The news that Goldman Sachs plans to acquire fintech platform and custodian Folio Financial in a deal expected to close in the third quarter should come as no surprise to our industry. As with any deal of this magnitude, at Apex Clearing, we see potential pros and cons for advisors and investors.
Large global banks and financial institutions have continued to consolidate their power in recent years by absorbing sub-scale competitors and expanding their capabilities with select acquisitions. This rapid evolution is the result of a race for vertical integration — or becoming a one-stop shop for a larger investor base — and wealth technology dominance.
Consolidation, in particular, has been sweeping the custodian and discount brokerage spaces, with Charles Schwab buying TD Ameritrade (which acquired competitor Scottrade in 2017) and Morgan Stanley acquiring E-Trade. This merger and acquisition wave in many ways has resulted from the new zero-trade-commission playing field.
At the same time, Wall Street firms with legacy technology have struggled to innovate, implement and integrate new technical solutions that improve the client experience, and have been looking to third parties for ways to bridge the gap. The future of wealth management relies on such tools, as well as tech-stack integrations and unified platforms.
This was likely the rationale behind Schwab’s recently announced deal to acquire the technology and intellectual property of the now-offline broker Motif Investing as well as Fidelity’s investment last year into self-described “tech-driven asset manager” Ethic. (According to Motif’s website, Folio purchased its client accounts prior to its shutdown.)