Ex-Goldman and United executives get $200 million in capital for new RIA

Former United Capital and Goldman Sachs executives have secured $200 million in private equity financing toward their goal of building a multibillion-dollar RIA by the end of the year.

Co-CEOs Gary Roth and Mike Capelle and President Jason Gordo launched Monterey, California-based Modern Wealth Management on April 5 after leaving the unit Goldman purchased as United Capital for $750 million in 2019, Goldman Sachs Personal Financial Management, last year. With an investment of hundreds of millions of dollars from New York-based Crestview Partners, the trio plans to acquire or recruit its first "anchor office" with $1 billion to $2 billion in client assets by the third or fourth quarter, Gordo said in an interview.

The trio brings experience from carrying out over 90 acquisitions of RIAs during their industry tenures, but they'll be facing a growing field of competitors spanning nearly three dozen "acquisition brands" that a consulting firm recently said are driving the industry's consolidation by carrying out as much as 70% of the M&A deals every year. Newer players popping up in the past two years such as Journey Strategic Wealth and Choreo have broken successfully into the RIA channel with approaches similar to that of Modern Wealth. Experts say that financial advisors' need for succession partners and scale will ensure a stable flow of potential recruits.

Modern Wealth is building "the firm that the three of us want to do business with," Gordo said, describing that vision as a staff equipped to service advisory practices with teams that have certified financial planners, certified public accountants and chartered financial analysts; estate planning specialists, experts in healthcare and professionals in other areas. The "three ways we plan to grow the business" are through M&A deals, traditional recruiting moves and referrals from adjacent fields, Gordo added.

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Goldman is ramping up its own bets on wealth management after announcing in February that United founder Joe Duran is stepping down as a partner to become an outside consultant to the firm. United folded into Goldman with 70 offices, 220 advisors, $25 billion in assets under management and 22,000 clients. 

Capelle and Roth had been with the firm since it opened in 2004, while United acquired Gordo's former RIA, Valley Wealth, in 2014. The trio will set their sights on different firms than those under the umbrella of their prior employer, whose ex-United advisory practices are "not a focus" of their current outreach and talks with prospective sellers, said Capelle.

"The vast majority of the advisors are still there," Capelle said. "In my opinion, we did a pretty good job of integrating the business."

In recent years, other competitors of varying sizes were carving out their own niches in the industry while the three Modern Wealth founders were buying up firms with United. 

Atlanta-based Advisory Services Network started in 2010 as the RIA offshoot of a compliance firm. With a target market of independent advisory practices between $15 million and $300 million in client assets that the firm recruits rather than acquires, Advisory Services views itself as catering to a group that's "underserved" and "possibly undervalued" by the biggest players, co-founder Tom Prescott said in an interview. The firm has $6.6 billion in client assets under advisement across 128 teams with 205 advisors. 

"The field continues to grow," Prescott said. "There are a lot of good quality firms out there and there are a lot of also-rans. At the end of the day, we focus on our marketplace, or our niche, if you will."

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About 15% of the advisors with Advisory Services use outside brokerages, and Capelle said Modern Wealth would be "happy and able to support the legacy business" of teams that have commissionable accounts through external third parties as well. Those prospective recruits would be partnering in Modern Wealth as a means to "evolve and advance the business" by moving the clients' accounts to the RIA side of their firms over time, Capelle added. 

"These days, the advisors who would tend to align with us are looking to migrate away from it," he said of the brokerage business. "We'd be open to it."

Modern Wealth represents the first foray into wealth management for Crestview, whose website lists seven financial services firms in its current portfolio and eight other prior investments in the industry. Crestview has raised $10 billion in capital commitments since its founding in 2004, and the existing financial firms in its portfolio include variable annuity firm Venerable Holdings, global insurer Fidelis Insurance Holdings and investment management company Victory Capital.

"It's one thing to have a great conceptual model, but assembling the team to execute is quite another," Dan Kilpatrick, Crestview's head of financial services, said in a statement. "We believe the secular tailwinds for RIAs remain robust, as individuals increasingly seek client-first financial advice."