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Joe Duran declares United Capital means little to him now beyond money and how relieved he is to pass its underdeveloped business model to Goldman Sachs

United Capital founder describes his roll-up as the baby that doesn't love you back: "It's just this thing you created"

Monday, August 12, 2019 – 9:10 PM by Brooke Southall
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Joe Duran: It's not your baby. It doesn't love you back the way your real babies do.

Brooke's Note: If somebody tells you what their next move is, listen. It sure sounds like Joe Duran is telling us he may not stay for long at Goldman Sachs, if his faint praise for his buyer is any indication of damnation. He speaks highly of its money and its willingness to take the "burden" off his financial and managerial shoulders. Not too much else. You can get rich -- and bring a few investors along for the ride -- by selling out an RIA to Wall Street. See: Goldman Sachs closes United Capital deal and Matt Brinker, Joe Duran's wingman, exits with social media swan song on same day But don't expect that cash to be bundled up with a stack of psychic rewards. Duran's starkly written column published today by InvestmentNews suggests the lords of karma may mete out some punishments.

Joe Duran fell out of love with United Capital, its brand, its autonomy and the excitement of having a company that he could call his baby, writes the roll-up's co-founder in the one-month postmortem of his sale to Goldman Sachs. 

When Goldman Sachs' $750-million check cleared after the New York investment bank's July 16 purchase, the former entrepreneur, now middle manager, questions, in an InvestmentNews column, whether United Capital was ever his baby to begin with.

"The truth is that if you run a company the right way, it's never really yours," he says in the column. See: 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?

"It belongs to the investors, the employees and the clients. The second time around, you aren't as attached. You learn that despite what people say, it's not your baby. It doesn't love you back the way your real babies do. It's just this thing you created."

Indeed, these are hardly words out of a parent's guide to child rearing.

United Capital was born in 2005 with the precocious idea of disrupting Wall Street by purchasing IBD reps and turning them one big branded national RIA with all the fiduciary qualities of smaller firms but with the marketing power, technology and scale of the giants.

RIA classic killer

Over the years, Duran expanded his mission and vision to proclaim that what he also planned to disrupt classic RIAs. See: Joe Duran lays out his latest case for why wirehouses -- and classic RIAs -- risk losing out to a coming oligopoly of new-model holistic firms

“I suspect 10 years from now, there will be a lot of advisors as employees in brokerages and independent advisors who don’t differentiate themselves,” Duran wrote presciently in a whitepaper published in May of 2011.

“Unless they have billions of dollars, they won’t be able to compete.”

He saw RIA firms as brandless, under-capitalized, under-organized bumblers who were having their day in the sun because of an anomaly of business history.

Ultimately, he believed RIA were practices destined to go the way of travel agents and the hapless independent coffee shops vanquished by Starbucks.

In the long run, so the argument goes, order would be restored, and RIAs would succumb to a golden rule of business enterprise: Bigger is better.

Duran is a gifted, high-spirited speaker and his talk on the topic of RIA death became a favorite on the RIA conference circuit.

Not that everyone believed his message, but Duran never failed to bring energy, polish and Harvard Business School-level intellectualism to the game.

He is slated to speak at Josh Brown's upcoming WealthStack conference in Phoenix, Ariz. and, rightly, nobody expects a dud event.

But in the speech, he will likely admit that United Capital itself was overcome by the same forces Duran augured would take down his more Lilliputian RIA competitors.

"To win in the future, United Capital would need to go beyond building financial plans and managing assets," he writes. 

"Advisors may offer banking services, refer clients for tax preparation and deliver it all on an elegant, integrated platform." See: What's wrong with this branding picture? Goldman Sachs takes a limo ride to the mass affluent market by flashing big cash for United Capital

Nobody would bat an eye if any banker in America uttered the latter line.

This raises  the question of what ever became of FinLife, the United Capital software that Duran touted as a way to get past all the banking and advice clutter. See: Framing it as a wildly disruptive 3,300-basis-point fee on de novo revenues, Joe Duran's United Capital digital reboot is apparently raking in RIA assets and revenues 

He paid it faint mention amid a vague claim.

Whither FinLife?

"We could become the standard against which others are measured — not just for the affluent clients we work with directly at United Capital, but for the independent advisory firms that serve them through our white-labeled FinLife platform."

FinLife's bright prospects aside, Duran found that his "failure" demons got the better of his inner sunny entrepreneur.

"I never forget that I would always be the only one responsible for its failure. That has been a lot of responsibility to carry for 14 years."

He adds gravely: "I have thought about every person I would let down if we failed in any way: Every adviser that has sold us their life's work, and every employee who joined us and received equity. Every investor who put millions of dollars into our company. Every client who had entrusted us with their life's savings."

With that anvil hanging over his head, Duran concedes that a big cash check from an asset-rich firm carried its own 'creative' powers.

