Goldman Sachs’ move to sell off Folio Investments’ DIY brokerage business to Interactive Brokers but retain Folio’s RIA clearing and custody business is good news for RIAs. But it’s also bad news for the biggest custodians serving this market, who will likely face some stiff competition from Goldman in the future.
Goldman is becoming the “RIA custodian industry’s worst nightmare,” said Tim Welsh, founder and CEO of Nexus Strategy, a consulting firm for the wealth management industry.
The other major RIA custodians include Fidelity, BNY Mellon Pershing and Charles Schwab, which will be shutting down the recently acquired custody and clearing operations of TD Ameritrade over the next 18 to 36 months.
“Goldman will become number four,” Welsh said.
Goldman has all the components it needs, according to Welsh: Folio’s technology, key executives poached from Pershing (Tim Dalton) and TD Ameritrade (Darla Sipolt), as well as other seasoned professionals. Plus, it’s a well-known, well-respected brand that’s attractive to high-net-worth investors.
In addition, it has a large potential client space in RIAs who have custodied and cleared with TD Ameritrade but don’t want to make the move to Schwab. There also are RIAs who’ve custodied with E-Trade, just bought by Morgan Stanley, who don’t want to do business with the wirehouse firm.
“No self-respecting advisor wants to custody with Morgan Stanley because of its egregious fees for SMAs and its commission business,” Welsh said. (Morgan Stanley declined to comment on the matter.)