A little over one year since his feisty, independent $25 billion AUM RIA was acquired by a Wall Street titan, Joe Duran, managing partner and head of Goldman Sachs Personal Financial Management, answers questions on life and work inside Goldman Sachs, and where the firm is in its effort to bring wealth management downstream.
WealthManagement.com: Where are you on your timeline in terms of integration and contributions to Goldman Sachs the parent company?
Joe Duran: Phase one of the integration took place over the first six months. Two big changes were adopting a different regulatory structure as part of a global bank, making sure that we had the heightened levels of supervision, and adapting to different decision-making as part of a very big company. We had to get everyone oriented around how decisions get made. Also, in the fall, we moved everybody's technology over to the Goldman Sachs technology system, because we have almost 800 employees that needed to operate on a new platform.
WM: How about in 2020?
JD: Phase two took place this year. In the spring we did the rebranding work and did some testing internally on how we might work together with Ayco, Goldman Sachs’ C-Suite corporate executive advisory unit, and Goldman Sachs Private Wealth Management, the traditional ultra-high-net-worth business. And then we laid the pipes for working more collectively with both Private Wealth Management and Ayco to pick up the potential [downmarket] referrals that were available from those businesses, which serve higher-net-worth clients than we do. This is the first time that Goldman Sachs has been able to work with high-net-worth clients—clients with between $500,000 and $10 million, so we spent most of 2020 getting connected to Goldman’s Ayco and Private Wealth advisors, and working collectively with them as a team.
WM: So you’re essentially serving folks at the level between private wealth and mass affluent?
JD: Yes. We’re basically providing all of the systems, tools and advisors that we have around the country as a resource to provide our offerings to the friends and family of Goldman’s Private Wealth advisors, clients that do not reach the level of assets that would typically be true for Goldman Sachs clients, and we're offering planning at scale for executives that are not in the C-Suite and wouldn’t be served by Ayco. Many corporations want to offer services and financial planning in particular to their next level of executives who maybe don't qualify or don't have the resources to spend the $15,000 a year that might be necessary to provide full counseling. And so we're providing resources to the next segment of clients down, really interactive planning with all of our tools, all of our systems, investment and fiduciary advice, as needed.
WM: Goldman CEO David Solomon singled you guys out on the company’s second-quarter earnings call, so this must have gone well; you got several hundred referrals through this cooperative relationship.
JD: It went a little better than we expected. In the initial stages, we thought it would be good. If we had picked up a few hundred million dollars in referrals, that would have been considered a pretty significant success. But by the half-year mark, we'd had well over a billion dollars in referrals from both PWM and Ayco. We are feeling quite bullish that everything we thought would be true, which is that there's a significant appetite in the marketplace for Goldman Sachs to offer services to the high-net-worth market. This year, our second year together, we should start seeing very significant impact in new client flows to the tune of multiple billions of dollars that will benefit the parent company and, alongside all of this, a closer connection to the retail marketplace. All of our technology systems that we built, we're looking to see what elements would be applicable to the Goldman Sachs wealth management offering.
WM: Can you talk in more detail about what Goldman and its 200-person technology team has done with your tech platform?
JD: We’ve added a bunch of things from Goldman’s private wealth unit: ETFs using Goldman’s internal asset allocation methodology and a premium money market offering, which many of our clients have participated in so far. But it’s been a very light hand so far in the kinds of offerings we’ve extended to our clients; they’ve been mainly banking products. All of our clients have also benefited from the research and the calls that we have that Goldman Sachs offers all of its ultra-high-net-worth clients.
WM: What has the impact of the pandemic been like on your business?
JD: The move to Goldman helped us bring in more new assets—in the double digits—than we did as an independent firm when we had no coronavirus. So our growth rate is still significantly higher as part of Goldman Sachs, even though, as you can imagine, for most of this year, most of us have been working from home. I've been really surprised that we're still seeing the kind of inflows that we've seen.
WM: What are your plans to grow your advisor ranks? I doubt Goldman is interested in acquiring small RIAs, and you lost your M&A chief, Matt Brinker, on the eve of the closing last year and haven’t replaced him.
JD: Correct on both points. We’re adding new offices in new cities in the next few months and we expect to continue that push for some time. We currently have 244 advisors in 100 offices In 96 cities.
WM: Other news outlets have predicted that some of your FAs would leave once a Wall Street–-type compensation system like Ayco advisors are subject to is introduced to your advisors. What plans are in the works? Can we expect any announcements this year?
JD: There have been changes due to how the markets have done and how they have been, but no, there's been no structural changes to their compensation. There will not be any announcements on compensation at all. Our advisors participate in their income stream and have a different structure from the traditional compensation of Wall Street financial advisors. We don't expect to make any announcements or change anything.
