The bank is exploring alternatives for its registered investment adviser (RIA) unit, Personal Financial Management (PFM), which manages about $29bn, after its scale back into three units last year and goals for its consumer business
Goldman Sachs to divest its wealth businessc. (Credit: Akshay Sadarangani on Unsplash)
Goldman Sachs is reportedly looking to divest a part of its wealth business, as the company shifts its focus away from high-net-worth clients in mass markets, towards the ultra-rich.
The bank is exploring alternatives for its registered investment adviser (RIA) unit, dubbed Personal Financial Management (PFM), which manages about $29bn, reported Reuters.
Its change in strategy follows a revamp in the organisational structure to scale back into three units last year, and ambitions for its consumer business, which lost $3bn in the last three years.
The US investment bank has offloaded the majority of its unsecured consumer loans since last year and is also planning to sell its fintech business, GreenSky.
Last month, Goldman divested personal loans from its consumer unit Marcus, worth $1bn, to alternative investment firm Varde Partners.
Argus Research analyst Stephen Biggar told Reuters: “This is part of the overall restructuring of the firm, back toward its roots. 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.”
Goldman acquired the RIA unit, previously known as United Capital Financial Partners, for $750m in 2019 to expand its client list beyond the ultra-rich.
The company’s private wealth business manages $1 trillion in assets for ultra-high net worth clients, who possess $60m or more in investable assets.
The high net-worth individuals served by the RIA unit would have around $1m to $10m to invest.
Reuters reported that the US banks compete to serve ultra-wealthy clients with brokerage, mortgage and other services, along with estate and tax planning.
Goldman plans to expand its core wealth business serving ultra-high-net-worth clients.
In a separate development, Goldman Sachs Asset Management has agreed to make a major investment in the US-based insurance brokerage World Insurance Associates (World).
Goldman will join the existing investor Charlesbank Capital Partners as a co-lead equity investor.
In addition to the equity investment, Goldman is concurrently leading a significant subordinated debt financing to support World’s acquisition strategy and organic expansion.
The US company will invest over $1bn into World, which has a total enterprise valuation of around $3.4bn, while its management team and employees remain major investors.