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Not Your Typical Wall Street Suit

Jessica Bibliowicz's assistant pops her head in the door with big news: Lenox Advisors has agreed to sell its high-end financial advisory business in Manhattan to National Financial Partners. This acquisition Bibliowicz's 101st brings her company within striking distance of its goal of $100 million in revenue from affiliated firms by the end of 2002, and that much closer to an IPO or a sale to a big

Jessica Bibliowicz's assistant pops her head in the door with big news: Lenox Advisors has agreed to sell its high-end financial advisory business in Manhattan to National Financial Partners. This acquisition — Bibliowicz's 101st — brings her company within striking distance of its goal of $100 million in revenue from affiliated firms by the end of 2002, and that much closer to an IPO or a sale to a big financial services player. Bibliowicz excuses herself to talk to her new partners. “That's great,” she can be overheard hollering into the phone. “Welcome to the family.”

NFP'S family is growing. Starting with $125 million in backing from New York-based buyout firm Apollo Management, NFP has spent three years snapping up small, independent financial planning, insurance and corporate benefits firms that cater to wealthy clients. It has about $16 billion under management.

This year NFP plans to focus on buying financial planning and asset management firms to boost its revenue from that business to 33 percent, from the current 25 percent. “We are aggressively out there talking to them and working with them to find ways to make them view NFP as an attractive proposition,” says Bibliowicz, in NFP's conference room 49 floors above New York Central Park.

What's in it for the firms that sell out to NFP? Plenty, if you ask Bibliowicz: capital for expansion, technology support, the ability to cross-sell products to and from other NFP firms, volume discounts on investment products, as well as a stake in fast-growing NFP. In return for all that, NFP gets 50 percent of their free cash flow.

Through its broker/dealer, NFP Securities, in Austin, Texas, which does all security transactions, the company offers hundreds of mutual funds, including American Funds, Fidelity, Putnam and Dreyfus. NFP also provides variable life annuities through such carriers as The Hartford Financial Services Group, Pacific Life, GE Life and Annuity, American Skandia and Phoenix Life. And it has life insurance products from American General, John Hancock, Phoenix Life and ING.

NFP also creates customized products. For instance, it provides its firms with a fund of funds offered through NFP member Peyser & Alexander Management, a New York-based money manager. Peyser & Alexander opened its third fund of funds after it sold its business to NFP in July 2000. “We're already 50 percent bigger now,” says David Alexander, one of the firm's co-founders.

“Opportunity to Dominate”

And through a joint venture with NFP, executive compensation firm Monaghan, Tilghman & Hoyle was able to add financial planning and asset management services. Patrick Monaghan, the Baltimore-based company's president, says at some point his business may be strong enough to buy local rivals. “With seven or eight people you have no opportunity to dominate a market,” he says, “but if you have a dozen or so registered reps and they're backed with adequate staff and adequate technology, then you're very well positioned for the future.”

Monaghan says he sold his firm, founded by his father in 1956, to NFP in November 1999 after meeting Bibliowicz. She was “the deciding factor,” he says. “She's a very dynamic person. She has a truly charismatic personality, a lot of energy and you sense that she has a great deal of experience.”

On this dreary January day, Bibliowicz, 42, is dressed in a form-fitting hazelnut-colored leather skirt and jacket with a black turtleneck sweater. She playfully suggests it's her charm that attracts business partners. But financial know-how clearly plays a big role. It also helps that she learned the business from one of Wall Street's legendary figures: her dad, Sanford Weill. Over the years, Bibliowicz watched Weill build an empire that started with Primerica and Travelers Insurance, bulked up with Salomon Smith Barney and grew to massive scale with the Citigroup merger, producing the world's largest financial services company. Weill says Bibliowicz grasped the business at an early age. “She enjoyed our conversations at home,” he recalls. “I've been in this business a long time. We used to talk when I was a registered rep and managed people's accounts.”

Weill, Citigroup chairman and chief executive, insists he didn't push his daughter to follow in his footsteps. But Hardwick Simmons, Nasdaq's CEO who has known Weill for decades, says it was almost preordained that Weill's two children would go into the family business. Indeed, Weill's son, Marc, worked for Citigroup for years before resigning in late 2000. Even so, Simmons says Bibliowicz was the one who inherited her father's traits: determination leavened with social savviness. “She's the one who had grown up most in her father's image,” he says. And she has some strengths her teacher doesn't have, he says: “She has a lighter touch than Sandy. She doesn't immerse herself in certain situations as deeply as he does.”

