Goldman Sachs is only just beginning to tap the significant opportunity of the wealth management business, according to chairman and chief executive officer David Solomon.
“It's a slower growth, it's a slower process if you do it organically, but we see it as a very big opportunity,” Solomon said last week during the company’s first-quarter earnings call.
Goldman has taken an aggressive approach to revamping its operations, with a large focus on bolstering its wealth management business — and it’s resulted in a transformation of the financial services giant. The company signaled a massive shift in how it wants to be seen by investors back in January 2020, when it announced the formation of a new division that includes both its wealth management and private banking business as well as the firm’s consumer banking operations.
Solomon said the Goldman brand will help grow its wealth management business. “I think we have an aspirational brand in the wealth space.”
The CEO noted that the past two years have been the foundation for the wealth management business’ growth, specifically through acquisitions.
“It's only been the last couple of years for us with the United Capital acquisition and also through our Ayco channel. We're meaningfully expanding our distribution of wealth products in corporations that we've been focused on really enlarging that footprint,” he said.
“I think we're off to a good start there, but I think there's a lot of organic opportunity that still exists,” he added.
Goldman has been growing both Ayco, the financial planning company it purchased in 2003, and Goldman Sachs Personal Financial Management, its rebrand of registered investment advisor firm United Capital Financial Partners, which it purchased in 2019.
“I think our Ayco channel, Goldman Sachs Ayco, is a very, very unique platform to work through corporations, and I do see a trend in this competitive environment where corporations are more focused on helping their employees with wealth management services,” Solomon said.
While Ayco started as a financial counseling tool for C-suite executives, Goldman increased its scope over time to offer it to company employees. In January 2020, Eric Lane, who was then Goldman’s global co-head of consumer and investment management division, said the goal was to add 30 new corporate relationships and 300,000 employees to Ayco annually. Lane is now at Tiger Global Management, where he is president and chief operating officer.
Goldman acquired United Capital to “help accelerate” the company’s strategy of offering “clients solutions across the wealth spectrum” by broadening its reach, Solomon said back in 2019 when the acquisition was announced.
Goldman’s consumer and wealth management business had $738 billion in assets under supervision as of March 31 — down from $751 billion in the fourth quarter of 2021, but up from $637 billion in the same quarter last year, according to the company’s earnings results.
Net revenues in the business totaled $2.10 billion — 7% higher than the previous quarter and 21% higher year-over-year.
Within the business, wealth management revenues represented $1.62 billion in revenues — 2% higher than the previous quarter and 19% higher year-over-year.
On Track with Overall Financial Targets
Solomon said last week that despite recent external challenges, Goldman has been on track with meeting overall financial targets.
Solomon said that “there’s no question” that the first quarter was volatile with the war in the Ukraine, rising inflation and a “trend towards deglobalization,” but that Goldman remains committed to financial targets it set in February.
“In February, I laid out a revised medium-term return target. I’m very proud that, even with the headwinds we faced, our results this quarter meet those objectives,” he said. “We’re also well positioned to achieve the targets we laid out for our growth initiatives across asset management, wealth management, transaction banking and consumer.”
Those targets include a three-year return on tangible equity of 15% to 17% as well as increasing the revenue of its Marcus brand to more than $4 billion by 2024 and fees of more than $10 billion in 2024 in asset and wealth management, according to The Financial Times.
Goldman unveiled its low-minimum digital wealth management platform for the mass affluent, Marcus Invest, in February last year.
Goldman also has “aspirations to build the leading global digital consumer bank,” chief financial officer Denis Coleman said last week during the earning’s call.
“Our active customers in the consumer space are north of 13 million now, and that number in the fourth quarter was less than 10 million,” he said.
“Perhaps next up on the product roadmap will be the launch of checking. We’re already piloting that internally and we expect to launch that more broadly to our clients later this year,” he added.
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