What Can Be Learned From the Growing Trend of Advisors Leaving Goldman Sachs
Goldman Sachs, the once seemingly impassable garden leave ...
I write a lot about changes in the landscape—whether it’s information about a new business model, relevant trends that we’re seeing, or discussing any of the headline-gripping announcements from firms that can ultimately impact the business lives of advisors. What strikes me about the past 12 months is the frequency and speed of transformation that we’re seeing. Even more striking is the evolution of the advisor population at large: Their courage and determination to live their business lives as they see fit, regardless of the obstacles they may encounter.
For example, over the past two decades rarely did we see Goldman Sachs Private Wealth Advisors leave the firm. Of course, the cache of the name alone and a belief that there was no better option kept many of the industry’s finest in their seats. Yet for many others, concern over withstanding the nail-biting period of garden leave, as well as the potential legal battle that might ensue, served as extremely powerful deterrents.
The fact remains that it was always considered a rare exception when a Goldman advisor changed jerseys. That is, until it started to happen, and not just once: In the last 12 months or so, we have watched 5 high-quality, top-notch, mega-teams jump from the Goldman ship.
So why am I outing Goldman advisors? Because in a world where advisors are in the driver’s seat, with virtually every make and model of opportunity available to serve their clients and careers as they see fit, many still believe they are “virtually handcuffed” to their firms. And for Goldman advisors, those handcuffs are stronger than most.
Yet despite potent deterrents like garden leave, the determination to live their best business lives is winning. So all this begs the following questions:
What’s going on in the industry that’s serving to push the finest advisors with the most restrictive post-employment mandates out of their firms?
Answer: It’s likely different drivers for everyone, but generally speaking, it’s about a growing sense on the part of the advisors that they don’t have control over how they are compensated and how best to serve clients.
Where are these brave folks going? Is there any commonality in their choices?
Answer: Not really. Where they are going is fractured—to Morgan Stanley Private Wealth Management, to First Republic Wealth Management, and three to different versions of independence. Having facilitated two of the biggest moves in the past year, I can tell you that once the advisors made the decision that it would be worth the risk of leaving, it became very clear where they wanted to go. (There is no shortage of exciting options for the industry’s top talent as most Goldman PWAs are aware.)
And, most importantly: What can advisors who are worried about a non-Protocol world learn from these Goldman moves?
The fact remains that there is more to a non-Protocol move in terms of planning, process, time and risk. And for Goldman advisors, these considerations are multiplied. So what is it that other advisors can takeaway from those who’ve gone before them? What realities should they be aware of before they even think of making a move? Consider what I call the “6 Gottas”—
- Gotta really want it
You believe verily that there is a better place to run your business. Said another way, there are significant enough frustrations pushing you out the door, as well as an obvious and tangible opportunity elsewhere that is more than marginally better than what you have now.
- Gotta really believe in the loyalty of your clients
You will be putting your relationship with them to the ultimate test—because if they’ve been unhappy with you, this is an opportunity for them to vote with their feet. Honestly assess the depth of your relationships and then trust in them.
- Gotta have tremendous self-confidence and self-belief
Any move requires a good amount of aplomb, for sure. You’re betting on yourself and your team, that you’ve got the goods to make this work.
- Gotta have patience
Proper planning makes porting over clients far less of an arduous task than it was years ago and, especially for those managing a small number of relationships, it usually happens pretty quickly. In the case of Goldman advisors and those moving from private banks where portability always takes longer, taking the long view is the only way to go.
- Gotta have a long enough runway so that the effort is worth it
We move advisors of all ages and stages in their careers, and in each case considering the benefits vs the time they are looking to stay in the game is key.
- Gotta be risk tolerant
Let’s be honest: There is some risk associated with any move, and so for those who don’t believe they have the mettle to tolerate any bit of it, staying put may be the better option.
The big lesson learned from the recent trend of Goldman advisors on the move is that if they have the chops to find a way to better serve their clients and their careers – despite the potential toll of garden leave – then it stands to reason that advisors with less restrictions can muster up the courage to do the same.
We’re now living in a world where we all have more options than ever before. It’s not that the notion of risk or fear has disappeared, but the desire for something better has grown stronger—and with all of the options and opportunities available, that desire can be more easily translated into something attainable. It still takes the “6 Gottas”—but if you have them covered, then you’re on you’re way to building your next chapter.
The Lies Spread by Bankers About Cryptocurrencies
I had a chat with The Financial Times the other day, and provided lots of background as to why I don’t think cryptocurrencies are the choice of criminals. The comment that was reported was the following:
Chris Skinner, a financial technology author, said it was “complete rubbish” to suggest the main use of cryptocurrencies was criminal. “There is some criminal activity associated with some cryptocurrencies but it is quite minimal,” he said. “It’s a myth that the financial community want to promote.”
I feel I need to explain this further, so here goes.
