Barnaby Levin chafed at how the wirehouse restricted the way he could serve a client list made up of top execs at start-ups

December 6, 2010 — 5:58 AM UTC by Bob Margolis


Sure, we have all heard “To thine own self, be true,” the Bard’s line about knowing yourself. But that information is sometimes difficult to access.

Not so for Barnaby Levin, principal of the Levin Group at HighTower Advisors. The Menlo Park, Calif.-based advisor left his position as a director of wealth management at Morgan Stanley Smith Barney in March to join the big Chicago-based aggregator, has had a few career-defining moments.

“I really thought I would be a doctor when I was little. That all changed when my dad, who was a surgeon, invited me to watch an open-heart surgery when I was eight. I fainted.” So much for practicing medicine.

After graduating from Dartmouth College and spending a short time in the advertising world, Levin moved back to the Bay Area in the mid 1980s and wound up taking the Johnson O’Connor Research Foundation aptitude test. The results pointed towards financial services.

What’s the best time to start a career at Kidder Peabody? Of course, the day of the 1987 market crash. Monday, Oct. 19th marked Levin’s first day in the firm’s Palo Alto office. “That first day was wild. Without pointing to exactly what was going on in the world, they just said ‘We’d love to concentrate on you, but there are some other things going on!’ While many at the time were laying off staff and not honoring new hire contracts, Kidder did not let Levin go.

Remember Joseph Jett?

All was fine at Kidder until the Joseph Jett scandal in 1994 when the firm claimed that Jett recorded $350 million in phony profits and then bilked them of $8 million in bogus bonuses. Kidder Peabody’s parent company, General Electric, eventually sold the firm to Paine Webber, attributing its exceptional losses in part to Jett’s alleged rip-off.

Being sold to Paine Webber was tough on Levin. He went from a firm with a total of around 1,000 advisors to one approaching 12,000. “It was clearly moving from a boutique type of shop to a more mass-level operation, where decisions were made from a central location, catering to the lowest common denominator. Think of moving from a high-end Italian restaurant to the Olive Garden.”

This frustration with top-down bureaucracy structures is a theme that ran through Levin’s stint at Paine-Webber and his subsequent decade at Smith Barney. “A bureaucracy means handling lowest common denominator with an attitude of – we can’t let you do something innovative, since we have to let everybody and out of fear of a rouge newbie, we can’t. As a professional, I want to live without limits and be passionate about what I do.”

After a short phase of kicking the tires of independence, Levin had not found the right indie space and took a call and ultimately the perch at Smith Barney in 2000. His job involved working with executives at startups who were going public, including counseling those execs on insider trading regulations.

Reacting to the bursting of the dot com bubble and in anticipation of the market meltdown of 2008, Levin began looking at ways to hedge against extreme volatility on a micro level and became familiar with the arguments of Ken Dychtwald, the author of “The Age Wave.”

“The idea of the book is that not fiscal policy but supply and demand is the driver of economic growth and contraction – and that it is demographics that is the underlying driver of supply and demand. “I believe that the Baby Boom generation, throughout the US and much of the developed world, is currently in the midst of a transition from a spending to a saving mode and that, while “saving” may be good and healthy for the individual – at this point, when essentially half of all working adults are doing this at the same time – it will put our economy into a prolonged, double-dip recession in which unemployment will get worse and remain high for a number of years to come. I believe that the Fed – much like Japan – is “pushing on a string” and that, in order for us to get our Budget Deficit under control, it will take sacrifice on everyone’s part.”

Levin became increasingly frustrated that he was unable to “short against the box,” as a means of protecting a client’s downside but not sell securities that the advisor wishes to keep in the portfolio. “We are in a new world and the basic question is how can we protect assets? No big firm was willing to let you do that. It is just not how they are programmed. ... So when Morgan Stanley bought Smith Barney, their priority was to integrate platforms… So finding a firm that would say yes and encourage me was my plan B. In the late 1990s I looked at owning my own firm, but in this climate, I wanted more of a partner.” HighTower doubles recruiting staff and seeks green pastures of Morgan Stanley Smith Barney brokers

The decision to make a move out of the wirehouse orbit was not a tough one to make, but the nitty gritty of the broker recruitment protocol did not sit well with Levin. “How can blindsiding clients be in the best interest of anybody? It is very scary on the most basic level. You think you know how your clients will respond and yes there is that ‘thank God free at last’ feeling but the bottom line is you are a money manager with no money to mange.”

Most hate to lose

Levin’ decision to jump to HighTower is a logical one, according to Danny Sarch, president of Leitner Sarch Consultants, a leading financial services recruiting firm: “The HighTower guys have had some luck and some foresight,” he said. “Their advisors enjoy an economy of scale that comes as a result of their transparent multi-custodian approach. They are recruiting guys the wirehouses most hate to lose and also bringing in advisors who are already successful in major money centers.”

Levin has about $300 million in AUM, according to published reports. His group has two employees besides Levin.

HighTower has been sued by Morgan Stanley Smith Barney over another breakaway — Purchase, N.Y.-based Strata Group, which went from MSSB’s New York location to HighTower in February.

“We followed protocol, of which we are a member and the suit has had zero impact on the team that was wrongfully sued. This is a baseless intimidation tactic and one that MSSB wanted to have a chilling effect on other advisors thinking of joining Hightower. It obviously has not been effective since we have had other lift-outs (Levin’s team and The Morgia Group) from MSSB and heard not a word.”

Calls to MSSB seeking comment were not returned.

Levin spoke with HighTower for four months before deciding to join. “There is a spirit here of respect and collaboration; of innovation and best-of-breed; an open-architecture that incentivizes our multiple custodians and vendors to compete for our business by delivering tools and solutions that address our clients’ objectives at reasonable rates. It is an environment that offers each of our teams their own P&L, business and brand, in conjunction with a balance sheet that stands behind us to protect our clients and us and which can provide us with the resources of far larger companies.”

Proselytizing and recruiting

Levin has also already served as a recruiting aide for the firm, helping Hightower add nine more Bay Area advisors to their ranks, including Thomas McGuirk, a subject of a recent RIABiz profile.How an Olympic hurdler and Smith Barney broker made the leap to his own RIA They bring a wide range of clients, which add to Levin’s roster of primarily CEOs of publicly traded companies — the client base he built up at Smith Barney.

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