Goldman Sachs can add the massive advisory firm Creative Planning to the RIAs that have chosen it for the custody of investor assets.
Overland Park, Kansas-based Creative Planning announced Monday that it had chosen Goldman Sachs Advisor Solutions for a "multi-billion-dollar" custody deal. The Securities and Exchange Commission, which oversees the advisory industry,
Creative Planning, which had $210 billion under management at the end of 2022, now has custody agreements with Charles Schwab, TD Ameritrade Clearing, Fidelity and Pershing.
Adding Goldman to that mix will allow Creative Planning to make use of the investment banking giant's capabilities related to alternative investments, electronic lending and advanced analytics, said Jim Williams, the chief investment officer at Creative Planning. Williams said Creative Planning has no plans to discontinue any of its current custodian relationships.
He said Goldman stands out for having services that are particularly well-suited to high net worth clients.
"A good example is the ability to borrow against illiquid or private investments," he said. "That's very constrained in this economic landscape. Goldman will have lending solutions for private or illiquid investments that are just not seen across the industry as a whole."
Read more:
Goldman Sachs is still a newcomer to the custody business, having entered it in May 2020 with the purchase of Folio Financial, a self-clearing custodian with $11 billion in assets. Goldman quickly touted its custodian offering as a way to give advisory clients
Doug Fritz, the founder and CEO of the wealth tech consultant F2 Strategy, said the Goldman custody option will probably appeal most to advisors and advisory teams who come to Creative Planning after leaving a wirehouse.
"I think the fact that Goldman can offer standard banking products — loans, lines of credit, mortgages — that are not available from other custodians should be far more attractive to the breakaway bank advisor," he said.
Richard Lofgren, managing director at Goldman Sachs, said clients who are growing wealthier often find they have new financial needs. He said Goldman's role as a custodian is to add to the list of services advisors can offer.
"And RIAs are the ones determining which solutions and technologies are best suited to those clients," Lofgren said. "For us coming into this space as a custodian, we're the ones offering the choices, and RIAs are the ones who determine what's most suitable."
Goldman is in the midst of a transition meant to make it less reliant on standard investment banking business like mergers and acquisitions and more tied to the wealth management industry.
The SEC put forward its first changes to its custody rules in more than a decade in February by calling on advisors to hold alternative investments like cryptocurrencies, real estate and derivatives with registered third-party custodians. The proposal, which awaits official approval, elicited a slew of
Read more:
Of particular concern was a provision that would require so-called discretionary accounts — whose assets can be traded by advisors without client permission — be held with third parties. Critics contend that rule would require firms to compel custodians to enter into elaborate contracts pledging to provide records on investor assets on request and hold assets in separate funds that are shielded from creditors.
Williams said Creative Planning's selection of Goldman as a custodian has little to do with the SEC's latest proposed reforms.
"We are just looking at things that will provide direct benefits to our clients, combined with operational efficiencies for Creative Planning," he said.