"Everyone would also be paid in cash. ... Ultimately, Goldman tipped the scales in their favor with the creativity they brought into the transaction to make a sale more economically interesting for our advisers, our employees and our clients."

The big question asked but...

In the bottom third of his Investment news column, Duran, like a good reporter, delivered the hard question to himself: 

"One of the more amusing parts of this transaction has been the speculation about what will happen with me and the firm I founded. Will I be able to play along with a large institution? Will the firm disappear?" he asks.

Yet as the ex-United Capital CEO -- like a well-schooled PR client -- deftly explained, you never really own anything, as if to say the question itself has no pertinence.

Duran then added two more cryptic lines that leave in question whether he will remain at Goldman Sachs, at all.

"When we started the firm, we wanted to shake up an industry that we felt was staid, unimaginative and not helping people to really live better lives," he wrote. 

"We're turning the page on United Capital as an independent firm, but the future is still unwritten. We all intend to keep shaping the industry for years to come as indispensable advisors."

Brooke Southall

Brooke Southall

August 13, 2019 — 8:36 PM
Well, I hope we're not quite as 'sardonic' as Dealbreaker. I take what you say in the right spirit and even as a compliment:) And I hope we prove you right even in the next few days that there are more interesting things going on. That said, I find a critical mass of jarring intensity in the sale of a United Capital to a Goldman Sachs. Sending dozens of ex-brokers back to Wall Street in one big raft is something for an RIA reporter to get his mind around. On top of that, this RIABiz article was sparked by a column that seemed to push a reset button about how a leading RIA's best path to the future is as a piece of a giant corporation where sales and transactions go to the heart of the culture. United Capital is being called "just this thing." That kind of language is honest and maybe correct in a technical sense but the spirit of it feels like a radical departure. What Joe Duran always said to differentiate United Capital from other roll-ups was that his was not an act of financial engineering but the building of a true company that was one with its brand. Now that it is becoming a cog in the Goldman Sachs machine and being spoken of in more dehumanized "thing" terms, it seems to imply that this is a fairly ultimate act of financial engineering. the one other factor that influenced the tone of this article was the tone of the Duran column. It does not seem to be full of a bright future but more of a look back at a burdened past. It doesn't feel triumphant. It is expressed as relief, as making the best of difficult circumstances. The Duran story sure feels like a big RIA parable that captures a paradox that all RIAs face -- of how to parse a Trinity of being all human, all business entity and all fiduciary care of investors. The Duran column says that, in hindsight, it was head-spinningly more about the business entity than he had ever let on before. I get that we all exaggerate to make our points but the article pivoted around Duran's description of his company, made up of people on a mission, as a "just this thing" ( the opposite of sacred) and his hard decisions got made and digested with that perspective foremost in mind.
gail graham

gail graham

August 13, 2019 — 10:32 PM
Sadly, I am not shocked by your "take" on Joe's open and honest article in IN. Be clear, he chose GS because he believes it's best for employees and clients - and shareholders. Talk to the advisors - they aren't being put on Wall St - Wall St is coming to them to learn. I spent years with Joe and the "burden" you disdain was absolutely sincere; he knew his employees would appreciate a cash deal, even if he could afford a different structure with more upside. Joe is fine, his clients and employees are fine, his shareholders are fine, Goldman Sachs is just a new adventure with much promise. Guess what, in the big leagues we do build companies that can last beyond their founders if that is something Joe chooses. Whatever motivates you to demonize this topic? UC did a great deal that works for their strategy to be a national RIA that serves people for many decades to come. Comparing Joe's decisions against the whole universe of RIAs is immature nonsense.
Brent Hagel

Brent Hagel

August 13, 2019 — 6:07 AM
Brooke this article is a bit too far into overtly sardonic territory. Readers with appetite for content crafted as an unabashed dressdown are already well fed by the likes of Dealbreaker… <a href="https://dealbreaker.com/2019/06/david-solomon-apologizes-to-marcus-team-for-succeeding-at-goldman-sachs" rel="nofollow">https://dealbreaker.com/2019/06/david-solomon-apologizes-to-marcus-team-for-succeeding-at-goldman-sachs</a> <a href="https://dealbreaker.com/2019/04/goldman-sacs-marcus-ads-savings-for-dumb-assholes" rel="nofollow">https://dealbreaker.com/2019/04/goldman-sacs-marcus-ads-savings-for-dumb-assholes</a> You’ve got a better publication and better work than this. There are a lot of other more worthwhile stories baking across the industry right now to be sticking on the front burner.
Peter Signorelli

Peter Signorelli

August 13, 2019 — 9:25 PM
Well stated, Brooke. It’s an instructive story, “sending dozens of ex brokers back to Wall Street in one big raft”. As an M&A advisor to smaller RIA’s I have heard a lot about the NFP’s and the United’s (and all those in between). The common thread is they do not ultimately deliver what they sell at the front door.

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