Goldman Sachs both clarifies and adds complexity to its RIA custody launch with press release reporting its' best-of-both-worlds' platform onboarded a '$1-billion' Merrill Lynch team
The New York City investment bank signed Beverly Hills Private Wealth, and it 'never really' had any timeline to meet, it tells an industry publication.
6 min read- Goldman Sachs courts breakaways eager to affiliate with its brand as an RIA.
- Platform's progress lags expectations, resembling Folio acquisition more than a Goldman overhaul.
- Recruiting firm suggests Goldman's recent win is a 'buying time' tactic amid platform delays.
Brooke's Note: What's clear to me after writing this article is that Goldman Sachs has a natural constituency of breakaway brokers who ardently want to be a Goldman Sachs RIA. My understanding from recruiters is that several broker teams who want to sign up as RIAs – and put on hold – are willing to hold on indefinitely until it is ready to bring them aboard. The question then becomes: What's the hold-up? The answer seems to be that the platform still resembles more the Folio unit Goldman acquired in 2020 than the Goldman overhaul that was supposed to evolve out of it by now. Of course, some advisors are saying: We don't care as long as the Goldman Sachs brand is emblazoned on our client statements. Goldman is likely wise not to take them up on that offer until it is fully confident it can do a top-notch job at scale. The fact that amid all the muddle, it is bringing on a very vanilla Merrill Lynch team, of upmarket size and sophistication may or may not be a leading indicator. But it may continue to constructively freeze the market for a certain number of low-hanging natural fits.
Goldman Sachs has announced its first RIA custody win in a press release but is still yet to clarify whether it is fully open for business to the greater RIA community.
The New York City investment bank will use the partially overhauled version of its 2020 acquisition, Folio Institutional, to park assets for Beverly Hills Private Wealth, a Merrill Lynch breakaway.
The Goldman Sachs platform is the bomb of digital RIA technology and Wall Street armaments, said Bill Dalton, head of new business at Goldman Sachs Advisor Solutions. Dalton was a major poach from Pershing in 2020 because of his rainmaking experience.
"Our goal is to offer advisors the best of both worlds - the freedom to operate as an independent RIA and the ability to access institutional-grade products and services," he said.
Goldman issued a statement separate from its release, acknowledging that it is a late-coming party crasher to the big-brand duopoly formed by Schwab Advisor Services and Fidelity Investments.
"There is room for a new custodian in the independent wealth management space, and we are excited to bring more choices to the market,” it reads in part.
No harbinger
There is especially room for a player with a brand that appeals so much to prospective breakaway brokers from Wall Street firms where Goldman Sachs is king.
"Goldman Sachs Advisor Solutions was at the top of that list - a premier choice to safeguard accounts and provide the infrastructure and platform needed," says Scott Shagrin, partner and co-founder of Beverley Hill Private Wealth in a release.
But Philip Waxelbaum, principal of Masada Consulting, a recruiting firm, also in Beverly Hills, says Goldman Sachs' recruitment of a Merrill Lynch team should not be seen as a harbinger of an onrush of RIA recruiting.
Goldman Sachs buys Folio to gain an RIA-custody toehold, and gets robo-advisors in the bargain, days after Schwab buys Motif
It has not achieved its both-worlds “goal” yet, he adds.
“They needed to put out a press release. They're buying time,” he says. “They look like their [custody] ship is sinking, and they needed to show something otherwise.”
Pressure
Waxelbaum says the pressure began to build when Goldman CEO David Solomon said that his firm was easing back on building out the platform. See: Goldman Sachs CEO confirms RIA custody service back-burnered amid exec exits, cut budgets and slipped deadlines relating to wealth management
What's curious, he adds, is that Goldman tells external recruiters to “inventory candidates” but that it isn't really ready to throw open its doors to all comers.
The Goldman release, issued today (Oct. 7), comes just three days after RIABiz published an article about Goldman's flagship RIA client, Steward Partners, signing with Pershing to cover for its Raymond James departure. See: Pershing wins $27-billion Steward Partners RIA custody account after Goldman Sachs boots launch and pressure built for an alternative to 'jilted' Raymond James
Story Timeline
The move came after its original engagement with Goldman Sachs proved premature.
Winning business
Though it's true that Goldman wasn't ready to take on Steward, there were extenuating circumstances, according to a technology vendor familiar with the software challenges.
“Don’t’ forget [Steward] was on Raymond James, which is fundamentally a very closed tech system, and part of Ray-Jay and that Ray-Jay has in-house tech, and they don’t like anything outside Ray-Jay.
Goldman Sachs lifts two superstar RIA recruiters from Schwab and Pershing, tipping hand on a big push into the RIA space, targeting early 2021 custody launch
“So when you all of a sudden go from [proprietary legacy] Ray-Jay and say you wanna' become innovative that's gonna' be a struggle.”
Yet Goldman in its statement says it is encouraged by acceptance from a such a quality advisor.
“Winning the business from an RIA of this caliber is a testament to all the hard work our team has put into further enhancing our solution.”
Full service promise
The Beverly Hills breakaway “collectively managed” $1 billion at Merrill, but the firm's initial SEC ADV says it does not yet know what assets it can report as AUM. See: Goldman Sachs buys Folio to gain an RIA-custody toehold, and gets robo-advisors in the bargain, days after Schwab buys Motif
The firm's ADV2 brochure says it will use “Folio” as its custodian, and that it will charge a fee of no more than 200 basis points and an hourly planning fee of $1,000 an hour.
Yet Goldman asserts in its statement to RIABiz that the RIA will get Goldman's full resource suite.
“Goldman Sachs’ investment solutions, including alternative investments, lending, capital markets, intellectual capital, as well as investment research and insights, are well-known as sophisticated options for institutional investors,” it reads.
“We are excited to make these solutions, previously reserved for institutional clients, available to the RIA community and the investors they serve.”
Evolving initiatives
In an interview with Wealthmanagement.com, Goldman Sachs counseled never to expect a formal launch date, partially because it already launched and partially because the platform will continue to evolve.
“We did officially launch in September of ’20 when we acquired Folio Financial,” said Jeremy Eisenstein, co-head of the RIA custody sales team within Goldman Sachs Advisor Solutions, in the interview.
“Since then, we’ve been actively providing custodial services to a significant number of clients, some of which have joined us post-acquisition.”
“Despite the press, we really have never set a timeline. The real reason for that is that we are and will continue to constantly evolve this platform. New capabilities and solutions will be strategically brought out to market at varying points in time."
The firm declined to disclose total RIA assets on the platform.
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