WM: Any other near-term goals?
JD: We have three big goals for the coming year. The first one is to establish Goldman Sachs PFM as a brand for personal advice for high-net-worth people to seek out. The research we've done suggests the vast majority of these people don't even know that they can become Goldman Sachs clients yet. We just changed our name at the end of April. Our work this year is to make sure people are aware of that. Second, we do expect to add significantly to our platform and enhance our platform meaningfully. And that might mean alternative investments. It might be more banking products. It might mean evolving the technology to expand to many of the things that Goldman Sachs does best today for its Private Wealth clients, so you’ll see an evolution of our platform in a multitude of ways, from investment solutions to technology to banking products. And then third is we expect to be significantly bigger. We do think that we will continue to grow, we will add offices, we will continue to expand measurably from where we were, because most of our integration work has been completed. We've got another few months of work to do.
WM: In what ways will you promote the brand?
JD: One way you do that is by doing great work for your clients. But we do expect that there will be some credibility builds. Most of all, though, it's just awareness. We're working on several strategic partnerships that will raise our visibility, let people know we're available. Of course we’re working with Ayco and its corporate clients to let them know that we are available to provide services to those participants. Right now, it's not that complicated. Today, our advisors are very, very busy with all of the new clients that they're bringing in right now. So we've got to make sure we have the capacity. But we’ll eventually target new clients through digital. We’ll be testing that in the fall.
WM: How have your advisors taken to joining a Wall Street firm after being independent for so long?
JD: The transition has been remarkably calm. Most of our advisors feel incredibly relieved and happy to be part of Goldman Sachs. The firm has been remarkably forward leaning in educating, training, being incredibly employee-sensitive. We've also had incredible communications to inform our clients. And we've had a bunch of really interesting events like a private concert for our clients that we did collectively with Goldman Sachs Private Wealth. We've even had a private cooking instruction during the pandemic. We've done all kinds of things that would simply not have been possible if we were United Capital. In almost every way, COVID highlighted the benefit of being part of an incredible company like Goldman Sachs for our employees, our advisors and our clients.
WM: What does your typical day look like as head of Goldman Sachs’ high-net-worth unit? How involved are you in day-to-day decision-making?
JD: My day starts at 5 or 5 a.m. Pacific time from Newport Beach, Calif., where I have lived for some time with my wife and three children. I closed on an apartment in Manhattan right before COVID-19 hit and was commuting there every other week, but now that’s impossible with the need to self-quarantine for two weeks before traveling back and forth. About a third of my life is interacting with corporate at 200 West, either with the folks at Ayco or Private Wealth. Another third of my day is working with the platform and what we're doing to innovate and improve it—technology, innovation, the client experience. The last third of my day is working with our advisors and clients. I do that directly and indirectly, sometimes it's with PFM’s executive team, working on that function; sometimes it's directly with clients and advisors.
WM: How much of your management team made the transition to Goldman?
JD: All of them. We had one departure, which was preplanned. But no one that I’d consider mission critical. Matt Brinker, our former M&A head, was here right up to the close but decided to leave [Brinker joined Merchant Investment Management, where he is a managing partner focused on corporate strategy, equity partnerships and growth strategies for partner firms]. I have nothing but love for that. He was with me for over a decade and he wanted to continue to do acquisitions and be in an independent framework. I think he wanted to be a principal in some way. He did very well at United Capital and earned everything he got. And we were very supportive of him finding a new career and doing something that let him continue to operate and do the things he was doing in a more independent structure. So we're super supportive of him in his new ventures. I still talk to him and interact with him quite frequently.
WM: What’s it like to be an executive at a large Wall Street firm and how would you describe the chain of command there? You left GE Capital not long after you sold it your first business, the investment management firm Centurion Capital. What is different here?
JD: I report to Tucker York, global head of Wealth Management. Every couple of weeks I interact with Eric Lane and Tim O’Neill, the global co-heads of the Consumer and Investment Management division. I talk to the executive office quite frequently as well. It’s a very flat organization. The partners tend to be quite fluid. You do have reporting lines, but it's not like anything I've experienced before. When I sold Centurion to GE, it was very hierarchical. Goldman is, personally, a remarkably different experience from what I had at GE. This organization tends to place a lot of faith and value in the partners. It's been quite refreshing. It's still remarkably entrepreneurial, even though there's clearly different levels of checks and balances. It’s far more exciting certainly than when I was running my own business. I am learning an unbelievable amount. It’s really been about just curating my days and making sure that I focus on the things that make an impact. The DNA of the firm is indescribably open. Incredibly transparent, unfailingly collaborative. Everybody's on the same page, making sure we do the right thing. It's an incredibly collegial environment in ways I could never have imagined.