EXCLUSIVE: Goldman Sachs Team’s Split (from Firm and Internally) Creates Waves
Goldman Sachs’ efforts to preserve cohesion among its historically tight-knit group of wealth advisors may be strained by a civil war occurring in Washington, DC, and by management’s response to it, according to sources at the firm and in the recruiting community.
Terrance McGowan, Tim W. Moore and John F. Hanley, who have been with Goldman’s private wealth management unit for 12 years, gave notice on March 31 and sent emails to clients that they were leaving, the sources said. They produced around $10 million of revenue in the previous 12 months, managed about $2 billion of client wealth and planned to join a Morgan Stanley branch in Washington following a two-to-three month “garden leave,” the people said.
Any departure from Goldman’s force of fewer than 500 brokers is rare because of 60-to-90-day “non-solicitation” clauses in their employment contracts that complicate the challenge for brokers of convincing clients to move.
What has tongues wagging about the McGowan-Moore-Hanley decision is that Goldman executives at the last minute convinced Hanley to rescind his resignation and help his firm colleagues call and retain his former team’s national book of clients. Offering him a sweetheart deal with a probable title elevation and other perks smacked of “betrayal” of the business and loyalty principles that management preaches, according to one Goldman staffer who spoke on condition of anonymity.
“There’s a feeling that a lack of loyalty is being rewarded,” the person said. “The firm is taking him back for selfish reasons and it’s causing a lot of us to think.”
Hanley, whose return was announced last Thursday, declined to comment when reached by phone at his office on Monday and last Friday.
Andrew Williams, a spokesman for Goldman, declined to comment, as did a Morgan Stanley spokeswoman. Reached at his Maryland home on Friday, Moore acknowledged that Goldman requires its brokers to take garden leaves before going to work for competitors but declined to elaborate. McGowan could not be reached for comment.
Unlike Morgan Stanley and many broker-dealers, Goldman is not a member of the Broker Protocol, which permits brokers who move among its approximately 1,500 signatories to take rudimentary customer contact information with them when they resign.
Goldman may have intensified its effort to woo Hanley because he was seen as something of a “culture carrier” who often served as a mentor to private wealth recruits in the firm’s mid-Atlantic region, the source said.
But it may also signal a loss of confidence by Goldman management that wealthy clients will remain loyal to the firm no matter where their individual advisors go, according to Roger Gershman, an industry recruiter with Consultants Period who said he was familiar with the events. That belief has allowed Goldman to give its top advisers significantly lower payouts than wirehouses, he and other recruiters said.
Goldman’s top producers retain less than 35% of the fees and commissions they produce compared with closer to 45% at some of its top rivals, according to Gershman. However, they enjoy the prestige of the Goldman name and an impressive supply of IPOs and other deals from the firm’s investment bankers and capital markets desks.
Goldman’s private wealth group for individuals, their businesses and family foundations is part of its investment management division, and it promotes them as having private bank-like pedigrees. Unlike the private banking units of commercial banks such as JP Morgan Chase and Deutsche Bank, which pay their advisors salaries plus bonuses, Goldman brokers are compensated according to a traditional brokerage “grid,” with payout percentages tied to the amount of fee-and-commission revenue collected for the firm.
McGowan, a 32-year securities industry veteran, joined Goldman in February 2005 after stints at Merrill Lynch, Hambrecht & Quist, Smith Barney, CS First Boston, JPMorgan Securities and Banc of America Securities, according to his BrokerCheck history.
Moore also joined Goldman in February 2005 after four years at Banc of America Securities.
Hanley, whose LinkedIn profile says he was a former business journalist, began his brokerage career at Morgan Stanley Dean Witter in 2001, and has been with Goldman since December 2004, according to his BrokerCheck history.
-Mason Braswell contributed reporting.