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For years, the CEO of United Capital has been looking for a financial partner who can run his business on a multi-billion dollar IPO and grow it. In the end, he opted for the high bid and the murky role in a Wall Street machine.
Joe Duran has achieved his goal – and has reached an important milestone in the field of RIA – by selling $ 24 billion in assets under management for $ 750 million to Goldman Sachs Asset Management, but it's a bitter-sweet consolation price well below his ambitious vision. Now his own future is at stake.
The CEO and founder of United Capital Advisors has finally entered into an agreement with Wall Street's Wealth Management Unit after abandoning its goal of seeking a white knight in the short-term and future. a long-term IPO, according to sources and previous press articles. See: Goldman Sachs is preparing a resounding start in the RIA distribution business, which adds (probably) $ 24 billion to United Capital to $ 35 billion in assets, Ayco, for a turnover of $ 59 billion; months after the purchase of the S & P RIA lure
"Joe did everything in his power to prevent this, and Joe was trying to find an agreement elsewhere," said the CEO of a multi-billion-dollar RIA who is familiar with Duran's unsuccessful efforts.
Duran's stake in United Capital fell between 7% and 15%, although he told InvestmentNews that it is between 10% and 20%. When Duran first sold to GE Asset Management in 2001, it held a 15% stake, which earned it $ 13 million.
Ultimately, United Capital's owners wanted a faster payment and Duran's hands were tied.
Goldman Sachs has emerged as the highest bidder. "The main buyers are strategic buyers, like a First Republic or a Goldman Sachs." The problem with RIAs is that we are supposed to be independent, "the source said.
In other words, the best way for an independent RIA to get the best possible dollar is to sell to Wall Street and risk losing much of its independence, control of fate and identity. her brand.
And you Goldman?
Goldman Sachs declined to comment through spokesperson Patrick Scanlan a number of questions previously sent via email. But his press release hardly recognizes Duran and gives little guidance on how it will fit.
The statement only indicates that Duran will join Goldman Sachs "as part of the deal".
Asked about his status at Goldman by InvestmentNews, Duran only stated that he held "management positions".
Goldman has also reduced the transaction with United Capital in other ways. David M. Solomon, President and Chief Executive Officer of Goldman Sachs, described United Capital as a sub-subsidiary of existing subsidiaries – Private Wealth Management and Ayco.
"We have a leading franchise in the wealth management business, driven by our leading Private Wealth Management and Ayco offerings, which will be the cornerstone of our business while implementing our long-term investment strategy." to offer our customers solutions at all levels, "said Solomon. .
Goldman's publication raises serious concerns about Goldman's intention to use Wall Street's old wall game: Use employees from city and suburban branches to sell high-margin investment products, cooked in high-rise buildings New York.
"United Capital will help accelerate this strategy by expanding our reach, allowing more customers to access Goldman Sachs' intellectual capital and investment capabilities," Solomon said in the prepared comment.
In an interview with Citywire, Duran rejects the idea that it will allow Goldman Sachs to put pressure on United Capital's advisors.
"There will be no product for sale," he told the British publisher several hours after Goldman Sachs confirmed that he would buy his RIA of a value of $ 25 billion. "This is not part of this discussion."
Citywire has refused to put pressure on Duran on how he defines "product promotion" and how his comments agree with Solomon's assertion that UC end customers will have more "capabilities". Investment "in GSAM.
Fading Glory
An executive at an RIA provider who asked to be anonymous, doubts whether it is Duran or the United Capital brand will last a long time.
"I imagine that once Joe is gone, these two companies will collapse." Ayco clearly has a better-known brand, so maybe go with that. "
Goldman Sachs acquired Ayco in 2003, with assets of approximately $ 4 billion. This acquisition is considered a successful acquisition in the sector. Now, with $ 35 billion, he could be ready for his future bigger destiny, says an RIA executive, not for attribution.
"Ayco is very important to GS because it allows them to cover (and control) the C suite of public companies," added the executive.
"It is these people who then hired their investment bank." Ayco is engaged in tax and reporting for executives as well as asset management. senior executives covered by Ayco Family Office and Goldman Sachs Private Wealth Management, followed by Ayco consultants and less experienced United Capital employees.
