Goldman Sachs, with $1B RIA custody win, grows UHNW attain

Because the race heats up amongst registered funding advisors to cater to ultrawealthy shoppers demanding bespoke companies, Goldman Sachs has planted one other flag within the quickly rising marketplace for RIAs serving the well-heeled. 

Prime Capital Funding Advisors, an RIA based mostly in Overland Park, Kansas, announced on Wednesday it had chosen Goldman Sachs Advisor Options, the former Folio Monetary, as an extra custody supplier. 

The Goldman Sachs arm, a a lot smaller participant within the burgeoning market of economic establishments that take “custody,” or handle, belongings and buying and selling for shoppers of RIAs, goals to supervise greater than $1 billion of RIA belongings on behalf of PCIA’s shoppers. PCIA had over $20 billion of belongings beneath advisement as of April, in line with a statement announcing the arrangement, and makes use of a number of custody suppliers, together with giants Charles Schwab, Constancy Investments, Pershing and LPL Monetary.

The brand new shopper is a two-for-one for Goldman. 

Not solely does the Wall Avenue funding financial institution achieve momentum within the red-hot RIA market, however it additionally beneficial properties floor among the many ultrahigh internet value shoppers that bigger RIAs, which embrace many former high wirehouse advisors, sometimes serve. The custody association permits Goldman to open up its cross-bank choices to shoppers of the RIA  by the brand new One Goldman Sachs program — furthering Goldman’s aim of advancing within the ultrahigh internet value house. The financial institution declined to say what number of RIAs it counts as custody shoppers however disclosed in a February presentation that it occupied 8% of the primary ultrahigh internet value market, within the Americas, for wealth administration belongings. 

The custody toehold
Impartial advisors are required to carry shopper belongings in “custody,” which means at establishments akin to banks, broker-dealers, under rules set by the SEC.

RIAs are rising sooner than every other kind of agency in U.S. wealth administration, at an annual asset development price of 12% since 2016 — in comparison with 7% on common throughout all different conventional advisor companies, in line with a 2021 McKinsey paper. By driving the wave of RIA growth by custody companies, Goldman may also develop its presence within the eyes of the richest shopper phase. 

“Our answer is designed with the understanding of the place the advisory business is headed, not the place it has been,” Cooper Rey, the top of RIA Gross sales & Buying and selling, International Banking & Markets Division at Goldman Sachs, stated in an e mail. “As shoppers count on extra from advisors, advisors will count on extra from their custodians, so our shift away from legacy know-how techniques which regularly hamper innovation and development, shall be one in all our core aggressive benefits.” 

Some legacy massive broker-dealers, like wirehouse Wells Fargo, have been criticized for dragging their toes on upgrades of tech companies for advisors. Advisors routinely cite sturdy tech platforms, together with custody, as a key promoting level to shoppers.

“GSAS gives the companies, know-how, and help to serve an vital and rising phase of our shopper base with much more care and a focus,” PCIA CEO Glenn Spencer stated in a press launch asserting Prime Capital’s choice. 

Scott Duba, the chief funding officer and managing director of wealth administration at PCIA, stated in feedback to InvestmentNews that Goldman’s choices of different investments had been interesting for shoppers. PCIA didn’t reply to FP’s repeated requests for remark. 

“Our shoppers make investments extensively in various belongings, and we want a custodian with the aptitude to deal with these investments on the service stage our shoppers count on,” Duba was cited as saying, including that GSAS’s sturdy digital platform with a “subtle service tracker and on-line chat performance” in addition to direct entry to a service group as compelling attracts. 

PCIA will use its latest custody supplier to cater to its ultrahigh internet value shoppers with Goldman’s choices in areas like various investments. Goldman’s custody companies are “for PCIA’s largest and most advanced shoppers,” the discharge stated. 

A Goldman report earlier this month confirmed that shoppers in a single phase of the ultrahigh internet value, household workplaces, invested on common 44% of their portfolios into options. Ultrahigh internet value traders, sometimes outlined as these with at the least $30 million in investable belongings, exterior of the household workplace sphere invested as a lot as 20% to 25% in alternatives, Goldman stated in a launch on the report. 

The ‘Tiffany’ of custody
Whereas Goldman’s custody enterprise continues to be younger — the white-glove financial institution secured its first RIA shopper, Steward Companions, in 2021 — its model cachet provides it an added edge out there that established gamers like Pershing, LPL and Constancy do not have, in line with business recruiter Michael King. 

“Goldman is the Tiffany of brokerage corporations. When folks hear that, ‘oh my God, you are with Goldman, you have to be a very good agency,'” King stated. For smaller corporations like RIAs, repute issues with shoppers, he added. 

“Different corporations in custody, like LPL, Schwab, Pershing, Constancy, do not have the identical resonance with the shoppers.” 

Constancy, for instance, with its mass-market model picture, was a non-entity to the high-end shoppers of 1 advisor King has been serving to on a transfer. “They did not know what Constancy was,” he stated of the shoppers. “If that they had Goldman, the shopper wouldn’t have stated a phrase.” 

Prime Capital, previously referred to as Lawing Monetary earlier than founder Kerry Lawing offered most of it in 2017 to insiders who then rebranded it as PCIA, has grown quickly lately, together with by a string of acquisitions. Slightly below a decade in the past, in 2014, the previous Lawing Monetary reported over round $3 billion in belongings beneath administration, which means its books grew practically seven-fold since then. 

Previously 18 months, PCIA added 43 advisors. It has ambitions to rival “the biggest non-public financial institution and wirehouse platforms,” Duba stated within the release

The agency listed Constancy, LPL, Pershing, Schwab, TD Ameritrade and Northern Belief Company amongst its accredited custodians, in line with one of many brochures in its SEC records

“Prime Capital’s addition of GSAS is consultant of demand we’re witnessing from a broader set of RIAs throughout the business pursuing a extra holistic shopper expertise,” Scott Wetzel, the CEO and co-founder of funding financial institution SkyView Partners, stated in an e mail. SkyView, which can also be a specialty lender, works completely with unbiased advisors and RIAson mergers and acquisitions. 

Wetzel stated he had seen RIA demand “notably because it pertains to UHNW shoppers and their banking wants that exceed the FDIC normal deposit insurance coverage protection restrict of $250,000,” within the wake of the financial institution disaster this spring. “As such, we’re helping a considerably increased quantity of RIAs trying to find totally FDIC insured options as much as $150 million per depositor for the reason that Silicon Valley Financial institution failure.”