Goldman Sachs has begun exploring the sale of its investment advisory business, which it acquired four year ago. This is a further retreat away from Goldman Sachs’ goal to become a major bank for mass-market clients.
The Wall Street firm announced on Monday that it was “evaluating alternative options” for its Personal Financial Management business. This includes Goldman registered investment adviser operations, and oversees approximately $29bn of assets.
United Capital was a California investment adviser acquired by Goldman for $750mn back in 2019. Goldman wanted to reach a wider range of clients.
Goldman wants to reverse the second deal that was made under former CEO David Solomon. This year, Goldman put GreenSky up for sale. It was the online lending company it acquired in 2021.
Citywire RIA reported on the potential sale of the Personal Financial Management business last week. The bank stated that it expects to reach a conclusion that will benefit both its clients and advisers.
Goldman’s wealth-management operation has traditionally been geared towards the ultra-rich – so-called high-net-worth clients – whose wealth is worth at least tens or hundreds of millions of dollars.
United Capital customers tend to have modest wealth. The four-year-old deal was an indication of Goldman Sachs’ efforts to reach a wider range of clients.
Solomon is facing the most difficult period in his five-year tenure. Solomon has been under pressure due to the losses he suffered from the move into mass-market banks. Goldman decided last year to reduce its Marcus online retail bank business, in addition to plans to sell GreenSky.
Solomon, who has the support from the Wall Street Bank’s directors as well as some of its most important shareholders so far, is now facing internal backlash due to his blunt leadership style and a series of negative news articles.
Goldman still prioritizes growth in asset and Wealth Management, businesses which are more predictable than its core investment bank and trading activities.
Goldman Sachs has assets worth more than $1 trillion under management in its wealth management division, including its Ayco platform for workplace money management and private wealth. United Capital managed about $25bn of assets when Goldman acquired it.
Morgan Stanley’s pivot towards wealth and wealth management under James Gorman as chief executive has been a success, boosting its market capitalisation to surpass Goldman.
Morgan Stanley’s wealth management success has been helped by the acquisition of ETrade, an online trading platform in 2020. Many of the bank’s core customers are high-net worth clients rather than the super rich that Goldman targets.
Registered investment advisors can provide advice, and in some cases manage money directly. The bank stated that it would continue investing in its services so as to cover advisers and customers.
Goldman Sachs is considering a sale during a period of increased job-hopping among registered investment advisors in this year due to mergers and turmoil within the banking industry. Many are leaving advisory groups that are owned by banks to start their own boutique firms or open their own companies, taking their clients along with them.
Goldman merged last year its wealth management business with asset management, and the combined unit is now led by Marc Nachmann a close confidant to Solomon.
Goldman’s shares were down about 1.3 percent by the time New York traders reached lunchtime.
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