Goldman Sachs expansion to target UHNW, HNW clients

Goldman Sachs expansion to target UHNW, HNW clients
Goldman Sachs is eyeing asset-gathering businesses like investment management and digital banking.

Mark Kauzlarich/Bloomberg

Goldman Sachs will pour resources into growing its wealth business serving the ultrarich, a pivot as it retreats from a disappointing venture into consumer banking, executives said during the bank’s investor day Tuesday. 

“There’s a lot of opportunity for us to grow, and we’re going to continue to grow on the high end and the ultrahigh end,” Marc Nachmann, the global head of the bank’s Asset & Wealth Management unit, said in a presentation live-streamed online. 

The investment bank occupies around 8% of the ultrahigh net worth wealth market and roughly 1% of the high net worth market in the U.S., according to Nachmann’s slideshow

Nachmann projected that Goldman’s AWM division, which emerged from a restructuring the bank announced last October, is projected to achieve “high single-digit” revenue growth over the next three to five years by organically growing from management fees it charges clients and income from private banking and lending. 

Additionally, Nachmann said he expects to achieve a pre-tax margin in the “mid-twenties” and a resulting return on equity in the “mid-teens.”

​”This is the area where there is the most significant growth opportunity for us, and where we are already operating at scale,” a company spokesperson said of AWM in an email. 

Nachman said that in the long term, “our goal is to outperform the industry organically.”

He outlined three strategies for achieving that organic growth: expanding the wealth management business; doubling down on industry-leading positions in its established alternatives business; and providing special investing “solutions” that clients can’t easily find elsewhere. 

Such bespoke solutions include Goldman’s outsourced chief investment officer services — which Nachmann said is already the market leader in the U.S. and at No. 2 globally, and which the firm plans to expand in North America and Europe — as well as insurance, separately managed accounts and direct indexing. Goldman is a top provider in insurance, where it is No. 2 in the market, and SMAs, where it is No. 1, he said.

“We’ve embraced our clients’ calls for customization and flexibility,” Nachmann said. 

By catering more to its richest clients, who tend to have a longstanding relationship with their private wealth advisor, the firm is betting that it can milk those ties for more streams of revenue. Goldman, an investment banking powerhouse, also wants to generate advisor introductions to wealthy individuals who are involved in an investment banking deal, for example. 

“We’re just getting started in terms of our potential of opening these trusted advisor relationships up to the firm,” said Dan Dees, the co-head of global banking and markets, at the event. Dees said the firm has seen “hundreds of referrals back and forth between GBM and AWM and vice versa.” 

The referrals system is part of the bank’s new One Goldman Sachs strategy of unifying its efforts across different divisions of the bank, essentially cross-selling products and services to clients whose bankers were previously siloed off. 

Goldman currently has over 16,000 wealth clients worldwide in its signature private banking channel. Clients stay on average 10 years with the firm and hold $60 million in an average account. The private wealth management business typically serves clients with at least $10 million of investable assets.

The bank has a total $1 trillion in client assets under management for its combined units in the wealth management business, including the younger Workplace and Personal Wealth Management and Private Wealth Management unit. 

Some 1,000 financial advisors, who have been at Goldman an average of 15 years each, service the bank’s ultrahigh net worth clients. The firm declined in an email to share how many advisors it intended to hire to achieve its growth goals. 

The ultrahigh net worth market “remains highly fragmented,” Nachmann said. “This leaves significant room for us to grow our franchise further and gain market share, both in the US and internationally.” 

Asked by Morgan Stanley analyst Betsy Graseck to describe what the geography of that expansion could look like, Goldman CEO David Solomon repeated this information but did not elaborate further.