Joe Duran on Active Management, Insurance and Following Sheep

Joe Duran is betting his new venture can turn middling advisory firms into decabillion-dollar Goliaths. 

The former Goldman Sachs executive and United Capital CEO launched the wealth management investment firm Rise Growth Partners last year, and announced a minority investment this week in Grimes & Company, a $5.7 billion fee-only RIA specializing in investment management. Grimes creates actively managed custom portfolios that help ultra-high-net-worth clients diversify highly concentrated portfolios. While most advisors are dumping assets into low-cost, plain-vanilla funds and leaning into planning, active management is an area of the market that is simply being ignored, Duran said.

“It’s the story that everybody tells, and our industry tends to be followed by sheep,” he said. “Planning is actually the commodity, and the investment piece can be differentiated.”

Rise, which also acquired a minority stake in the $10 billion, insurance-based Bleakley Financial in August, is backed by Charlesbank Capital Partners, and plans to eventually invest upwards of $250 million in a handful of companies this year. Duran is already in talks with firms that cater to Gen X and Gen Y clients, which he sees as a growing, and lucrative, segment of the market, he told Advisor Upside. “We’re not just people writing a check,” he said.

We chatted with Duran about his latest investment in Grimes, the reason his firm is backing active managers and insurance-based providers, and where he sees the most opportunity for financial advisors. 

What’s the biggest competitive threat to the industry right now?

These large national firms that have been built up are basically just modern-day wirehouses. They are just buying and renting advisors. They’re bringing them onto their platform, paying bigger checks, and doing exactly what the wirehouses did for decades. It’s not additive to the end client; it’s not additive to the end advisor.

You’ve seen some of these firms start that way, but now because of all the PE money, it’s just: buy, buy, buy. There’s no migration to put them under the same name, or worry if they deliver the same product. The large RIAs — most of which are just an amalgamation of advisors doing their own thing on a shared platform — look no different than Merrill Lynch or Morgan Stanley. They’re not doing anything in a way that would suggest their brand counts for anything but having big advisors. 

The reality is, it’s a great opportunity for everyone else to help create very specific, tailored, and integrated platforms, which most of these large national firms are not.

Active management is having a bit of a Renaissance moment. Why is that?

Active is very out of fashion right now because with most of the large, national firms, you have to model everything and it’s all ETFs. The pendulum is actually swinging in the other direction though, especially for higher-net-worth clients. It’s still planning centric, but you lead with a different investment approach. They want a totally personalized portfolio. And a lot of people today are choosing to ignore that. 

How are insurance-based advisors different?

Everybody loves the wirehouse advisor, but nobody loves the insurance-based advisor. I love the insurance advisor because they’re great at relationships. They come from a background where they know how to sell, and they’re really ambitious growers. 

Many of them do a very small amount of insurance business and are predominantly RIAs, but they don’t have any natural home in the RIA universe. They’re exceptional advisers, with deep relationships, who grow at double digits a year, and that’s very exciting.

What’s the next big opportunity?

One of the next things that we’re looking at is our Gen X and Gen Y strategy. So, we’re looking at other segments that we think are interesting. Frankly, a lot of people are piling into that exact same marketplace. There are just segments of the industry where there’s big opportunities … where the water is just bluer.