After buying RIA aggregator United Capital, can Goldman Sachs really build the advisory firm into the industry’s “next big brand,” as United CEO Joe Duran claims it will?
“The primary reason Goldman did the deal was to grow and expand its reach” in the mass-affluent market, says Duran, who will personally reap at least $75 million in the deal for his stake in the company, which he says is between 11% and 19%.
How will this happen?
United will soon begin offering financial planning and asset management services in conjunction with Ayco, the Goldman-owned RIA with $35 billion in AUM that specializes in compensation packages and financial planning for senior Fortune 500 executives. United will target the “next level of executives” below those in the C-suite that Ayco currently doesn’t service, Duran says.
To better attract new clients, the United Capital brand itself is likely to be replaced by the better known Goldman Sachs name in relatively short order, Duran says.
The United Capital brand has “zero relevance” to consumers compared to Goldman Sachs, Duran says. The brand of the venerable 150-year old Wall Street investment bank will be “lights out” in the mass-affluent RIA market, he maintains.
United, which has $25 billion in client assets, will also focus on recruiting and opening more offices, but will be “more selective” when it comes to acquiring other RIAs than it has been in the past, according to Duran.
What about cross-selling Goldman products?
Hedge funds and alternative investments from Goldman will "augment" United offerings, Joe Duran says.
“They will absolutely cross-sell, it’s just a matter of disclosure,” says one former Goldman executive now working in the RIA business. “It’s less a matter of if they will cross-sell than how transparent they will be.”
Although many large banks and financial services firms routinely cross-sell investment products — which is one of the reasons many planners like the ones who sold their RIAs to United Capital say they left large firms — Duran says there is “zero possibility of conflict of interest” in the new corporate marriage. United will remain an open-architecture shop, he insists.
But United will “augment” its client offerings with Goldman products and services, Duran adds. For example, savings accounts and loans from the parent company’s bank, Marcus by Goldman Sachs, represent “a huge opportunity to help our clients in a way that we haven’t been able to do before,” he says.
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Goldman “investment solutions” such as hedge funds and alternative investments will also be made available, Duran says. “We could not have done [those products] ourselves.”
Analyst Matt Crow thinks Goldman will proceed with caution. “Product distribution will have to be done in the spirit of the fiduciary standard,” Crow says. “But it’s 2019 and everybody knows that.”
Won’t there be a culture clash between the elite Wall Street giant and the more modest Main Street advisory firm?
The Goldman-United integration "will be a major cultural challenge,” says consultant Jamie McLaughlin.
No, Duran says. “There’s no better evidence than United’s history of integrating firms” for the past 14 years, he asserts. Goldman’s success with Ayco, which it bought in 2003, is another harbinger, Duran says.
Industry consultant Jamie McLaughlin isn’t convinced. “It will be a major cultural challenge,” McLaughlin says. “The main issue is the chasm that will exist between serving the mass affluent and the super wealthy segment. There is very little overlap in service platforms and negligible economies of scale in their staff configurations.”
What about Duran himself? Will the firm’s strong-willed founder and high-profile public face stick around?
He says he will. An opportunity to build out an RIA with the kind of backing provided by Goldman comes “once in a lifetime,” Duran says.
Duran says his timeframe for remaining with Goldman is “open-ended.”
Accordingly, Duran will become a Goldman managing director and remain United’s CEO, reporting directly to Tucker York, global head of Private Wealth Management for Goldman.
While the time frame for the position is “open ended,” Duran says, he adds that he hopes “to be contributing for many years to come.”
In fact, Duran’s presence is a “significant asset” for Goldman, according to Crow.
“If Duran can be Goldman’s brand ambassador to the RIA industry, then I think this strategy will be competitive and compelling,” he explains. “Duran can recruit new acquisitions for Goldman Sachs. It’s a narrative strategy that will be very appealing. The story won’t suit everyone, but it will work for many.”
So can United really become, as Duran claims, “the dominant wealth management firm to the $1 million to $15 million client?”
Crow thinks Goldman has as good a chance as anyone.
“Selling to Goldman Sachs opens a wealth of imaginable opportunities,” he says. “Goldman has a foothold in the mass-affluent space and can create a whole new business there with products and distribution. It’s a national RIA with a major recognized and respected brand — plus the resources to back all of that up.”
