At 70, Too Young To Retire From the Street

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

At age 70, Malcolm Lowenthal, who has been a stockbroker for the past 43 years, recalled the other day an earlier job where the head of his brokerage firm recommended a stock that subsequently got killed. Nervous and worried, he asked his boss, “What am I going to tell my clients?” His boss’s response: “Get new clients!”


To Mr. Lowenthal, things haven’t changed much on Wall Street. “This business has no soul,” he says. “Anything goes to make the bottom line bigger.” Unfortunately, greed is what makes things go ’round on Wall Street, which, he contends, is “solely in the business of transferring wealth from the needy to the greedy.”


If you’re so disenchanted with the nature of your work, I asked, why not call it quits and retire? “Because I love what I’m doing,” he said. “I’m good at it, and I really get off being a player in a thrilling and exciting business. I feel good when I make money for my clients and cry when I don’t. Besides, I’m too young to retire, and I already have a gold watch.”


A Colorado investor and former hedge fund manager, Robert Holmes of Gilford Partners, is a fan, describing Mr. Lowenthal as “a consummate professional, honest as the day is long, and someone who cares about his clients.” In fact, he adds, “If you’re looking to give someone a holiday gift from Wall Street, give him the name of Mal Lowenthal.”


Most folks Mr. Lowenthal’s age might well consider slowing down. Not him. Not only is he not slowing down, but he recently changed jobs, moving from brokerage biggie Smith Barney to a small, relatively new Big Apple firm, Kern, Suslow Securities.


Mr. Lowenthal was miserable at Smith Barney, which, he insists, has no use for his breed – the old-fashioned broker who wanted to do his own thing (such as recommending the stocks he liked, not those the research department was pushing). Smith Barney, he noted, prefers a broker to raise money for fee-based products, such as mutual funds and managed accounts. Included here are “rap fees” (which is where a brokerage client pays as a fee a percentage of his managed assets, but pays no commission).


Mr. Lowenthal strongly opposes rap fees because, he notes, the lack of commissions leads to less management of the account. On the other hand, he points out, when the client pays commissions, brokers tend to over manage. Likewise, he notes that when an investor buys a fund and pays no commission, versus paying a commission, he’s actually shelling out more because of the annual expense charges.


I last interviewed Mr. Lowenthal some 15 years ago when he was at Shearson Lehman (which has since split up). During the interview, I asked him why there were so many bad guys on Wall Street. His response: “Because our product is money, and money attracts scum.” He was also critical of Shearson’s research. The result: The firm fired him.


Mr. Lowenthal, who during the 1980s and 1990s, was an annual million-dollar producer, give or take $100,000 (meaning he generated about $1 million in yearly commissions) is especially critical of what he views as wrongdoing on Wall Street. One is consistently poor quality and touty research; another, inflammatory and misleading brokerage get-rich advertising pitches.


The Street’s policy of disallowing the public, “the poor kid on the block,” to have any access to hot new issues, also bothers him. So too does the practice of many brokers of pushing certain crazes (such as poker and the Internet) when they’re way overpriced and have long lost their excitement.


Investors have to be wary of the bad guys because the SEC can’t legislate honesty and ethics, Mr. Lowenthal says. The key, he stresses, is to factor in the risk, which many investors fail to do. As for the greedy investor, Mr. Lowenthal says he will surely be burned. And if he’s greedy and naive, Wall Street will surely have him for lunch. Unfortunately, too, he adds, the theme of “screwing the public” has become institutionalized.


Mr. Lowenthal’s caring about his clients can be seen in his relationship with his gardener, who gave him $10,000 to invest, which was most of his life savings. “I did very little because I was afraid to lose money for him,” says Mr. Lowenthal, who gave his gardener a few hot new issues, enabling him to make about $500. Eventually, Mr. Lowenthal ended the relationship since he felt his gardener shouldn’t be in the market because he couldn’t afford to lose any money.


What does he think of the market? “I’m scared. It could go either way,” he says. “Tell me what’s going to happen with oil, interest rates, and China. No one knows the answers, and that’s not what rising markets are all about.”


Any final thoughts? “Only,” he replied, “that our product is still money and there’s still a lot of scum around.”


dandordan@aol.com


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