Goldman Sachs weighs sale of part of its wealth business

New York — Goldman Sachs is weighing the sale of 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.

The Wall Street bank is evaluating alternatives for its registered investment adviser (RIA) unit, called Personal Financial Management (PFM), which manages about $29bn (R551bn), it said in a statement.

The move comes as Goldman retreats from its consumer operations, which lost $3bn in the last three years, and pushes ahead with a sale of its fintech business, GreenSky.

Goldman bought the RIA, formerly known as United Capital Financial Partners, for $750m in 2019 when it managed about $25bn in funds. The purchase aimed to broaden 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.

RIABiz reported earlier on the possible sale.

The potential divestments come after CEO David Solomon reorganised the firm into three units last year and scaled back ambitions for its loss-making consumer business.

“This is part of the overall restructuring of the firm, back towards 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 Goldman’s core, ultra-wealthy clientele, Biggar said.

Goldman declined to comment on PFM’s earnings.

The company’s shares slipped 0.9% in early trading, compared with the S&P index of bank stocks, which was broadly stable.

Goldman’s wealth business has lagged rivals, including Morgan Stanley, 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 writedowns on its consumer businesses and real estate investments weighed on earnings.

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.

US 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.

Reuters