So creating vertical integration allows a firm like a Goldman or a Morgan Stanley to hold more of the levers that do exist.
#Folio institutional resources how to
What this means for firms in practice is that there are fewer levers to pull in terms of how to monetize the client relationship. And, at the same time, we have the ongoing push towards zero commissions and we are stuck in basically a zero interest rate environment.” “Retail wealth management clients want to understand what they are paying for and that there is value being delivered all along the chain. “The vertical integration is necessary in a world where transparency has become as highly valued as it is,” he says. We haven’t even mentioned yet that Morgan Stanley is making a similar play via its acquisition of E*TRADE.”Ĭapuzzi says the motivations behind these strategies are not mysterious.
It’s about connecting the dots vertically.
#Folio institutional resources software
They now have financial planning software from eMoney, they have the custodian resources, the asset management and a cash management component. It’s true they haven’t yet totally gotten into the front office game in terms of making a direct-to-consumer platform play, but I believe that is their next step.
They now have the banking resources, the asset management capabilities and a way to package things vertically under one roof. “Again, the deals really appear to be about vertical integration,” he suggests. But, in Capuzzi’s view, the M&A activity has a clear end goal along these lines, though its achievement may still be somewhat far off. It is important to note that both Charles Schwab and Fidelity continue to emphasize that they have no express desire to “disintermediate” the role of advisers. The dynamic is playing out very quickly.” Independent advisers are wondering, are we hooking our wagon to the right custodian? Are these firms becoming conflicted about servicing us and our business as advisers? My opinion is that the answer is yes-at least, there’s a lot more conflict from the adviser’s perspective right now than there was even three or four years ago. And then you have Fidelity basically doing the same thing. Every time you turn on the TV, you see Schwab running a commercial about going direct to the retail financial services consumer, cutting out the adviser. “From their perspective, it’s like the fox is in the hen house. “ Independent advisers are concerned, and rightfully so in my opinion, about these deals,” Capuzzi says. In this sense, Capuzzi says, the recently approved merger of Charles Schwab and TD Ameritrade is also important.
“This transaction signifies the fact that there will be very few established independent custodians remaining that won’t compete directly with advisers for retail customers.” “Furthermore, it will allow them to vertically integrate their digital businesses and connect the dots between their front office and back-end solutions,” Capuzzi says. He said he sees Goldman Sachs’ technology acquisition and innovation strategy as “part of one of the biggest but somewhat overlooked financial news stories going on right now.”Įchoing that sentiment, Bill Capuzzi, CEO of the independent custody and financial services technology provider Apex Clearing, says the Folio deal will position Goldman Sachs to more directly compete with some of the biggest retail financial services players-including heavy hitters such as Charles Schwab and Fidelity. Indeed, as Rob Foregger, co-founder of Next Capital, recently told PLANADVISER, the Folio acquisition is far from the first to be made in recent years by Goldman Sachs in the area of financial services technology. Wallman further said the transaction would “enhance our innovations and bring scale to our business, particularly in the execution, clearing and custody space,” adding that Goldman Sachs and Folio “share a commitment to serving the needs of our clients and to expanding the scope of sustainable, responsible and impact investing.”įor its part, Goldman Sachs was more reticent in describing its incentives for the deal, but clearly part of the motivation is the potential combination of Folio’s patented technologies and services with Goldman Sachs’ investment solutions and access to global resources. Despite the fact that the coronavirus pandemic is slowing down financial services industry merger and acquisition (M&A) activity, deals continue to be inked.īack in mid-May, for example, Goldman Sachs announced its intention to acquire Folio Financial.Īt the time, Folio CEO Steven Wallman said joining with Goldman Sachs would fulfill his firm’s “long-term goal of partnering with a pre-eminent financial services firm to increase the reach and impact of the investment technology and services that many hundreds of people over the last two decades have dedicated their lives to creating.”
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