Make no mistake, we at the Gershman Group take a backseat to no one when it comes to our appreciation of Goldman Sachs and its legacy of excellence. For decades, Goldman was our industry’s standard bearer for operational best practices, and, indeed, to this day its name can still conjure up mental images of America’s gilded age.
But the simple fact is, Goldman, while still a beacon of excellence, is a very different company now than it used to be. Part of that, of course, has to do with David Solomon, the sometime actor/sometime DJ/and always provocative new head honcho, who’s brought to his company an all-new attitude, if not a change in philosophy.
It’s more, though. And that’s what we’d like to detail for you as briefly as possible today.
For years, Goldman drew many of our industry’s finest advisors. They hired only MBA’s and they constantly staked out the highest ranked B-schools for the best and brightest would-be graduates in each class. And even though those advisors they did hire were ultimately paid less at Goldman than they might have made elsewhere on the street – and, indeed, for years Goldman’s commercial business represented only 10% of their overall revenue – the sheer wattage of the Goldman brand was intoxicating to so many.
And for years that formula worked like magic. Because not only were advisors drawn to Goldman like bees to honey but so was a seemingly endless stream of clients. Lured by the same brand power as the advisors, while comforted by the company’s tacit value proposition that “our money is invested alongside yours,” individual investors came to Goldman in droves because for years, especially in the consumer mind, its name conjured a comforting mix of growth and stability.
But, as Hamlet might have said, “Ay, there’s the rub.”
All that time, Goldman continued to treat their advisors as employees who, in the opinion of all those lions in all those corner offices – and because they were operating under the company’s solid gold banner – benefitted more from Goldman than vice versa.
As a result, the company regularly paid those best and brightest significantly less than they might have received elsewhere. And while, we suppose, for a time such thinking had trace some amount of merit to it, it now defies the essence of the modern advisor/investor relationship.
Why? Because these days, if the client/advisor/company dynamic has any “stickiness” at all to it at all, it has to do with the client and the advisor. Not the client and the company. So, despite the fact Goldman felt it “owned” its advisors’ clients, those advisors could not have disagreed any stronger.
Because – and this is true now more than ever – clients continue to prove they want to do business with people and put their faith in (and trust their money to) knowledgeable and experienced people – not brands, however powerful they may be.
That dynamic has put many of Goldman’s advisors at odds with the company, who continues to operate out of what feels like a playbook from another time and place, if not another century.
This behind-the-scenes and constant tug-of-war is why so many of their most successful advisors have now left Goldman or continue to leave it – either to strike out on their own or join a more welcoming, clear-eyed, and market-aware firm.
After all, consider all the high-profile names who have departed just in the last few years, dedicated and longtime professionals
- *$20M Dallas Hunter Henry + Cullen Thomason to UBS PWM
- *$17M Jeff Friedstein and Jay Page of Grey Street,
- *$21M Boston/LA Denis Cleary + Greg Devine to UBS PWM
- *$75M Frank Ghali of Jordan Park
- And consider those of past who also were dedicated, successful advisors of GS who grew tremendous empires to pass onto for generations.
- *Todd Morgan of Bel Air,
- *David Hou and Mark Sear of Luminous Capital,
- *Bruce Bligh of Seven Post,
- *Jeff Colin of Baker Street
To counter this, Goldman under Solomon has taken a relatively new, aggressive, and frankly out-of-character tack to growth. The company has opted to go downstream and adopt what I call a “retail” approach to the private wealth side of its business, having recently acquired such street-level and/or robo-advisory firms as United Capital and NextCapital, while bestowing on them the still-golden but now ever-so-tarnished Goldman brand.
It’s also chosen to move beyond the high-earner market, the very one that for over a century had served as its stock in trade, if not its very own calling card. Instead, the private banking side of Solomon’s firm has now chosen to focus on the still-ripe and yet largely untapped average-income market.
To that end, and because it’s what the street continues to pay, Goldman is now compensating its new/less-experienced advisors at a rate up to 50%-60%, using exactly the same GSAM platform, alts et all, while its dwindling number of “legacy” professionals must take comfort in the fact they’re still making roughly 20% – plus, of course, the usual stock options.
They then look to retire them, pay them just 3 years of their previous W2 and all the hard earned relationships stay within Goldman along with a generation of future cash flow.
So, in case you were wondering why the best and most successful advisors continue to leave Goldman Sachs in droves, wonder no longer.
Because, believe me, it’s not rocket science. And, more than anything else, now you know.
Contact us for more details on who is buying GS teams and for how much.