If Goldman Sachs is anything, they are opportunistic. Seeing trends in finance and investment banking and acting on them as quickly as they can. Sometimes they act on behalf of clients, but often times they act on behalf of Goldman and Goldman alone. Their latest push into, what some consider for Goldman, the down market ‘mass affluent’ tier of wealth management has industry insiders talking.
And what they are talking about is what Goldman isn’t saying, but rather doing. Evaluating acquisitions up and down the ladder of wealth management clientele based on assets and profitability. Their latest move, which just closed, to acquire United Capital in a $750M all cash deal is both aggressive (any all cash deal is aggressive and noteworthy) and a window into the changing soul of the poster child of global investment banking.
For several years now the goose that lays the golden egg at financial institutions has become wealth management. Steady flows of fees, products and services, and the ability to manage those upward somewhat disconnected from market fluctuations has made wealth management a Wall Street darling. The likes of Morgan Stanley, UBS and others have seen their annual share of revenue and profits connected to wealth management skyrocket since the financial crisis.
Goldman Sachs has not only noticed but seems to be acting as if they have an opportunity to pounce on potential balance sheets that have a certain level of bloat that they don’t have.
A couple of quotes from Goldman Sachs CEO, David Solomon, make it clear that his firm is on the hunt for wealth management assets via acquisition:
“We have a very big infrastructure that we can continue to feed in terms of all the wealth, in terms of all the asset management and wealth management products we have.”
“United Capital came up for sale, we looked at it, we thought it was a really good fit to accelerate our business, so we decided to act on it…If something similar appears to complement the company’s asset management business, we’ll consider it.”
A clear indication that Goldman Sachs is committed to growing its wealth management business well beyond just the ultra-high net worth community. United Capital is clearly a mass affluent acquisition.
Pure speculation here but what other firms look a bit like United Capital? We certainly could name a few: HighTower, Focus Financial, Dynasty, Steward Partners. To say nothing of the national scale available to Goldman should they choose to wade into the middle market wealth management space occupied by Stifel, Ameriprise, Raymond James and others. Or does this heavy-footed pivot by Goldman turn to a firm like UBS and its US wealth management operations?
Whatever the next move is, the fact that Goldman was aggressive in its acquisition of United Capital, and is being vocal regarding its wealth management acquisition strategy looms large over the wealth management industry.
It will be a fascinating and ongoing discussion.