Bloomberg News reports that Goldman Sachs agreed to sell off its $29 billion PFM or personal Financial Management unit on Monday. The company will sell the unit to a Kansas-based RIA or Registered Investment Advisor named Creative Planning.
What will be the outcome of the sale?
This move is to design the reorientation of the stalwart of Wall Street back to focus on the clientele with ultra-high net worth. Goldman Sachs has dominated the sector for long.
The unit of PFM is a spin-off from the United Capital, an advisory company that Goldman bought for $750 million in May 2019. This was as part of the expansion plan of the then chief executive officer David Solomon to increase the client base, which he desired would go beyond the ultra-rich. Also, this would address the needs of the slightly less affluent.
Did the move work out?
Although the then-CEO put in the above effort, the move turned out to be inconsequential when it came to the firm’s long-term strategy. However, as of February, Goldman just catered to 1% of the clients of high net worth, or the ones that belonged in the group between $1 million and $10 million as far as investment was concerned.
In comparison, the individuals of ultra-high net worth, which was Goldman’s primary client base, were found to possess investable funds that were more than $60 million. Goldman’s private wealth arm keeps tabs on more than $1 trillion in assets where roughly 16,000 clients are involved.
When is the sale scheduled to close?
Bloomberg News reports that the sale will close in the fourth quarter. This deal is to positively affect the wealth division’s finances, thereby boosting the profit margins.
According to the Global Head of Asset and Wealth Management of Goldman Sachs, Marc Nachmann, the transaction is a step towards progress, thereby implementing the targets and goals that the company has outlined on investor day in February. He also said the deal is a margin accretive for Asset & Wealth Management. It will allow them to focus on carrying out their growth strategy related to premier ultra-high net worth wealth management and growth at the workplace.
About Creative Planning
Creative Planning is one of the country’s biggest private investment advisors. It has more than 2000 employees on its rolls and a combined assets AUM worth $245 billion under assets under management. Most importantly, Creative Planning is to take on Goldman’s PFM unit.
What about shares of Goldman Sachs?
Following the announcement, the shares of Goldman Sachs surged 1% above Monday’s trading in the afternoon. They shed more than 5% in the present year till date, thereby underperforming the greater S&P 500 Financial sector. It was basically flat year-to-date.