"All stand-alone customers can use Marcus, and Goldman has an employee mentality, so they like the United Capital and Ayco advisors to not focus on asset management, and the back of the house takes care of their business. the construction of the port. " See: While Goldman Sachs keeps the secret on the mark of a consulting robot, Goldman's observers see the outlines of Lloyd Blankfein's grand strategy if virtual consulting takes shape
The shiny side
Leading industry players believe that it is important to look at the Goldman / United Capital deal on the bright side of things, much like the purchase of Edelman Financial by Financial Engines or the first IPO of Focus. See: Ric Edelman's RIA Empire will merge with traditional Mutual Fund Stores stores into a $ 3 billion deal that will privatize Financial Engines
"Although it is not the finish line, arriving at a significant point of reflection like this for Joe and his team is, I'm sure, very rewarding and a lot of interesting. we in the industry today say "congratulations" to Joe and the team, "said Shirl Penney, CEO of Dynasty Financial Partners, in an email.
"In the long run, I think it will be a good data point on the timeline showing the growth of the RIA space as an important inflection point that has further helped accelerate the movement." Dynasty underpins RIAs with combined assets under management of approximately $ 35 billion.
A former equity owner of United Capital, owner of shares, said that Goldman Sachs and Duran would hear very well to offer wealth management to large-scale masses.
"I'm optimistic about this deal," said Gail Graham, director of Graham Strategy LLC and former director of marketing at United Capital.
Matt Crow, president of Mercer Capital, says that he shares Graham's optimism, but that the success of the deal could depend on whether Goldman Sachs gets Duran's value or not.
"I am very interested to see how Goldman uses Joe Duran," he says. "He would be an excellent spokesperson for Goldman Sachs to join the RIA community and recruit more companies – I do not know if GS will use it or stay there for a period of consultation."
Sell Goldman
Having United Capital advisors selling Goldman Sachs' investment know-how might be more effective than it seems, Crow says.
"Are GSAM products perfectly suited to the types of companies that have a strong mass that a United Capital service? Maybe for a sub-segment of them," he wrote in an email.
"I think Solomon is trying to distribute the GS brand to a much wider audience – hence Marcus – so it makes sense to have an RIA-style platform in-house. It is an example of a market downturn, nor Goldman risk to depreciate their name ".
Marcus is the online bank of Goldman Sachs with a global asset of $ 47 billion that has been transferred under the umbrella of the company's wealth management for cross selling.
The investment process at United Capital is decentralized. Some companies use standard portfolios and many corporate partners act as their own investment managers.
"The assets are also managed through United Capital's local offices," says United Capital on page 6 of its ADV2.
"With respect to the management of local offices, the investment sub-committee managed locally by United Capital provides oversight of each IAR with respect to making decisions about its investment portfolio."
That said, RIAs allow people to live and die according to the ability of their constituents to go beyond exceptional investment management knowledge and to show their concern and heart – an alpha predator, Goldman Sachs, is not known.
It's there that Duran enters, hopefully, says Graham.
"No one has a heart as big as Joe Duran," she says. "He has a huge heart, I'm going to bet on him, I hope his huge heart will win."
In fact, for all the X's and O's in this $ 750 million merger, this could result from the way Goldman applies the talents and heart of the founder of United Capital, Crow says.
"It seems to me that not to use it would be to spoil an opportunity."
Graham advises to take a closer look at the fact that Solomon occupies a central place in this publication, as a more important factor in his determination to make the contract work so as to transform Goldman from a niche supplier to a niche provider. very rich provider in a more traditional provider. (She adds that if Solomon simply wanted the distribution, he could buy a much more economical brokerage force.)
"He has the skin in the game," she says.
Lost paradise
Duran would have preferred to prepare for an IPO.
Duran told Charlie Paikert of Financial Planning in January that he was "very likely" that a private equity firm would become its new financial partner.
The CEO of United then told FP's senior reporter that a new investor would ideally be a company that would take a significant stake in United, "making a check for hundreds of millions of dollars and saying," Keep doing what you do . you do and let us help you do it faster. "
He wanted the bridge capital to give him the time to complete his mission: to achieve his goal of accumulating RIA, which would allow him to replicate the feat of Focus Financial: an initial public offering.
An IPO promised to highlight its RIA brand, secure its CEO position and reward it with a huge gain. It would also have allowed him to continue to build his FinTech start-up, FinLife, after a solid launch thanks to a $ 30 million investment. See: United Capital begins recapitalization and continues to repopulate ranks of senior executives – both motivated by the asterisk of "under contract" assets of $ 6.9 billion
The reports are all over the map on the situation of FinLife, although most agree that it is an albatross from the united capital at the moment. That being said, Dan Seivert, CEO of ECHELON Partners, has estimated this amount at $ 260 million in his interview with WealthManagement.com.
But an IPO just was not in the cards, conceded Duran in the Paikert interview.
"If we were going to do an IPO, I'd like to do it as a multi-billion dollar business and I know we're not here today."
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