Goldman Sachs considers sale of wealth business to focus on ultra-rich clients
NEW YORK, Aug 21 (Reuters) – Goldman Sachs (GS.N) is exploring the possibility of selling a portion of its wealth business, according to a statement released on Monday. The move comes as the bank aims to shift its focus back to serving the ultra-rich and away from high-net-worth clients in mass markets.
The registered investment adviser (RIA) unit, known as Personal Financial Management (PFM), which manages approximately $29 billion, is being evaluated for potential alternatives, Goldman Sachs said.
This decision is part of Goldman Sachs’ retreat from its consumer operations, which have incurred losses amounting to $3 billion over the past three years. The bank is also moving forward with the sale of its fintech business, GreenSky.
Goldman Sachs acquired the RIA, previously known as United Capital Financial Partners, for $750 million in 2019 when it had approximately $25 billion in funds under management. The aim of the purchase was to expand Goldman’s client base beyond the ultra-rich, but the unit has remained a small component of the bank’s wealth business.
Currently, Goldman’s private wealth arm oversees $1 trillion in assets for ultra-high-net-worth clients.
The potential divestments follow CEO David Solomon’s reorganization of the firm into three units last year and the scaling back of ambitions for its consumer business, which has been operating at a loss.
“This is part of the overall restructuring of the firm, back toward its roots,” said Stephen Biggar, an analyst at Argus Research. Biggar noted that the RIA was unable to achieve profitability and scale, as it catered to high-net-worth individuals in mass markets outside of Goldman’s core ultra-wealthy clientele.
Goldman Sachs declined to comment on PFM’s earnings.
In late morning trading, the company’s shares were down 1.2%, compared to a 0.6% decline in the S&P index of bank stocks (.SPXBK).
Goldman’s wealth business has been trailing behind competitors, including Morgan Stanley (MS.N), where CEO James Gorman expanded the wealth management arm through a series of acquisitions that generate consistent fee income.
CEO David Solomon is under pressure to reverse Goldman’s fortunes after the bank’s profit plummeted by 60% in the second quarter due to writedowns on its consumer businesses and real estate investments.
Goldman Sachs plans to grow its core wealth business by focusing on ultra-high-net-worth clients, aligning with its aspirations outlined during its investor day in late February. Other core wealth businesses include workplace financial planning through Ayco and Marcus savings, according to Goldman.
U.S. banks are vying for the ultra-wealthy clients market by offering brokerage, mortgage, estate planning, tax planning, and various other services. These activities tend to provide more stable revenue compared to the volatile operations of Wall Street, such as investment banking and trading, which are closely tied to economic activity.
Reporting by Saeed Azhar; Editing by Lananh Nguyen, Tom Hogue, Sharon Singleton, and Jonathan Oatis