Goldman Sachs strategy for revamp is selling part of its wealth business. Goldman Sachs strategy for overhaul is to sell-off a part of its wealth business, it said on Monday, as it shifts its focus back to serving the ultra-rich and away from high-net-worth clients in mass markets.
Goldman Sachs Wealth is evaluating alternatives for its registered investment adviser (RIA) unit, called Personal Financial Management (PFM), which manages about $29 billion, it said in a statement.
Goldman Sachs strategy
The shift in Goldman Sachs strategy comes after CEO David Solomon reorganized the firm into three units last year and scaled back ambitions for its consumer business, which lost $3 billion in the last three years.
Goldman Sachs business strategy also includes pushing ahead with a sale of its Fintech business, GreenSky and also offloading the bulk of its unsecured consumer loans after it halted this kind of lending last year.
“This is part of the overall restructuring of the firm, back toward its roots,” said Stephen Biggar, an analyst at Argus Research.
“They’ve been unable to carve a path of profitability and scale” for the RIA, which catered to high-net-worth individuals in mass markets outside of Goldman’s core, ultra-wealthy clientele, Biggar said.
Goldman declined to comment on PFM’s earnings.
Goldman Sachs market share
Goldman bought RIA, formerly known as United Capital Financial Partners, for $750 million in 2019 when it managed about $25 billion in funds. The purchase was aimed at broadening Goldman’s client list beyond the ultra-rich, but the unit has remained a small part of the bank’s wealth business.
Goldman’s private wealth arm oversees $1 trillion in assets for ultra-high net worth clients, who have $60 million or more in investable assets. High net worth individuals – who would fall within the business Goldman is considering selling, typically have about $1 million to $10 million to invest.
Goldman Sachs wealth
Goldman Sachs Wealth’s business has lagged behind rivals, including Morgan Stanley (MS.N), where CEO James Gorman built the wealth management arm through a series of acquisitions that generate steady income from fees.
Solomon has been under pressure to turn around Goldman’s fortunes after its profit sank 60% in the second quarter as write-downs on its consumer businesses and real estate investments weighed on earnings.
Reason for Goldman Sachs business strategy
The bank plans to grow its core wealth business serving ultra-high-net-worth clients, reiterating aspirations from its investor day in late February. Other core wealth businesses include workplace financial planning through Ayco and Marcus savings, Goldman said.
U.S. banks compete to serve ultra-wealthy clients by providing brokerage, mortgage and other services, as well as estate and tax planning. Those activities tend to generate more stable revenues than volatile Wall Street operations, such as investment banking and trading, which are strongly linked to economic activity.
Stock update
The company’s shares slipped 0.6% in afternoon trading, compared with the S&P index of bank stocks (.SPXBK), which rose 0.2%.
