Goldman Sachs Creative Planning

Goldman Sachs Divests PFM Unit to Creative Planning

In a strategic move to recalibrate its business portfolio, financial powerhouse Goldman Sachs (GS) has reached an accord with Creative Planning, a prominent wealth management firm headquartered in Overland Park, Kansas, for the sale of its Personal Financial Management (PFM) unit. This decision comes as part of Goldman’s efforts to scale down certain aspects of its operations and focus on targeted growth areas.


Goldman Sachs announced the sale on Monday, highlighting its agreement with Creative Planning to transfer ownership of the PFM division. Creative Planning, known for its robust presence in the wealth management sector, commands significant attention with over 2,100 employees and assets under management totaling $245 billion. Notably, Peter Mallouk, the CEO of Creative Planning, boasts an impressive resume as an author of investment-focused literature, including collaborative works with motivational speaker Tony Robbins.


The PFM unit in question had managed assets valued at $29 billion as of the conclusion of the previous year. Although financial specifics of the transaction were not disclosed, Goldman Sachs anticipates the deal will lead to a gain and is set to finalize during the fourth quarter. Following the news, Goldman’s stock exhibited a 1.67% surge in early afternoon trading, while the KBW Nasdaq US Bank Index (^BKX) displayed a concurrent 1.52% increase. Over the course of this year, Goldman’s stock performance has observed a 5.4% decline, positioning it behind competitors such as JPMorgan Chase (JPM) and Morgan Stanley (MS), yet still ahead of Citigroup (C) and Bank of America (BAC).


The origins of Goldman’s Personal Financial Management unit trace back to its acquisition of United Capital Financial Partners, headquartered in Newport Beach, California, for a sum of $750 million in 2019. This strategic move expanded Goldman’s portfolio by integrating over 200 financial advisors, catering to a client base recognized as the “mass affluent” – individuals whose wealth levels are moderately lower than Goldman’s traditional clientele.


The acquisition of United Capital Financial Partners was part of a broader strategy to diversify revenue streams beyond the inherent volatility of capital markets. However, recent developments show that Goldman Sachs is now reevaluating certain elements of this strategy, including consumer banking, to streamline its operations and better align with its core objectives.


Marc Machmann, Goldman’s Global Head of Asset and Wealth Management, emphasized the transaction’s alignment with the company’s previously outlined goals, as stated during the investor day in February. This divestment, according to Machmann, enables Goldman Sachs to focus more intently on executing its premium ultra-high net worth wealth management and workplace expansion strategy.


The overall assets managed by Goldman’s asset and wealth management business stand at approximately $2.7 trillion. Additionally, the private wealth division oversees assets totaling $1 trillion, encompassing key components such as the Ayco workplace financial planning platform, private banking and lending operations, and the Marcus Savings platform.


This announcement follows Goldman CEO David Solomon’s challenging period, marked by the company’s recent report of its lowest quarterly profits in three years. As Goldman navigates through various challenges, from global investment banking struggles to internal partner unrest, Solomon’s leadership and strategic decisions remain under scrutiny.


Furthermore, Goldman Sachs’ retrenchment from the consumer banking sector is evident. Solomon expressed intentions to divest the consumer lending arm, GreenSky, and reports suggest that the partnership with Apple is also in the process of termination.


Industry expert Gerard Cassidy, a bank analyst covering Goldman Sachs at RBC Capital Markets, has projected 2023 to be a challenging year for the firm. However, he believes that the latter half of the year holds the potential to establish a foundation for a more favorable outlook in 2024.


Source: Yahoo Finance

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