Source: Goldman Sachs expected to announce sale of 'United Capital' on Monday or Tuesday, which tells more about the Wall Street bank's dysfunction than Joe Duran's old rollup

Goldman Sachs' inner turmoil is making headlines everywhere, and it will spread to the RIA world  next week. United Capital's sale is expected to be announced along with the remnants of its asset base.

The New York City investment bank may be nearing harmony on one topic – its disdain for selling financial services directly to the middlebrow public. 

The sale of the Newport Beach, Calif. RIA to the mass affluent is expected to be announced Monday or Tuesday, according to an RIABiz source. 

The source with very close knowledge of the matter told RIABiz about the expected RIA jettisoning today (Aug 18). That person conceded, however, the buyer and price are still unknowns. 

LPL Financial and Advisor Group, the latter more decidedly, are being floated as probable buyers, said the source, who asked not to be named.  The deal will be constructed to recognize that many remaining advisors and much of the $13 billion may not be inclined to stick around, the source added.

Citywire also reported today that Goldman is selling United Capital based on a source (not our own) without specifying the expected timing.

On Monday, Aug. 21, Goldman issued an emailed statement to Dow Jones, Reuters, Bloomberg etc. that said in part about United Capital: “We are currently evaluating alternatives for that business as we determine where to invest our resources and where we see the greatest opportunity.”

Goldman Sachs revealed in its newest ADV for the unit in mid-July that United, now called Personal Financial Management, has only about $13 billion of assets under management (AUM). It had $25 billion when Goldman bought United in 2019 for a staggering $750 million. It told the wire services that it “oversees” $29 billion but declined to explain how it compiled that sum total.

Foothold remains

Goldman's sale of United Capital isn't a complete exit from fiduciary wealth management or the RIA business.

It still holds Ayco, which manages $28 billion from Albany, New York. The Ayco unit, however, is more in line with Goldman Sachs's business-to-business B2B model. 

The RIA focuses on CEOs of Fortune 500 companies and the like, specializing in executive compensation.

Goldman Sachs also seems to be staying with its upstart B2B RIA custody unit, despite growing pains. It recently cozied up to RIA elite like Peter Mallouk. See: Peter Mallouk grants Goldman Sachs a 'multi-billion dollar' RIA custody opportunity but only after meeting his co-equal president in the Goldman c-suite

As viscerally negative as RIAs are about Goldman owning RIAs, the opposite has been the case with Goldman's entry into the RIA custody space. 

RIAs are going out of their way to grant Goldman the benefit of the doubt that it will provide good service and that it will persevere, despite low profit margins. See: An RIA 'gambled' on Goldman Sachs to custody client assets because he saw folksy TD Ameritrade-like service wrapped inside a gold standard brand -- with no lane swerves

Though Salomon was Goldman CEO in 2019 when the United Capital deal was struck, it came on the heels of Lloyd Blankfein's departure in Oct. 2018. 

Blankfein got caught up in the then-young fintech revolution when people still believed robo-advisors – or some other algorithmic spitfire – could disrupt wealth management, hence the sense that market leadership might be up for grabs. See: As Goldman Sachs' badly kept secret about branding an advice robot leaks out, Goldman-watchers see contours of Lloyd Blankfein's grand if 'scattergun' virtual advice strategy take shape

Avoiding Wall Street

Still, Salomon was happy to take that starry-eyed Blankfein fintech mantle and raise him one by buying United Capital and its FinLife software unit. Goldman Sachs banking on David Solomon to be a catalyst for more RIA-ification, getting hip with millennials, diversifying firm... and keeping bankers happy

The RIA community was split in its reaction to Duran selling out to Goldman Sachs.

While admiring the pluck of the done-good kid from Zimbabwe, who parlayed an RIA startup into a Goldman Sachs partnership, most RIA afficianados also felt disgust at the principle and the rhetoric.

The whole idea of the RIA business was to get assets and people away from the Wall Street ethos of product sales. 

Selling the unit wholesale to the apex predator of the whole ecosystem had undercurrents of betrayal, RIA executives, recruiters and wealth managers agreed. See: Joe Duran will co-develop Goldman Sachs unit aimed at outsourcing to non-Goldman RIAs after 'magic' never materialized for direct-to-consumer RIA

Duran seemed disingenuous when he insisted to reporters – and as a speaker at events –  that he sold the RIA because future RIAs need the resources and full arsenal of a bank to thrive.  See: Peter Mallouk and Joe Duran described the RIA business like they were from two separate planets, spinning heads at WealthStack

Internecine war

Still, Duran might never really have stood a chance to prove his vision. He likely got caught up in the larger crosscurrents of Goldman Sachs's “war with itself” as the Wall Street Journal reported in June.

In November a year ago, RIABiz reported that the New York City investment bank was in a six-year quest to answer its penultimate, soul-defining question: Is it a “vampire squid” investment bank or a budding middlebrow wirehouse? 

A succession of chief executives have grappled with the bank's long-term future in the burgeoning digital banking world. It hasn't been easy. 

Solomon, who took over the executive suite from Lloyd Blankfein in 2018, is in the middle of his third restructuring in the last four years. 

The Journal traced much of the current Goldman headaches to a hangover from its decision 24 years ago to go public, hence supplanting its vaunted partnership structure with a traditional c-suite. 

Yet, it still maintains an internal “partnership” of about 420 members, “many of whom think they’re just as important as the CEO,” the Journal noted. 

Goldman Sachs conceded a certain level of partner turmoil to The Journal but cast it as a healthy intellectual process that would make the company stronger longer term.

It remains to be seen if the squid can save itself. 

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