By the time she was 14, Jessica Weill was working for her dad at Shearson, filing annual reports. She considered studying law, but after graduating from Cornell University (her father's alma mater) in 1981, she moved to New York and went to work in the industry she knew best, financial services. After marrying Natan Bibliowicz, who's now an architect, in 1982, she left Shearson. But after her honeymoon, she was back — in the asset management division. (Her father left a few years later in 1985.)

In 1990, Salomon Brothers bought the unit and the climate changed. “Culturally, it wasn't a good fit,” she recalls. Weill, then CEO of Primerica, offered her a job, but she turned him down. Instead, in 1992, she accepted a position at Prudential Securities as director of its sales and marketing for mutual funds. But she was passed over for a promotion. “Marketing of an idea has always been a great strength of hers,” says Simmons, then Prudential's CEO. “But she didn't have enough experience running a business.”

So, in 1994, she left Prudential and accepted her father's offer to head his company's mutual fund unit. It wasn't an easy decision. “You want to be your own person,” she says. “People don't necessarily respond to you as you, they respond to you as the daughter of someone else. And that's just not a great place to be.” Three years later, she left after a public falling-out with Jamie Dimon, one of Weill's top executives.

Bibliowicz landed at John A. Levin, a New York money management firm, as president and chief operating officer. Twenty-two months later, NFP wooed her away. “I thought it was a brilliant idea,” she says.

Targeting the Wealthy

Brilliant, perhaps. But not revolutionary. Highland Capital Holding, Centurion Financial Advisors and Clark/Bardes Consulting have tried to create a financial services company by buying up smaller firms, says Chip Roame, managing partner of research firm Tiburon Strategic Advisors in Tiburon, Calif. “What's new is someone having success,” he says. “NFP has a strong senior management. And the financial model makes sense for people who want to stay in business and grow their business.”

NFP is targeting firms that cater to the high-net-worth market. The NFP firms' clients have between $5 million and $10 million in investable assets. Most of the firms have been in business for 10 to 15 years. And many of the principals left larger firms. After three years, NFP firms generate roughly $300 million in sales.

One of NFP's key selling points is that it lets the firms' executives manage their businesses without interference and it lets them profit from their companies' growth, Bibliowicz says. Unlike other so-called roll-up companies, she says that hers is not driving profit growth by slashing costs and combining back-office operations. Instead, NFP is building up a strong network of independent firms that benefit from each other's expertise, she says.

Here's the Deal

This is how it works: NFP buys a firm for stock and cash, as well as 50 percent of its free cash flow (revenue minus salaries, rent, supplies and other expenses.)

For example, if NFP calculates that the company will generate $1 million in free cash flow annually, it will get the first $500,000 and the firm keeps the rest. If, however, the managers miss that target, NFP still gets its cut and the managers get less. So, there's a built-in incentive for the firms' managers to grow their businesses. If the firm managers make more than their target, then they get to keep the excess.

And NFP's management contract leaves the firms' executives in charge. “NFP didn't change the way we do business, which was attractive to us,” says Joe Carpenter, a principal with Sharon ECA, who works in the executive compensation consulting company's Nashville office. Sharon was one of NFP's first acquisitions back in January 1999. “We operate as if nothing happened.”

Well, almost nothing. Now that it's part of NFP, Sharon can take advantage of NFP's network. For example, it picked up a new account when it sold a bank-owned life insurance policy to a bank that was a client of another NFP firm near Chicago. Another time, Sharon referred one of its small business customers to an NFP company that administers corporate cafeteria benefit plans. “Once everyone taps into the resources all these independent firms offer under NFP, then we can compete with the large consulting firms, like the Mercers or the Tower Perrins,” Carpenter says. “Essentially, we go to bat for each other.”

NFP isn't for everyone. Sidney Friedman, president of Corporate Financial Service, a Philadelphia company that provides insurance and employee benefits, resisted Bibliowicz's charm and her firm's offer to buy his 60-employee firm for five times earnings. “There wasn't enough money for me,” Friedman says. “I don't want to be beholden to anybody. My business is profitable and I don't want to be in business with 80 or 90 people I don't know.”

But that's not slowing her down. Bibliowicz expects revenue from acquired firms to reach $95 million by the end of this year, up from $65 million at the end of 2001. And she's still on the prowl for more business.

Who knows? Someday, Sandy Weill may be known as Jessica Bibliowicz's father.

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