The Goldman Sachs Group GS has announced a $750 million all-cash deal to acquire United Capital Financial Partners — a boutique wealth-management firm — to expand client reach and get access to the latter’s enhanced digital platform.
The deal is expected to close in third-quarter 2019. Per the terms, Joe Duran, founder and CEO of United Capital, and his team of employees will join Goldman Sachs.
With about $25 billion in assets under management, United Capital offers financial life and investment management services through its subsidiary, United Capital Financial Advisers. It also offers wealth management services through its digital platform — FinLife CX.
Two-Fold Acquisition Benefits
Goldman Sachs offers wealth management services through two units — Private Wealth Management and Ayco. At present, the Wall Street giant offers services to the ultra-high net worth market through Private Wealth Management unit. However, with this acquisition, not only will Goldman have access to the mass affluent clients base of United Capital but will also be able to attract more such clients.
Also, the company expects this acquisition to bolster Ayco that provides financial planning and advice to corporate executives. Ayco will be able to cater needs of a broad range of clients with help of an “advisor-led, tech-enabled platform with considerable scale and geographic footprint.”
Wealth Management Expansion Drive in Wall Street
The Fed’s dovish monetary policy, concerns related to unsolved U.S.-China trade deal negotiations and expectation of global economic slowdown have taken a toll on trading revenues. Thus major Wall Street banks are diverting attention to more stable sources of revenues, such as wealth management.
Recently, Morgan Stanley MS acquired Solium Capital Inc. that helped it gain access to Solium’s corporate clients and their employees. This acquisition will aid in bringing Solium’s major stock plan administration platform together with the leading Wealth Management business, thereby, positioning Morgan Stanley as an industry leader in Workplace Wealth Solutions.
Also, Citigroup C is expanding reach in Asia Pacific by targeting clients with investible assets between $100,000 and $10 million in 17 markets. The company seeks to achieve this by combining world class advisory services from its trained managers with enhanced wealth management digital platform, including remote advisory and wealth management tools.
Goldman’s efforts to diversify into more reliable and stable source of revenues bode well. Its consumer lending business seems impressive as well. Also, it is tapping into the large addressable market of consumer deposits with its digital consumer lending platform — Marcus. However, Goldman continues to encounter probes and queries from several federal agencies, which remains a concern.
Shares of the company have recorded slight gain in the past three months against 4.5% decline of its industry.
Goldman currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked stock in the same space is Stifel Financial Corporation SF, currently sporting a Zacks Rank #1. Over the past 30 days, the company has witnessed 2.9% upward earnings estimate revision for the current year. Its shares have gained 6.4% in the past three months.
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