Joe Duran will co-develop Goldman Sachs unit aimed at outsourcing to non-Goldman RIAs after 'magic' never materialized for direct-to-consumer RIA

Brooker's Note: Freedom isn't free. Joe Duran is giving up his salary as a Goldman Sachs manager and the compensation that flows from a hallowed GS partnership for something that may ultimately be more valuable, satisfying and empowering… free agency. Duran may yet have a second act within Goldman Sachs by technically exiting and taking the inglorious title of “consultant.” Having made his fortune selling his RIA rollup to Goldman Sachs and spending four years inside learning its ways, he's having a go at what skeptics call a pretty darn good idea that he may well be suited for. Go figure. What I gleaned from talking to Joe and Goldman Sachs staff is they all genuinely like each other. They have just come to a very mature understanding that it'll be a healthier relationship long-term if they do business as two separate entities – especially in courting RIAs who found cozy relations between the man and company was less than ideal for evincing impartiality

Joe Duran's days as a partner and senior executive at Goldman Sachs are almost over, but his role at the New York City investment bank still lives. 

The Newport Beach, Calif., executive will leave W-2 employment for a more precarious 1099 consulting contract with a perk: Duran has a license to switch hats to help free-standing RIAs use Goldman Sachs to compete with every RIA – including the unit he led the past four years.

The deal is a win-win. Duran is about to reclaim his mojo as an outsider while still retaining an insider connection to the bank.

Duran granted RIABiz an interview during his cab ride from the airport to the Goldman Sachs partners meeting in Florida yesterday and acknowledged it will still take a few weeks to form a more detailed plan.

“We're a long way from done,” he said, drawing kudos, nonetheless, from industry watchers. See: 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

It's still a good start, says Tim Welsh, president of Nexus Strategy.

“It has potential, for sure, because Joe is the best salesman on earth, and you put that together with Goldman, and you have the semblance of a plan.”

“I'm finding if I'm a partner it's difficult [to evince impartiality to RIAs],” Duran explains.

“I happen to be the weird intersect between Goldman Sachs and the RIA. I can [now tell an RIA] when Goldman Sachs has the world-class [solution] and when they need to look in other places."

Real power

Under the new arrangement, Duran, 55, has been stripped of his title and duties as CEO of Goldman Sachs Personal Financial Management; he has already been scrubbed from the corporate website. See: Goldman Sachs turns big page on United Capital with big changes for Joe Duran and FinLife, giving its home-grown executive money, mandate and HR muscle to create national RIA

David Fox will become head of Personal Financial Management (PFM) after already claiming the title as head of PFM Advisors. 

Duran, however, is now working in tandem with Padi Raphael, Goldman Sachs global head of third-party distribution. That is allowing him to redirect his impetus from a business-to-consumer model to a business-to-business model where non-Goldman RIAs are the chief customer on behalf of consumers.

Why be good when you can be great? Raphael told Wealthmanagement.com in an interview yesterday.

“While I think we’re pretty good at individual business lines serving our clients, our real power and our real magic as a firm is bringing that together and operating as a firm,” she says.. 

“To that aim, for the last year, I’ve been spearheading an effort bringing together a dedicated team of senior leaders across the firm who have been working together to really think about how we can present Goldman Sachs as a holistic firm to the RIA community."

Connecting the pieces

The idea is to take the existing product and service inventory of Goldman Sachs and make it accessible to RIAs. 

The primary means of that is to give an RIA a dedicated Goldman Sachs contact that can negotiate across silos of banking, alternative investments, structured notes and asset management.

The idea makes sense for Duran and the investment bank, says industry recruiter Philip Waxelbaum.

“It's as good a starting point as any,” he says. 

“They collectively realized that Joe's greatest strength is to develop a delivery vehicle. It's good for Joe because he's good at it. It's good for Goldman because it's not good at it.”

What exists now is largely baffling to an RIA.

“”It's certainly not as well coordinated as it should be," Duran says. “Can we bring it together and not in a product-centric way but in a client-centric way?”

Big questions

That's where Raphael, a trained neuroscientist turned financier, comes in. 

“She is incredibly humble and knows all the parts of Goldman Sachs,” Duran says. “I think she'll stand big as an RIA voice.”

Her job is to have Goldman Sachs inventory delivered massively – something she gets that RIAs could unlock, Waxelbaum adds.

“That's a wildly profitable possibility,” he says. “They could take in major deposits.”

Still, Raphael is faced with big questions about how to execute the plan.

“Someone has to market it. Someone has to sell it,” says Welsh. “That creates a whole new layer of overhead.”

Plus, Duran says he has learned a lot about Goldman Sachs, its people and its products since 2019, when he sold United Capital to the firm for $750 million and became a manager.

One lesson he learned is that Goldman Sachs is willing to change tack. Goldman initially gave wealth management more agency as its own discipline and service offering by separating it from asset management. 

Fat margins

Last October, Goldman again put the two into the same Goldman Sachs Asset Management (GSAM) division with the $2 trillion-plus of asset management assets setting the tone. See: Goldman Sachs fought the squid, but the squid won as CEO David Solomon puts the United Capital-Ayco RIA back under the control of house asset managers

The wealth management assets, including legacy Ayco and United Capital, are still just about $120 billion of AUM.

The new RIA delivery unit will not be a way to sell Goldman Sachs custody services necessarily. See: Goldman Sachs CEO confirms RIA custody service back-burnered amid exec exits, cut budgets and slipped deadlines relating to wealth management

“Most advisors live where they live,” Duran says. 

Indeed, Schwab and Fidelity largely own RIA custody with about $4 trillion combined. See: In rare form, Schwab's Bernie Clark calls out rivals -- not least Fidelity, Goldman Sachs and LPL -- by name and warns them about challenging Schwab's prohibitive custody business domination

Duran is absolutely right not to worry about winning custody or going directly to the consumer, Welsh says.

“Retail margins are fat, but margins are also fat with the advisor,” he adds. “Any institutional company that tries to go direct to the consumer … it never works. RIAs already know Goldman Sachs. You don't need a Super Bowl commercial.”

Duran agrees.

“It's more in line with who we are already,” he says. “It's not that big a step function.”