As the race heats up among registered investment advisors to
Prime Capital Investment Advisors, an RIA based in Overland Park, Kansas,
The Goldman Sachs arm, a much smaller player in the burgeoning marketplace of financial institutions that take "custody," or manage, assets and trading for clients of RIAs, aims to oversee more than $1 billion of RIA assets on behalf of PCIA's clients. PCIA had over $20 billion of assets under advisement as of April, according to a
The new client is a two-for-one for Goldman.
Not only does the Wall Street investment bank gain momentum in the red-hot RIA market, but it also gains ground among the ultrahigh net worth clients that larger RIAs, which include many former top wirehouse advisors, typically serve. The custody arrangement allows Goldman to
The custody toehold
Independent advisors are required to hold client assets in "custody," meaning at institutions such as banks, broker-dealers,
RIAs are growing faster than any other type of firm in U.S. wealth management, at an annual asset growth rate of 12% since 2016 — compared to 7% on average across all other traditional advisor businesses, according to a
"Our solution is designed with the understanding of where the advisory industry is headed, not where it's been," Cooper Rey, the head of RIA Sales & Trading, Global Banking & Markets Division at Goldman Sachs, said in an email. "As clients expect more from advisors, advisors will expect more from their custodians, so our shift away from legacy technology systems which often hamper innovation and growth, will be one of our core competitive advantages."
Some legacy big broker-dealers, like wirehouse
"GSAS offers the services, technology, and support to serve an important and growing segment of our client base with even more care and attention," PCIA CEO Glenn Spencer said in a press release announcing Prime Capital's decision.
Scott Duba, the chief investment officer and managing director of wealth management at PCIA, said in comments to
"Our clients invest extensively in alternative assets, and we need a custodian with the capability to handle these investments at the service level our clients expect," Duba was cited as saying, adding that GSAS's strong digital platform with a "sophisticated service tracker and online chat functionality" as well as direct access to a service team as compelling draws.
PCIA will use its newest custody provider to cater to its ultrahigh net worth clients with Goldman's offerings in areas like alternative investments. Goldman's custody services are "for PCIA's largest and most complex clients," the release said.
A Goldman report
The 'Tiffany' of custody
While Goldman's custody business is still young — the white-glove bank secured its first RIA client, Steward Partners,
"Goldman is the Tiffany of brokerage firms. When people hear that, 'oh my God, you're with Goldman, you must be a really good firm,'" King said. For smaller firms like RIAs, reputation matters with clients, he added.
"Other firms in custody, like LPL, Schwab, Pershing, Fidelity, don't have the same resonance with the clients."
Fidelity, for example, with its mass-market brand image, was a non-entity to the high-end clients of one advisor King has been helping on a move. "They didn't know what Fidelity was," he said of the clients. "If they had Goldman, the client would not have said a word."
Prime Capital, formerly known as Lawing Financial before founder Kerry Lawing sold most of it in
In the past 18 months, PCIA added 43 advisors. It has ambitions to rival "the largest private bank and wirehouse platforms," Duba said in the
The firm listed Fidelity, LPL, Pershing, Schwab, TD Ameritrade and Northern Trust Corporation among its approved custodians, according to one of the brochures in its
"Prime Capital's addition of GSAS is representative of demand we are witnessing from a broader set of RIAs across the industry pursuing a more holistic client experience,"
Wetzel said he had noticed RIA demand "particularly as it relates to UHNW clients and their banking needs that exceed the FDIC standard deposit insurance coverage limit of $250,000," in the wake of the
