For Goldman Sachs clients who don't want the full services of a family office, the Wall Street dealmaker is now rolling out à la carte options.
The new offering comes as part of Goldman's outsourced financial services to ultrawealthy clients who want the advantages of having a family office without the administrative burdens of running one. A family office is a private company set up specifically to tend to very affluent families' often complex needs — whether that be estate and tax planning, investment management or charitable giving.
Goldman, long a specialist in working with the wealthy, recently began offering outsourced family office services through its private wealth management division. But it became apparent that not everyone would need something quite so comprehensive.
Hence the decision to allow clients to choose family office-like services in an à la carte fashion, said Chris Gleason, the head of family office solutions under the firm's Goldman Sachs Family Office group. The goal is to be able to be as accommodating as possible to needs extending beyond basic investment management.
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Are clients, for instance, seeking cybersecurity services to keep hackers from breaching their families' wi-fi service? Or how about a detailed presentation showing just how their assets will be divided among heirs under a given estate plan? Or help managing complex alternative investments in private equity or credit?
Goldman can now offer each of those as standalone services, Gleason said.
"I think that's where we are seeing the trends in this space of, more broadly, how do we cater to these needs?" Gleason said. "We want to be a business that's able to say 'yes' as often as possible."
Jeff Nash, the CEO and co-founder of the recruiting firm Bridgemark Strategies, said the family office offering is always a good way to make client assets "stickier" — meaning harder to move to a rival wealth manager.
"Many advisors are working with ultrahigh net worth clients, and the more they can tie them into the family office solutions with estate and tax planning and other products on top of asset management, the stickier that client relationship is," Nash said.
Goldman's starts and stops in wealth management
The new offering also comes as part of Goldman's long-standing plans to become less reliant on investment banking revenue, which tends to be tied to the pace of mergers and acquisitions and initial public offerings in the market at any given time. Like many large financial services firms, Goldman has been trying to make more room for the steady streams of income offered by the wealth management business.
The firm's ventures in this direction have had some starts and stops. Goldman paid $750 million in 2019 for United Capital Financial Advisors, a California-based registered investment advisory, only to sell the practice four years later to the Overland, Kansas-based RIA aggregator Creative Planning for $349 million.
Goldman has since stepped back from its experiment of working with retail advisory clients to instead concentrate on working with the ultrawealthy. The shift in strategy has begun to bear fruit.
Last month, Goldman reported having brought in $7.6 billion in wealth and asset management fees in the first three quarters of the year. That figure was up 8% year over, putting the firm on course toward its goal of generating $10 billion from those sources this year.
"We grew our total client assets to $1.6 trillion, and our ultrahigh net worth franchise is well positioned to continue to grow globally as we expand our adviser footprint and our leading offerings and our lending offerings to clients," Goldman CEO David Solomon said on Oct. 16 in an earnings call with analysts.
Much of that growth has been driven by inflows of new assets. And like many large firms, Goldman is viewing existing clients as possible conduits to even greater troves of money that could most likely benefit from sophisticated management.
One source of assets is Goldman Sachs' Ayco division. Ayco, which Goldman acquired in 2003, works with executives and corporate employees on financial planning and has begun referring clients to the firm's private wealth group for family office services, typically offered to clients with a net worth of $100 million or more.
Great wealth transfer
Gleason said he and his colleagues think even more assets will be up for grabs from the long-predicted "great wealth transfer." That's the expectation that baby boomers and slightly older Americans will hand down tens of trillions of dollars to younger generations in the next 20 years.
Gleason said the inheritors of that money may very well find themselves encountering the sorts of complex financial questions that are best dealt with by a family office. But many will no doubt be reluctant to take on the headaches involved in hiring professionals and managing such an office on their own.
That's where the outsourcing offered by Goldman Sachs Family Office can step in. And for clients who don't want the full panoply of family office services on offer, there's the à la carte option.
"I think clients are being more deliberate about thinking about: How do I prepare my family for that wealth transfer and make sure that there's continuity when I pass those assets down to the next generation?" Gleason said. "They're wanting to have some institutional framework and governance around that."
Alts, cybersecurity and estate mapping
Gleason said one type of standalone service Goldman can offer to clients is management of their investments in alternatives such as private equity and private credit. Goldman is among the many firms helping clients move money into these types of vehicles.
It reported having $328 billion in alternative assets under supervision in the third quarter, up from $267 billion the year before. Alternatives tend to come with far more tax documents, reporting requirements and other burdens.
Gleason said clients can find themselves inundated by paperwork and needing a "mini-army" to keep track of it all. Goldman, he said, uses technology to simplify all of that.
"It's an example where we can bring it together all on a single platform, and I can show you all your alts in one single location," Gleason said. "And I can show you not only all your reporting assets but, more importantly, all the documents."
Gleason said the firm receives calls almost daily from clients asking about another new one-off service it is offering: cybersecurity.
"It used to be: Here are the best practices to make sure you have your wi-fi protected," Gleason said. "Now it's: How do we create an ongoing monitoring capability that provides any monitoring needed to make sure their wi-fi isn't compromised? Or if a hack happens, it provides the backup needed to get the information back to our clients."
As for estate planning, Goldman is planning to introduce a "road map" system next year meant to help clients track assets they may hold in various LLCs, trusts and similar entities and plan the best ways to hand them down to younger generations or charities. Gleason said Goldman doesn't offer tax advice. But its new system will help clients understand what effects tax considerations will have on their inheritance plans.
"We're going to show you one single picture on a page that will show those entities that have assets and the value of those assets," he said. "But, more importantly, we're going to make sure those pass down to the next generation or philanthropy."