My response was in answer to Vasant Prabhu, Chief Financial Officer of Visa (the card network) who made two claims:
1) Most people have no idea what they’re doing with cryptocurrency investments; and
2) Cryptocurrencies are mainly being used by criminals.
With the first point, I agree. In fact, I loved the John Oliver Show that discussed crypto and started with the line that cryptocurrencies are “everything you don’t understand about money combined with everything you don’t understand about computers”. A perfect combination for idiots to invest in. I agree with both Vasant and John, as many people are buying cryptocurrencies for no other reason than other people are buying them.
The second point I completely disagree with. Mr Prabhu said cryptocurrencies were a “favourite” for criminals.
“It’s very hard to get dirty money through a banking system. Cryptocurrency is phenomenal for all that stuff . . . Every crook and every dirty politician in the world, I bet, is in cryptocurrency.”
This is complete baloney and is a smokescreen being created by financial people to deflect the real purpose of cryptocurrencies, which is to use software and servers to manage value rather than buildings and humans. In other words, cryptocurrencies have the opportunity to reduce or even replace banks, which is why I find it interesting how often I hear a financial person say that bitcoin and cryptocurrencies are just for criminals when it’s blatantly not true. Unfortunately because they are in a position of authority, politicians believe them; and unfortunately, because they are also in a position of authority, the media believes them; and unfortunately, because they are in a position of authority, the public sometimes believes them too.
Most law enforcement authorities however, state that the levels of criminal activity with cryptocurrencies is so tiny today that it doesn’t matter and, specifically, does not warrant deflecting their time and energy to investigate them. Just to illustrate this, the total worldwide investment in all cryptocurrencies is around $300 billion today. Even if criminals were running 10% of that, it’s still just $30 billion. That is an insignificant amount compared to the trillions being laundered through the traditional financial system, mainly through offshore companies buying up properties.
From The Telegraph, November 2017:
Organised crime generates income equivalent to around 2.7pc of global GDP. Around $1.6 trillion of this is laundered to disguise its criminal origins: financial crime is undoubtedly a worldwide problem.
From What Mortgage, February 2018:
Julian Dixon, CEO of Fortytwo Data, whose research found that more than a third (37%) of all suspicious activity reports (SAR) across the entire legal sector were related to property: “For criminals, the vast amount of cash involved in property purchases provides the perfect cover for laundering the proceeds of drugs, terrorism and firearms offences.
From The Times, February 2018:
Rob Wainwright, director of [Europol], revealed that 3 to 4 per cent of the £100 billion of illicit cash circulating in Europe is laundered through anonymous digital currencies such as bitcoin.
So that’s around £4 billion max right now. That’s less than a particle of a drop in the ocean of crime globally.
Now, the concern may be that cryptocurrencies offers the opportunity to launder funds. This is possibly true and is why I said there is some criminal activity with some cryptocurrencies which is tiny today, but might grow over time. Even then, it is speculative and too early to call. For example, that paragraph from The Times is factually incorrect, as bitcoin is not anonymous. In fact, nearly all digital transactions can be tracked and traced online, and therefore offer the worst use case for money laundering.
This is why the only currency that criminals currently use in any volume for illicit activity is Monero, because it is nearly an equivalent of digital cash. Nevertheless, the total market cap of Monero is $3 billion, and even if half of that is criminal activity, it’s totally insignificant on a global scale.
All in all, it is obvious that most financial people have created this myth of criminals opting for cryptocurrencies for two reasons:
1) it is to protect their turf, as they don’t want to lose their role as intermediators of finance; and
2) it is to deflect the authorities from looking at the true perpetrators of illicit monetary activity, namely the banking system.
Bear these two points in mind when I say that banks were built for the physical distribution of paper, which is why cash and property are the physical assets that are the preference of criminal choice. If you didn’t know it, London is actually the money laundering capital of the world:
- British registered companies and British-based banks helped move at least $20 billion of the proceeds of criminal activities out of Russia between 2010 and 2014.
- Transparency International’s research found 766 UK corporate vehicles involved in 52 large scale corruption and money laundering cases approaching valuations of £80 billion.
- Around half of the 766 companies alleged to have been involved in high-end money laundering were based at just eight UK addresses.
- The Home Affairs Select Committee hearings found that the London property market is the primary avenue for the laundering of £100 billion of illicit money a year. No wonder first time buyers cannot get on the property ladder.
If anything is the preferred market for money launderers then it is banks, not cryptocurrencies. No wonder financial people are trying to deflect the media elsewhere.
Bottom-line: as all things move to digital distribution of data, the trail to audit such movements get easier because they can be sniffed out and monitored; as a result, most criminal activity will continue to leverage the weak links in the chain, which is the physical distribution of paper through cash and property assets in the traditional financial system.
I’ve written a lot on this in the past and would point to these two blog entries for more:
- Laundering-as-a-Service (a bank USP)
- Money laundering is most likely to wash with your local estate agent
And there’s also a lengthy but worthwhile read about why bitcoin cannot be regulated, as it is protected by America’s first amendment and the right to free speech.
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