Goldman Brakes Advisor Hiring Plans, Delays Digital Wealth Offering
Goldman Sachs’ plan to quickly expand its wealth management services has been delayed by the coronavirus economy, a top executive said on Wednesday.
Goldman in January outlined plans to hire 250 advisors globally in its traditional private wealth unit for ultra-wealthy clients over the next few years, and to expand organically and through acquisition into serving middle-class and young investors.
“We have decided to slow our advisor hiring activities this year,” Waldron said Wednesday, “and we will defer the launch of our digital wealth offering into 2021.”
Goldman’s pivot to wealth management and consumer banking business as counterbalances to its vaunted but volatile investment banking and trading heritage was put in relief earlier this year when it announced plans to launch a robo-like wealth service for so-called mass affluent clients investing as little as $5,000.
The company has shifted its long-time cadre of fewer than 500 advisors serving wealthy individuals and families from its investment management division to a new consumer and wealth division. The new unit also houses the “Personal Financial Management” business of small investment advisory practices Goldman absorbed last summer with its $750 million cash purchase of United Capital Financial Advisers.
Goldman’s core private wealth franchise targets clients with $10 million or more in investable assets, while the United Capital businesses target clients with $1 million to $10 million.
“Our wealth management strategy will be a little slower on the advisor hiring front, although [it’s] going a little better on the high-net-worth United Capital rebranding and integration,” he said.
Goldman’s traditional force of upper-high-net-worth brokerage advisors has traditionally been stable, in part because of employment contracts that require advisors to take garden leaves of two to three months before joining a new firm. But the hiring delays come as Goldman has suffered an unusually large exodus in the past few years of high-producing advisors.
A Goldman spokesman declined to comment on Waldron’s remarks.
Despite the coronavirus hurdles, Waldron emphasized that Goldman remains committed to the diversification strategy it outlined in January in a first-time “Investors Day” presentation.
“There’s nothing about the crisis that leads us to deviate from what we laid out,” Waldron said. “While there are puts and takes, broadly across the firm, we feel good about the long-dated approach we are taking.”
He touted the company’s success in integrating the Personal Financial Management/United Capital business for affluent investors with its Ayco business offering stock-management and other services to corporate executives and workplace investment plans.
The partnership has yielded seven recent mandates among Fortune 500 companies, including Chevron Corp. and Schlumberger N.V., Waldron said, and about 300 individual clients with $800 million in assets have been referred among its private wealth business and Personal Financial Management.
Waldron also highlighted the firm’s plans to develop a custody business for registered investment advisers through its pending purchase of Folio Financial.
“That’s a stable, durable fee-based business consistent with our strategy,” he said.
Net income in the consumer and wealth division that Goldman created this year fell 11% in the first quarter, on a pro forma basis, despite a 21% jump in revenue. Overall, the company’s first-quarter profit plummeted 46% to $1.21 billion from the year-earlier first quarter.
