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Financial Planning > UHNW Client Services > UHNW Client Advice

How an Ex-Goldman Advisor Serves Wealthy Clients in High-Stakes Transitions

By John Manganaro

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What You Need to Know

  • A growing number of RIA firms are launching services to support the closely held business transition planning needs of highly wealthy clients.
  • Serving this market requires special expertise, but it also comes with significant opportunity for firms that get it right.
  • One team of advisors says the key to serving this market niche is an empathetic approach that doesn't compromise on tax efficiency.

The owners of successful closely held businesses face tremendous challenges once they begin to plan for their life after work and how they will liquidate what can be a very substantial amount of wealth tied up in their company.

In fact, depending on the level of liquid wealth being generated by a business sale, getting the planning effort right can save tens or even hundreds of millions of dollars in taxes, says Gary Hirschberg, founder of Aaron Wealth Advisors.

As he told ThinkAdvisor in a recent interview, Hirschberg founded his independent firm to be able to excel in this area. After more than 12 years at Goldman Sachs, where he served as a lead advisor for a select group of high-net-worth entrepreneurs and institutions, Hirschberg came to see that independence would be essential in helping clients navigate big liquidity events.

“For most of these people, this liquidity event is going to be biggest single financial transaction they will ever participate in during their lifetime, and depending on the amount of wealth being generated, it can completely change their life and the lives of their families,” Hirschberg says.

According to Hirschberg, the scale of the transaction and the emotional investment involved in selling a closely held business means a holistic advisory approach is essential to ensuring good outcomes. He warns that many business owners turn to the support of narrowly focused investment bankers who are more concerned about getting deals executed quickly than getting deals done efficiently and effectively.

An independent firm like Aaron Wealth Advisors, he argues, can take a fundamentally different approach built around the needs, hopes and expectations of the client. By keeping these factors front and center from the beginning to the end of the transaction process, Hirschberg argues, a significant amount of tax efficiency and intergenerational wealth protection can be achieved.

Breaking Away to Serve Business Owners

After more than 12 years at Goldman Sachs, Hirschberg knew it was time to seriously consider breaking away and starting an independent practice by late 2017 or early 2018.

At the time, Hirschberg recalls, Goldman had recently made the decision to enter the consumer finance sector via the acquisition of GE Capital Bank’s U.S. online deposit platform — a transaction that was intended to enable Goldman to provide an online banking and investment service for large swaths of retail customers.

By 2016, the firm had launched the Marcus platform, initially offering no-fee unsecured personal loans and other services for the mass market. In the years since, though, Goldman has struggled to find its footing in the retail space, and it has drawn substantial scrutiny from investment analysts for persistent losses on this side of the business.

Hirschberg says his concerns at the time were actually more personal and did not really reflect concerns about the potential success or failure of the Marcus venture. Simply put, his role was to serve as a trusted advisor for a select group of high-net-worth entrepreneurs and institutions, as well as very wealthy private investors and families, on all aspects of wealth management, estate planning and investing.

Hirschberg was concerned that his current clients (and prospects) would worry that Goldman’s focus was shifting away from their distinctive needs and requirements, and he also saw an appeal in gaining more freedom to serve this unique client base in a more holistic manner. He made the decision to launch Aaron Wealth Advisors in September 2018.

The firm is now closing in on its fifth anniversary in independent practice, boasting $2.4 billion in assets under advisement across 45 families served by 14 employees.

Most exciting, Hirschberg says, is the recent expansion of the firm’s capabilities in the closely held business transition and investment banking area, thanks to the hiring of his former Goldman Sachs colleague Chris Mason, who now leads Aaron Wealth Advisors’ mergers and acquisitions business line.

Mason is himself well-known for working as the head of the investment banking management group at Saudi Aramco in the run-up to that organization’s initial public offering, an experience he says has already been highly useful in the new role.

Echoing the sentiment of other independent advisors focused on the ultra-wealthy client base, Hirschberg and Mason say the demands coming from clients are complex and growing, but so is the opportunity for firms that deeply understand the dynamics of this part of the advisory market place.

A Deeper Focus on Transition Planning

According to Hirschberg and Mason, there is nothing simple or straightforward about the liquidation of a closely held business.

As the pair point out, the stakes are surprisingly high when it comes to making the right decisions about deal structures and putting prior planning in place with respect to asset transfers and the possible utilization of trusts during the process.

For some clients, they warn, failing to efficiently enact a deal can result in literally tens of millions of dollars of effectively squandered wealth.

“We are an after-tax firm,” Hirschberg says. “Everything we do is about after-tax returns, and this philosophy means we are considering all the potential estate planning techniques and weighing, for example, what types of stock you are going to buy, sell or give away at what time during the deal process.”

As Mason emphasizes, a lot of these business owners are very sophisticated in their own world, having developed some amazing companies. But that doesn’t mean they have the skill set needed to effectively establish and operate their own private family office.

“For example, the typical business owner isn’t going to understand the ins and outs of grantor retained annuity trusts,” Hirschberg says. “Yet, this can be such a powerful tool while you are doing a deal. That’s why our clients need us to be involved from the very beginning of the ownership transition process.”

The opportunity for added value is huge, Hirschberg says. “In one case, for example, we were literally able to help a client save $110 million in taxes during their transaction.”

The Personal Side of UHNW Planning

In addition to critical choices about deal structures and tax mitigation strategies, Hirschberg and Mason agree, highly successful entrepreneurs must also think deeply about what their day-to-day life will look like post-sale. They also must be prepared (by their advisors) to face some stressful moments during the transaction process.

“It might sound dramatic, but the emotion of a deal like this often resembles what it is like for a parent to see their kid go off into the world,” Hirschberg suggests. “This business is likely something they have built and seen grow over many, many years. Every now and again, you do get those 11 p.m. phone calls, and you just have to listen and coach people through their concerns.”

While emotions generally do run high during the deal process, not all clients are alike, Mason points out.

“Some clients are just more transaction-focused, and they really look forward to getting the deal done and generating that liquidity,” he explains. “Whatever the case is, you have to listen and be empathetic. Where we can provide the best support is by bringing an honest answer to every question they have, good or bad. Very much like a doctor — you have to be candid with your patient, or in our case, the client.”

Credit: Shutterstock

John Manganaro

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