of the firm’s EBITDA value), NFP shares the on-going earnings of the firm with their principals, who remain via a management contract under which they continue to run the firm.
Another important factor, and the one that was of critical importance to Lenox, would be NFP’s ability to acquire firms for them, under something called a “sub-acquisition”. Firms that were too small to be acquired out-right by NFP could still be acquired, or bought, for one of NFP’s acquired firms. Lenox became a part of NFP in 2001. NFP later went public on the New York Stock Exchange in 2003.
It was through this type of sub-acquisition that made Tom Henske a part of Lenox. Once on board as a partner, Henske took over another critical area for the firm; the actual writing of individual financial plans for their clients.
Lenox has expanded into new areas and created other successful programs for their clients including Lenox CFO, where Lenox takes on the role of ‘Personal CFO’ for their individual clients and The Lenox Virtual HR Manager, a trademarked program described as being created for business clients that do not employ a full-time HR person or where the HR function is a part of a manager's other duties. The Lenox Virtual HR Manager makes various HR forms available to the business. “It’s an IT-savvy way of organizing an HR person who is not 100% totally dedicated to HR, and who needs a tool to help them organize their HR duties, such as all insurance forms, employee forms, benefit manuals, sick leave, paid time off, and others” says Henske.
Today, founding partner Michael Book (also one of three Managing Partners, along with Large and Van Benschoten) is the main face of Lenox, overseeing the on-going relationship with NFP, as well as Lenox’s relationships with various investment, insurance, and benefits products carriers. Van Benschoten runs the ever-expanding area of Fee-Based Advisory Services, Greg Olsen, the sixth partner, runs Benefits, Greg Large oversees the vital relationships with Lenox's corporate clients, and, and aside from writing financial plans, Henske has taken on additional marketing and branding responsibilities.
That has not stopped Lenox from hiring a full-time Director of Marketing, Peter Haines, who comes complete with a Madison Avenue advertising pedigree. Such is the extent to which they consider marketing to be of importance to the success of Lenox. “How many firms our size hire someone like Peter to do full-time marketing for them?” asks Henske. The answer: Not many.
One of Henske’s additional roles is that of a sort-of sounding board for the other partners of the firm. “I corral different opinions, these are very bright guys in the industry, and I hear a lot of great ideas, but my job is to keep them focused on core competencies, to find out our sweet spot for profitability, and to focus there.”
Today 60% of Lenox’s clients come from the world of Financial Institutions and another large chunk from former Wall Street analysts and portfolio managers, now running hedge funds. The business grew so large in that particular niche that Lenox opened an office in Stamford, Ct., the hedge fund capitol of the Universe. Lenox now also operates offices in Chicago and San Francisco.
Their ideal client, or the roadmap of success with their ideal client, is to get the corporation as a client, do the group benefits, the long term care, life, retirement plan, the executive benefits for senior executives, create the financial plans, and then implement the plans by doing asset allocation, choosing the managers and purchasing the insurance for the risk management portion. "A to Z", Lenox handles all of it, and in so doing, achieves multiple revenue streams from the same client, where many synergies are achieved, with the end result being to remove the competition.
A typical meeting between the client and Lenox can have representatives from Lenox having 6-8 meetings in one day, on various aspects with regard to what Lenox provides. “Some of these clients actually give us office space and employees view us as part of their own companies” relates Henske.
This all sounds ideal, with several lines of revenue coming from the client, being seen as the executives and employees of their clients as actually a part of their firm, and with success breeding success, actually as many qualified clients as they can handle, as well as an office in Stamford to handle their hedge fund manager clientele. But, this much success, this soon, to partners this young, has been the downfall of more than one firm.
Greed, ego, poor personal choices, extravagant purchases, expensive, high-roller type vacations, and even living like rock stars can rip apart even the best, most talented firm once the money starts rolling in.
After all this success, how do they keep it together? “You know, we’re very close knit” says Henske. “My wife jokingly calls it “The Firm” (without the mob influence of course). Three of us live in the same town and within a mile and a half of each other and many times the three of us, Michael, Tom and me, can be catching the same train into New York at 6 am. We spend time together on the weekends, our kids are friends and they all hang-out together.
“We support a lot of sports activities, have season tickets, and we have relationships that run much deeper than as just business-friends. Before we were business partners, we ran our own businesses under Cowan. We can look at things from a different, deeper level” continues Henske. “When it comes to decisions, it’s like dealing with your brother, and you’d never do anything to hurt them. At the end of the day, they are still your brothers. I’d take our 6 and put them up against 6 other of the smartest guys in the world because they can’t make the emotional connection we have at Lenox, and I don’t take it for granted for even one day. It’s very special.” Taking a page from the ubiquitous industry must-read book From Good to Great by Jim Collins, in their meetings, they regularly recall one of the book’s most oft-quoted mantras: “Get the right people on the Bus”.
One thing that may also keep the partners at Lenox toeing the line, is the presence of NFP, looking over their shoulder and protecting their investment, reaching out to help make sure that Lenox continues to reach their ‘target’ earnings, or the amount of earnings that NFP and Lenox agreed that Lenox could earn on an annual basis at the time Lenox sold to NFP. To help motivate them, NFP pays an earn-out bonus that kicks-in when Lenox exceeds their target earnings numbers.
In the end, Lenox comes from a refreshing perspective; a firm that handles the financial planning for executives of large financial institutions, and hedge fund managers out of offices on 5th Avenue, but without all of the ego so rampant in the financial world, and on Wall Street in particular. Energy and youthfulness but not at the expense of knowledge and intelligence. Relying on each other like a Band of Brothers. It’s been a winning combination at Lenox. Tom Henske of Lenox on FOX talking about their Money-Smart Kids program: Link to the page on Lenox Advisors.com that provides details of the program: |
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