The competition to custody RIA assets officially increased Monday, as Goldman Sachs closed its deal to acquire Folio Financial and confirmed its interest in serving more RIAs.
“Folio Financial has developed a differentiated technology offering that provides institutional grade clearing and custody services to RIAs. This will enhance the firm's own offerings to RIAs while expanding its client base in that segment,” the investment bank said in a statement.
“Looking forward, RIAs will have access to rich analytics and services through a comprehensive suite of Application Programming Interfaces (APIs), all part of a fully-integrated Goldman Sachs execution, clearing, and custody solution. Over time, this will further diversify the firm’s funding mix, and add durable recurring revenues to its Global Markets Division.”
Goldman and Folio began discussions about a possible deal in 2019 and the bank agreed to buy the McLean, Virginia-based company in May. The week before the deal was publicly announced, Folio called RIA clients to share the news and inform them that no immediate changes were planned. Folio also told clients that Goldman was “very interested in and committed to RIA custody,” one of the clients told RIA Intel.
[Like this article? Subscribe to RIA Intel’s' twice-weekly newsletter.]
At the time of the deal, Folio had 160 employees and approximately $11 billion in assets under custody for about 450 RIAs. Specific terms of the deal have not been disclosed.
In a letter this spring to clients about the deal, Folio CEO Steve Wallman said “the combination of Folio’s patented technologies and services with Goldman Sachs’ investment solutions and access to global resources will create material value for our clients.”
The effort to fuse the two together and achieve that could start promptly, if it hasn’t already.
“We are excited to integrate Folio’s technology platform with our client service expertise to broaden our franchise and expand our product offering to new and existing clients,” Philip Berlinski, the global chief operating officer of Goldman Sachs’ Equities Division, said.
Berlinski also highlighted the size of the opportunity within the fast-growing RIA segment of financial services, which has an estimated $5 trillion in assets.
Monday’s statement about the deal closing did not say how soon the integrated custody service would be available to RIAs.
In May, John Waldron, president and chief operating officer at Goldman Sachs, said the bank was performing well overall but delaying the launch of its digital wealth offering, or robo-advisor, until 2021.However, the bank’s Private Wealth Management (which caters to ultra-high-net-worth clients) and Personal Financial Management are coalescing and driving growth, he said.
Goldman also announced other changes on Monday.
With support from the bank, Folio’s First Affirmative Financial Network, an investment firm that builds sustainable, responsible, impact (or SRI) portfolios for institutions and advisors, is spinning out to become an independent, employee-owned company. “This structure will allow First Affirmative to continue its core mission of enabling advisors to deliver financial results while leveraging the power of capital in bringing about lasting environmental and social change,” the bank said.
The SRI Conference and Community, a popular conference series founded by First Affirmative in 1990, will remain part of Goldman Sachs.
“Under the leadership of First Affirmative and Folio Financial, the SRI Conference has grown into the world’s largest, longest-running, and preeminent ESG-focused conference. The SRI Conference and Community will complement Goldman Sachs’ commitment to ESG investing and thought leadership. More information will be provided on the event and other plans in the future.”
Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.