Three Goldman Sachs executives are launching a new registered investment advisory firm in an unusual way—with a long-term capital partner and no clients.
Co-CEOs Gary Roth and Mike Capelle, along with President Jason Gordo, introduced Modern Wealth Management on Wednesday. The trio has experience, connections, $200 million from private-equity investor Crestview Partners and big plans for growth—but no advisors, no tech stack and no assets to speak of.
Between them, the team has already founded two successful RIAs and sees an opportunity in the current landscape, said Capelle. “There’s been an evolution in the industry,” he said. “We believe the leading edge of the industry—in the RIA space—is to really broaden the set of services available to the client.”
Modern Wealth plans to build a national full-service firm rapidly through acquisition and organic growth initiatives. The management team is already in talks with firms to establish anchor offices, beginning with one in each U.S. time zone. They declined to name names but noted advisors will be brought in on a W-2 basis and acquired firms will adopt Modern Wealth branding.
“We’ll have more to share, probably in the not-too-distant future, around both people and how we’re going to grow fast,” said Gordo.
“A good size anchor office is probably in the one-to-two billion (dollar AUM) range,” he said. “We're looking for somebody who has actually built some people, some systems and some processes that we can go in and take advantage of and then enhance in a way that we know is possible given our backgrounds.”
Capelle and Roth co-founded United Capital in 2004 with Joe Duran (who announced in February he also would be leaving Goldman Sachs) and acquired Valley Wealth, founded by Gordo, in 2014. After growing to $25 billion in assets and 220 advisors, United Capital was acquired by Goldman Sachs for $750 million five years later and all three remained with the firm. They have a combined 66 years' experience in various leadership roles around platform development, operations and growth at the two firms.
Roth and Gordo also founded fintech companies in their earlier careers, with Gordo selling his “gamified” financial planning software FlexScore to United Capital in 2016.
The team plans to leverage that experience to build a “modernized” firm that utilizes a team approach to provide a full suite of responsive services and offers a strong career path for like-minded next-gen advisors.
After leaving Goldman Sachs last year and developing the Modern model, the first thing they did was seek a capital partner.
“It’s more typical to approach the capital discussion as you need it,” said Capelle, pointing out that some firms are seeking recapitalization opportunities every two or three years to continue growing. “We thought we would solve for that upfront and find a partner looking to get into wealth management who hasn’t found the right partner for whatever reason.”
Enter Crestview, a private-equity firm with investments in the financial services sector that had long been seeking to get into the RIA space and has experience building companies around management teams in other industries.
“It's been an area of long-term interest for us, so we're really thrilled to have found the team with a great track record and a business strategy that we think will be unique and really resonate in the market,” said Crestview Partner Dan Kilpatrick.
For a $200 million equity stake, Crestview will be majority owner of the new firm, providing support while Capelle, Gordo and Roth retain control of development, growth and day-to-day operations.
“They’re essentially betting on the networks and know-how of the management team,” said Brandon Kawal, principal at Advisor Growth Strategies. Pointing to firms like Dynasty Financial Partners and Rockefeller Capital Management, he said there are examples of the strategy being successful in the RIA space and he expects to see more of it as private-equity interest remains high.
“Our goal is to spend the $200 million over the next three to five years to build a scaled, national RIA,” said Kilpatrick. “We’ll use the capital to hopefully do a number of acquisitions as well as fund growth initiatives.”
“We're very, very early at the starting blocks,” said Gordo. “The advisors that we are speaking with are excited that they get to be part of something that's in the very early stages. They get to come here, have a voice and the ability to share ideas on how to grow this thing, and share ideas on how to serve clients and be part of the development of a really nice business.”