The influx and demands of private capital in the RIA space increasingly leave little distinction between the largest national RIAs and wirehouses, according to Rise Growth Partners Joe Duran.
During a conversation with WealthManagement.com Managing Editor Diana Britton at Wealth Management EDGE at the Diplomat Beach Resort in Hollywood Beach, Fla., Duran said the industry was operating in an environment where anyone who wanted a planner could get one, including from large national firms.
However, many of these firms are partly owned by private equity, which Duran considered “money with no instinct or desire to help the underlying consumers;” smart people run them, but at heart they are “economic creatures”.
“So they're going to add leverage, they're going to force changes that aren't necessarily good for clients, and there's not a huge difference between the big national RIAs and the telcos, except that they have slightly different rules, he said.
Since advisors are available everywhere, Duran said the RIA space shouldn't be viewed as a growth industry, but a battle for market share. He worried that the glut of firms buying other firms could leave both parties in a worse position by diluting their brand. Large firms have done well with operational excellence.
“Unfortunately, once they do a sponsor-to-sponsor deal, they sell their soul, they have to do a mountain of acquisitions, they don't integrate them, and now you have a bunch of advisors under one brand, but no consistent distribution , no promises made, serving every customer the same way,” Duran said. “How can they win?”
Duran acknowledged that his former firm, United Capital, had made acquisitions, but said the firms it bought were consistently better at getting the deal done. However, Duran's concern for larger RIAs is that they may not see an exit if they want to be acquired. The bigger wires won't buy them, he thought, and the public market won't pay what they want.
“So, is it sponsoring to sponsor sponsorships? How many times can this happen before someone says, 'There's got to be an exit sign here somewhere,'” Duran said. “I look and I don't see anything in these big national firms that I wish I could have built.”
Duran founded United Capital in 2005, and in 2019, Goldman Sachs bought the firm for $750 million as the bank's effort to expand its wealth management services to the mass affluent market. Duran joined Goldman and United Capital was rebranded as Goldman Sachs Personal Financial Management.
But in 2023, Duran left Goldmanand within months the bank was offloading the former United Capital business. Creative Planning chose to buy the companyexpanding its total assets to nearly $275 billion. Observers said WealthManagement.com RIA had “never found a home” at Goldman Sachs, with one former United Capital adviser saying Goldman had “killed everything the firm stood for”.
In his EDGE conversation, Duran said Goldman had decided they needed to “get to their core” and that the limitations inherent in operating in that environment were a strain on everyone involved.
“The brand is powerful, but if you're a global bank, you have to put in place a number of controls that are why Goldman has the reputation it has,” he said.
In particular, the controls and systems in place at Goldman imposed a “heavy toll” on United Capital's individual businesses and the broader institution, a cost that was ultimately too high.
“Any business that buys a business has the right to change their mind,” Duran said.
Duran launched Rise Growth Partners earlier this year. The company will take minority investments in next-generation RIAs with between $1 billion and $5 billion in assets under management and help them become national platforms with more than $10 billion in assets.
In February, Rise Growth Partners announced it had raised $250 million from private equity firm Charlesbank.