Goldman’s Fledgling RIA Custody Biz Signs on Steward Partners–Sources
Less than a year after closing its acquisition of custodian Folio Financial, Goldman Sachs appears to be elbowing its way into competition for the assets of registered investment advisory firms.
The arrangement comes as Goldman is expected to formally advertise its custodial offering in the coming months, according to a well-placed source. Having an early roster of RIAs like Steward would be a “very significant” signal for Goldman’s intentions to add large custody clients, said Tim Welsh, a former Charles Schwab & Co. custody executive who runs consulting firm Nexus Strategy and who was not familiar with the agreement.
“With someone of Steward’s status, they immediately vault into the credibility zone for larger firms,” Welsh said. “Other RIAs, seeing that they have a guinea pig, will now be much more receptive to going with Goldman.”
A spokeswoman for Goldman Sachs declined to comment on whether it had reached an agreement with Steward Partners or with any other RIAs since its acquisition of Folio, which had about $11 billion in assets under custody for roughly 450 RIAs when the deal was announced last May.
A spokeswoman for Steward Partners did not return a request for comment.
The Washington D.C.-based firm, founded in 2013 by former Morgan Stanley managers, intends to name some additional custodial partners “soon,” according to a statement from CEO Jim Gold in Steward’s announcement last week.
One of the sources knowledgeable of the Goldman agreement with Steward had noted that a multi-custodial approach will help Steward as it moves beyond its traditional wirehouse recruiting and looks to acquire RIAs with assets at other custodians.
Spokespeople for Charles Schwab and Fidelity–two of the largest RIA custodians–did not respond to requests for comment on whether the firms were in the running for, or had finalized, any custodial agreements with Steward Partners.
For Goldman, long known for its investment banking and trading units, the RIA custody expansion is its latest push into retail advice for the masses under Chief Executive David Solomon, who took over in 2019. That year, it acquired the $25 billion-asset RIA United Capital. (The bank also has a private wealth unit of around 800 advisors focused on customers with at least $10 million in assets).
The bank has been recruiting RIA business development talent in recent months including: Scott Smith, a vice president in Chicago, who joined from Pershing; Kayla Kennelly, a vice president in New York City, who joined in February from Facet Wealth and had previously been with Pershing; and Amber Murphy, a vice president for the global markets division in Denver, who was most recently a senior product manager for structured products and alternative investments at Schwab, according to their LinkedIn profiles.
Goldman’s “aggressive” hiring campaign had already put its competitors on alert, said Mark Tibergien, former chief executive of advisor solutions at BNY Mellon/Pershing, who retired last year. Still, Tibergien noted that RIA custody is not a “wildly profitable” venture without scale.
“While nobody has underestimated Goldman, there are a lot of questions as to what critical mass will look like for them,” said Tibergien, who was also not familiar with the Steward agreement. “Considering the size of their investment, they probably need to get to $200 billion or more of assets under custody to break even and much larger to be considered a material business at Goldman.”
Tibergien said that Goldman may see the burgeoning custodial business as a point of leverage in acquiring more firms to fold into United, giving it another path to grow its retail advice channel and through which to cross-sell asset management and banking products.
Goldman’s entrée into custody comes at a time of upheaval after Schwab’s takeover in October of TD Ameritrade. Goldman’s Wall Street rival Morgan Stanley in April said it would sell the custody business it acquired from its takeover of E*Trade Financial to Axos Bank for $55 million.
-Mason Braswell contributed to this story.
[Editor’s note: Tony Sirianni, CEO and publisher of AdvisorHub, was a founding partner of Steward Partners.]