Goldman Sachs announced on Monday that it is considering selling a portion of its wealth business as it turns its attention back to serving the ultra-wealthy rather than high-net-worth clients in broad markets.

The Wall Street bank stated in a statement that it is considering alternatives for Personal Financial Management (PFM), an RIA unit that oversees around $29 billion.

The change in tactics follows CEO David Solomon’s last year’s division of the company into three sections and scaling back of goals for its consumer sector, which lost $3 billion over the previous three years.

Additionally, Goldman is moving forward with the sale of its fintech company, GreenSky, and has sold the majority of its unsecured consumer loans after ceasing this type of lending last year.

“This is part of the overall restructuring of the firm, back toward its roots,” said Stephen Biggar, an analyst at Argus Research.

“They’ve been unable to carve a path of profitability and scale” for the RIA, which catered to high-net-worth individuals in mass markets outside of Goldman’s core, ultra-wealthy clientele, Biggar said.

Regarding PFM’s earnings, Goldman declined to comment.

In afternoon trade, the company’s shares fell 0.6%, while the S&P index of bank stocks increased 0.2%.

When RIA, then known as United Capital Financial Partners, handled around $25 billion in assets in 2019, Goldman acquired it for $750 million. Although the segment has remained a minor component of the bank’s wealth division, the acquisition was intended to expand Goldman’s clientele beyond the ultra-rich.

For clients with an investable wealth of at least $60 million, Goldman’s private wealth division manages $1 trillion in assets. High net worth individuals often have between $1 million and $10 million to invest, which would fit within the scope of the firm Goldman is considering selling.

The potential sale was initially covered by Citywire RIA.

Competitors like Morgan Stanley, whose CEO James Gorman established the wealth management arm through a series of acquisitions that produce constant income from fees, have outperformed Goldman in the wealth industry.

After Goldman’s profit dropped 60% in the second quarter due to writedowns on its consumer businesses and real estate investments, Solomon has been under pressure to turn around the company’s fortunes.

The bank reiterates goals from its investor day in late February and intends to expand its main wealth division serving extremely wealthy clients. According to Goldman, two further primary wealth businesses are Marcus savings and workplace financial planning through Ayco.

In order to compete for the business of ultra-rich clients, U.S. banks offer brokerage, mortgage, and other services in addition to estate and tax preparation. Compared to volatile Wall Street operations like investment banking and trading, which are closely tied to economic activity, those activities often produce more predictable revenue.

(Adapted from BusinessToday.in)