A $2.4 billion registered investment advisor is the latest firm to announce
Reston, Virginia-based Burney Company said Tuesday that it had chosen Goldman Sachs Advisor Solutions as an asset custodian. Burney, a nearly 50-year-old registered investment advisor, now custodies client assets with TD Ameritrade, Charles Schwab and various smaller firms.
The Securities and Exchange Commission, which oversees more than 15,000 federally registered advisory firms in the U.S., requires many RIAs to hold client assets at specially designated custodians for safekeeping and providing an additional level of scrutiny to prevent fraud. Custodians can be everything from large banking firms like
Goldman, though one of Wall Street's most storied investment banks, is a newcomer to the custody business. Its Goldman Sachs Advisor Solutions unit has its origins in its parent firm's purchase in May 2020 of Folio Financial, a self-clearing custodian with $11 billion in assets.
For many of the firms turning to Goldman, part of the appeal is the firm's expertise in alternative assets like real estate and private credit. Lowell Pratt, the president of Burney Company, said his company's history is in managing equities but that it also finds a place for alts for many investors. Burney's website lists 10 portfolio managers on its staff, along with five wealth advisors and five people in its trading and operations division.
A typical client portfolio, Pratt said, might show a 60-20-20 split, meaning 60% is invested in stocks and similar securities, 20% in fixed-income vehicles like bonds and 20% in alternative investments.
"Especially with respect to alts, there's a big opportunity with Goldman that other custodians just can't provide," Pratt said.
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Jeff Nash, the CEO and co-founder of the recruiting firm Bridgemark Strategies, said Goldman's entry into the custody business has produced a "buzz" that should have competitors like Schwab and Fidelity Investments thinking twice about what they need to do to remain attractive to clients. That's especially true, he said, for custodial firms that are seeking to work with advisors who cater to high net worth investors.
"And when you are talking to breakaway advisors, that Goldman name really is important," Nash said. "There is an ability for a firm to latch onto Goldman's name and infrastructure, and that creates a level of comfort that can really help in that high net worth space."
Pratt said the three types of alternative investments Burney tends to favor are private real estate, private credit and managed futures — a portfolio of futures contracts. Pratt said managed futures for many years were probably the "most hated" among the firms' various asset allocations.
But they rose in many clients' estimation after proving a good hedge against falling stock and bond markets in 2022.
"It's important to stick with an asset class like that, that has a very low correlation with all the other asset classes," Pratt said.
Even as some aspects of Goldman's wealth management business
Richard Lofgren, managing director at Goldman Sachs, said Goldman views its custodial offerings as a way to ensure independent advisors can offer their clients a full range of services.
"That extends to the individual clients as well," he said. "Individual clients are saying, 'Hey, I want the choice to hire an independent advisor who's a professional, who's going to surround me and my family with the very best guidance and advice.'"
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Even with its addition of new custodial clients, Goldman's wealth management ambitions have been tripped in other ways. Julian Salisbury, the chief investment officer of the firm's asset and wealth management division, recently decided to depart to the asset manager Sixth Street Partners following various other changes in Goldman's top ranks.
That news came out after Goldman reported on July 19 that its wealth division saw a 4% decrease in its net revenue in the second quarter, even as its assets under supervision rose to a record $2.71 trillion.
