Goldman's Focus Shift Toward Ultra-Rich Clients
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 move reflects the Wall Street bank's renewed concentration on its core clientele.
Evaluating the Sale of Personal Financial Management (PFM) Unit
The bank 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. This unit’s sale is part of a broader strategic move within the company.
Retreating from Consumer Operations and GreenSky Sale
Goldman is retreating from its consumer operations, which lost $3 billion in the last three years and pushes ahead with a sale of its fintech business, GreenSky. This withdrawal underlines the bank's shift away from unprofitable ventures.
Background of the RIA and Goldman’s Wealth Business Overview
Goldman bought the RIA, formerly known as United Capital Financial Partners, for $750 million in 2019 when it managed about $25 billion in funds. Goldman's private wealth arm oversees $1 trillion in assets for ultra-high net-worth clients. This section highlights the evolution of Goldman's wealth strategy.
Recent Reorganization and Analyst Insight
The potential divestments come after CEO David Solomon reorganized the firm into three units last year and scaled back ambitions for its loss-making consumer business. Analyst Stephen Biggar's insights on this restructuring provide context for the bank’s recent moves.
Challenges with RIA and Share Performance
Goldman has struggled with profitability and scale for the RIA, which catered to high-net-worth individuals in mass markets. The company's shares slipped 0.9% in early trading, illuminating the market's reaction to the news.
Comparing Goldman's Wealth Business with Rivals
Goldman's wealth business has lagged rivals, including Morgan Stanley, where CEO James Gorman expanded the wealth management arm. This comparison underlines Goldman's need to innovate within the sector.
Pressure on CEO Solomon and Future Plans
Solomon has been under pressure to turn around Goldman's fortunes after its profit sank 60% in the second quarter. The bank plans to grow its core wealth business serving ultra-high net worth clients, outlining its future focus.
U.S. Bank's Competition and Revenue Stability
U.S. banks compete to serve ultra-wealthy clients by providing brokerage, mortgage, and other services, as well as estate and tax planning. This industry insight underscores the importance of the wealth management sector for the financial industry.