NEW YORK - David Solomon is going hunting. The Goldman Sachs boss is courting wealth adviser United Capital Financial Partners in what would be the firm’s largest deal since the financial crisis. The $23 billion in assets Goldman would acquire are a drop in the bucket, but they bring the kind of predictable earnings that Solomon wants. He’s not the only one.
Registered investment advisers (RIAs) used to be at the sleepy end of the U.S. money business, but that has changed as people increasingly prefer to have advisers manage their money for a flat fee rather than invest with commission-hungry brokers. That in turn has sparked a wave of consolidation by firms looking to capitalize on the opportunity, and to develop the technology needed to handle ever-growing client lists. Some of the biggest firms, like Focus Financial Partners and CapTrust, boast over $100 billion in assets. That’s enough to catch Wall Street’s attention.
United Capital isn’t quite in that league, but Chief Executive Joe Duran has been on a roll-up kick since founding the firm in 2005. Today it has more than 300 investment professionals. TD Ameritrade reckons that RIAs generate 71 cents of revenue for every $100 of assets. That implies nearly $165 million of revenue at United Capital, a conservative figure because the firm also licenses its wealth-management software. And RIAs grew revenue by 16 percent on average in 2017, the latest year for which figures are available.
If Solomon does buy United Capital in coming days it would be the first purchase of a major RIA by a big Wall Street firm. Solomon has been looking for growth areas to offset the decline of staples like its once-dominant bond, currency and commodity trading operation, and to mute the swings of its merger advisory and underwriting operations. He should also be able to generate cost savings and extra revenue from putting United Capital alongside Ayco, Goldman’s advisory business which manages $35 billion for a somewhat wealthier clientele.
Wall Street has already been nibbling around the RIA sector’s fringes – including Goldman agreeing to buy a portfolio-management software company from S&P Global and BlackRock taking a stake in financial-planning software provider Envestnet. Solomon’s pursuit of United Capital will shift the hunt to bigger game.
- Goldman Sachs is nearing a deal to buy wealth-management firm United Capital Financial Partners for several hundred million dollars, Reuters reported on May 10, citing a source. The acquisition could be worth $700 million to $750 million, CNBC reported.
(Editing by John Foley and Amanda Gomez)
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