Goldman Creates New Consumer & Wealth Sector
Goldman Sachs Group said Tuesday that it has created a new business segment called Consumer & Wealth Management to demonstrate the growing importance of individual clients to its core results.
Goldman did not previously break out its wealth management results, which were subsumed into a broader investment management division that was dominated by its asset management business. Under the new reporting structure, the investment management division has been renamed asset management and will exclude wealth management and most lending revenue.
Interest and other revenue from loans and deposits had been included in a volatile reporting line called investing & lending that many analysts and investors found confusing.
“The firm believes this new segment presentation, which is part of its ongoing commitment to organizing the firm in a client-centric way, will not only better reflect how the firm is now managed, but also help drive greater accountability for executing its forward strategy,” Goldman said in the press release.
The investment banking and trading powerhouse signaled its embrace of retail wealth management—a segment that it long eschewed—in July when it bought United Capital Financial Advisors, which assimilates small registered investment advisory and financial planning practices and oversaw $25 billion of customer assets at the time.
Like other Wall Street powerhouses, Goldman has turned to wealth management fees as a counterbalance to volatile trading and banking revenue.
On a pro forma basis, the new consumer and wealth sector booked $3.8 billion of net revenue in the first nine months of 2019, $3.2 billion of which came from wealth management, according to Tuesday’s filing with the Securities and Exchange Commission. The business is the smallest of Goldman’s four business sectors, but its $2.6 billion of management and incentive fees exceeded the $2.0 billion that would have been booked in asset management under the new reporting structure, according to the filing.
Pretax earnings in the consumer and wealth sector would have totaled $256 million in the first nine months of 2019, Goldman said in the regulatory filing. The company as a whole had $8.26 billion of pretax profit in the first three quarters of this year, including $3.5 billion in global markets, $2.3 billion in investment banking and $2.3 billion in asset management.
Goldman will report its 2019 fourth-quarter results under the new alignment on January 15.
Investing and lending results that Goldman previously consolidated on the now-defunct reporting line will be dispersed among Investment Banking (corporate loans and acquisition financing), Global Markets (formerly institutional client services, which will be credited with structured finance and warehouse lending fees), Asset Management (proprietary equity investments and securities lending fees) and Consumer & Wealth Management (credit card fees, unsecured consumer loan fees and private wealth lending fees).
Goldman’s traditional retail brokerage business in the U.S. remains small, with fewer than 500 advisors in 13 private wealth offices.
A company spokesman declined to disclose the exact number of Goldman’s private wealth advisors or of those at United Capital. The California-based RIA had 220 advisers in 90 offices at the time of its last regulatory filing as an independent firm in April.