The Mission-Driven Advisor: Why Should United Capital's Sale to Goldman Sachs Matter to You?

Written by: Jeff Thomas

Goldman Sachs announced they were buying 14 year old RIA, United Capital, for $750 mm in cash on May 16, 2019.  The 220 advisors who sold to the independent RIA, United Capital, are about to work for Goldman Sachs.  How must those advisors feel about that?

 

Wealthmanagement.com interviewed industry experts who offered their opinions on what this means for the industry.

 

One of the more colorful quotes came from Andrew Stoltmann, an attorney and investor advocate, who said:  “It’s like a drunken sailor has stumbled into a religious boarding school.  I expect Goldman to import its growth and sales quotas…” [1]

 

Another of the experts quoted in the article was Ryan Morfin, CEO of Wentworth, an acquirer of independent broker dealers.  Mr. Morfin led off by quoting a line from Michael Corleone in “The Godfather, Part III”:  “Just when I thought I was out…they pull me back in.” [1]

 

Mr. Morfin says that:  “…this deal should put advisors on notice; not every door is a guaranteed continuation of the journey on independence they signed up for.” [1]

 

The most common opinion was that this is Goldman’s attempt to enter the mass-affluent marketplace.  Goldman has a void in that space between their high-end wealth management business and their direct-to-consumer Marcus business.  Other ideas were that Goldman just wanted to improve its’ reputation by entering the fiduciary space, that they just wanted another channel to sell their proprietary products or that they want to sell United Capitals technology “picks and shovels” to a broader base of RIA’s. [1]

 

No matter what the real motivation was, it takes a huge player out of the independent RIA space.  The firm went from $0 to $24 billion in 14 years [1]. The founder of United Capital, Joe Duran, has been a champion of the independent channel and RIA’s in particular.  He had proclaimed his vision to build a national RIA.  He is famous for wanting to help put people’s narrative before their numbers.  How does that goal jive with selling to a company like Goldman Sachs? 

 

In my humble opinion, it simply doesn’t add up.  I watched a video interview of Joe talking about the Goldman deal.  He did his best to toe the company line and talk about all of the resources Goldman would bring to the table.  Other resources I found told what appeared to be a likely backstory of why the company sold to Goldman.  It was very simple.  Joe only owned about 10% of the company and his other shareholders simply took the highest bid.  In the end, it really didn’t matter what’s Joe’s vision was because he could simply get out-voted. [2]

 

What does this mean for you? 

If you are a financial advisor or the client of one, does the company’s vision and culture line up with your own?  If not, you may want to start looking for a new platform where those things do line up. 

 

Before you make that move to an aligned platform, make sure you understand who controls the company.  If the platform is a public company, well, you know who controls it—the public shareholders!  Do you think like they do?  If the firm you are considering is a private company, who controls the stock?  Are those shareholders aligned with you?

 

Look before you leap!  There are seismic shifts happening in the wealth management industry.  Be sure you are on solid ground and that you don’t end up on the wrong side of the cliff when the tectonic shifts take place.

 

rEAD MORE:

WHY THE EXODUS FROM THE WIREHOUSE?

ARE YOU A FIDUCIARY 100% OF THE TIME?

 

Sources

[1]. (2019). Will Wall Street Change the Independent RIA? 7 Industry Leaders Weigh In      Retrieved from: https://www.wealthmanagement.com/industry/will-wall-street-change-independent-ria-7-industry-leaders-weigh?NL=WM-27&Issue=WM-27_20190603_WM-27_846&sfvc4enews=42&cl=article_1&utm_rid=CPG09000011594879&utm_campaign=20822&utm_medium=email&elq2=c628c89c1e63490283162b42b0c0cd4a 

[2]. Southall, Brooke. (2019). Joe Duran's sale to Goldman Sachs achieves impressive goal but at the expense of his far grander dream; Will Goldman leave him outside looking in?Retrieved from https://riabiz.com/a/2019/5/17/joe-durans-sale-to-goldman-sachs-achieves-impressive-goal-but-at-the-expense-of-his-far-grander-dream-will-goldman-leave-him-outside-looking-in

 

Jeff Thomas is the Founder/CEO of Archetype Wealth Partners. He has assembled an amazing team to provide an open architecture, fee-only (fiduciary) platform that offers a wide variety of investment choice to clients. Archetype exists to help families thrive across generations.

 

Disclaimer: Our intent in providing this material is purely for informational purposes, as of the date hereof, and may be subject to change without notice. This article does not intend to constitute accounting, legal, tax, or other professional advice. Visitors and readers should not act upon the content or information found here without first seeking appropriate advice from a trusted accountant, financial planner, lawyer or other professional.

Follow us on: