For many former United Capital advisors who found themselves at GSPFM, the partnership has not been the harmonious union they had hoped for. As everyone knows, these advisors initially joined United Capital as independent business owners seeking a sense of community and collaboration, all conveniently offered under the visionary leadership of Joe Duran. United Capital was truly exceptional, driven by a client-centric ethos and innovative marketing that personalized the client experience. However, the Goldman Sachs acquisition of United Capital brought about a seismic shift in culture and compensation. Goldman’s closed architecture platform was alien to the former United Capital advisors, and to add insult to injury, the pay was slashed dramatically to as low as 20% GRID with an additional 10% in largely unwanted stock all for the honor of using the Goldman name and platform.
It’s undeniable that United Capital advisors felt betrayed, their treatment falling far short of the personalized client-centric ethos they had originally signed up for. Enter the sale of the GSPFM division to Creative Planning under the leadership of Peter Mallouk, known for his proficiency in acquisitions. Advisors are now faced with the crucial task of determining if this new home is the right fit for them. Thus far, skepticism abounds, with many feeling like pawns in a larger game.
GSPFM finds itself entangled in a challenging Goldman Sachs contract, one of the most restrictive in the industry, imposing onerous terms such as a 3-month garden leave, 6-month non-solicitation, and, in some cases, non-compete clauses. The message is clear: leaving Goldman is not an option (now Creative Planning), and if you dare to try, you will face significant obstacles.
Peter Mallouk, a shrewd businessman, recognizes this predicament for what it is and has presented advisors with four choices, all with the common thread that Creative Planning will have a controlling stake in you and your client’s businesses, with the obvious goal of just keep the dialogue up or else:
- Join Creative Planning – Always was the initial intention for United Capital Advisors to become an employee of yet another brand, and receive a retention package, but at a 30%+/- payout. An improvement over GS but still far from the 60-70% that advisors rightly deserve, but comes with a 1 year non-solicit/non-compete, and the firm effectively owns you and your clients for the rest of your career.
- Establish a new ADV for United Capital 2.0 under its name, with Creative Planning retaining a stake in the business. The details at this point are murky at best, who owns what, at what price, and what are the risks/rewards? Who manages this new entity, what is the critical mass necessary to succeed, and who can trust if it eventually folds? Once again, there are very stringent non-compete clauses effectively that own you and your clients for the rest of your career.
- Opt to start your own independent RIA once more, with Creative Planning providing transition assistance while retaining an ownership stake in your newly formed RIA. The details here are even murkier and are very far from the baseline business of Creative Planning. By owning this business too they effectively own you and your clients for the rest of your career.
- Leave without Creative Planning’s assistance or against the terms of their equity stake, triggering Goldman’s non-compete clause that they now possess, leading to a battle for your clients. Or if you don’t like it, buy out these restrictions as if they own you and your clients. But at what price?
It’s vital to note that GSPFM and former United Capital advisors hold the key to client relationships, not any acquirer. Advisors should be empowered and emboldened to decide for themselves if they care to sell their business and their clients. Goldman and now Creative Planning claim to control your destiny, holding you hostage as if they own you, with what are the most erroneous, unfair employment contracts in our industry. Even though advisors had little to say when presented with these contracts, now they must make very careful consideration when contemplating change.
While platforms and products are abundant, what truly matters is the culture and the level of control advisors can maintain over clients and their businesses. The undeniable fact is that payouts should hover around 60-70%, not the 30% or the 20% plus 10% in Goldman stock that was offered. Another sobering reality is that Peter Mallouk, despite his prowess, is essentially an active venture capitalist who seeks greater goals than his own business and clients. The day will come, possibly soon, when Creative Planning is sold yet again. How many times must advisors and their practices endure mergers and acquisitions without a say?
We firmly believe that there are options for GSPFM teams to explore. While the Goldman contracts, now owned by Creative Planning, are undoubtedly burdensome, it’s important to recognize that some legacy Goldman Sachs clients are often attracted by the brand name rather than the platform or experience. Clients who came via independent RIAs and United Capital understand the true value of personal service with a personal touch. In essence, we remain confident that they will follow advisors regardless of the legal jargon Mr. Mallouk’s team wields a threat. For a lifetime of freedom and control is it worth the burden of only a few months of risk?
There may be a terrific opportunity to stay and we fully support exploring this option.. Though we implore United Capital advisors to explore beyond Creative Planning to unlock their true value with a wide variety of pure independent competitive platforms, that clear through Schwab and/or Fidelity, with average 60-70% 1099 pre-tax margins, with 100% equity and no contractual obligations. With deep experience with legal contracts, we hope to also provide guidance to honor the contractual terms and assist in optimizing a transition that minimizes client attrition. Advisors deserve more than being consistently sold to the highest bidder without commensurate compensation or recognition for the unique services they offer. Mr. Mallouk and Goldman may share a belief in ownership, but we believe advisors have the right to break free from this dynamic, especially considering the likelihood that Creative Planning will change hands once more. The simple message is, to control your long-term destiny.
