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Goldman to Buy a Small Wealth Manager -- WSJ

17/05/2019 8:02am

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By Liz Hoffman 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 17, 2019).

Goldman Sachs Group Inc. is buying boutique wealth-management firm United Capital Financial Advisers for $750 million in cash, striking its biggest deal in two decades as it accelerates a push away from Wall Street into lower-octane businesses.

United, whose 220 financial advisers manage $25 billion in assets, will slot into Goldman's existing wealth-management business, which skews toward billionaires. The Wall Street Journal reported last week that the companies were nearing a deal.

Goldman's new chief executive, David Solomon, is pushing the firm to be more diversified and dependable, less a Wall Street powerhouse and more a financial supermarket modeled after JPMorgan Chase & Co. It is looking to offset declines in its bond and commodity-trading divisions and smooth out the swings in its merger and capital-markets units.

That pivot is sending Goldman in search of steadier businesses that will prosper in hot markets and cold ones and suck up little of the firm's capital, a precious resource since the financial crisis.

Wealth management fits the bill. Advisers collect flat fees to manage money for clients, who can invest in Goldman's own branded funds and borrow against their portfolios. Their spare cash can be swept into Goldman's online deposit accounts, a cheap form of funding that the bank is eager to grow.

Goldman's existing private bank manages about $480 billion for clients, with a minimum account size of $10 million. The bank is also building an automated investment tool aimed at the masses.

United's clients fall in the middle, with $1 million to $5 million in assets. They can be tricky clients, with finances complex enough to occasionally need a human adviser but not lucrative enough to merit the full white-gloved service.

They most resemble clients of Goldman's Ayco business, which provides financial planning and advice to corporate executives.

Wealth management remains a fragmented business, with thousands of small advisers scattered around the country. United CEO Joe Duran, who will join Goldman Sachs, has acquired more than 50 of them since launching the firm in 2005.

That makes United an unlikely target for Goldman, which has done few deals for fear of diluting its culture and polluting its home-built technology. It is expected to be more acquisitive under Mr. Solomon, a former deal banker who has built a 30-person strategy team scouting new business opportunities and takeover targets.

Write to Liz Hoffman at liz.hoffman@wsj.com

 

(END) Dow Jones Newswires

May 17, 2019 02:47 ET (06:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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