Goldman Sachs wealth bounces back with record management fee revenue and assets

Goldman Sachs reported an increase in earnings, record assets under supervision and record revenue from management fees in its asset and wealth management division.

The division reported net earnings of $700 million, signaling that the firm is bouncing back from its subpar performance last year when it reported $208 million in losses at the end of the second quarter. Overall, Goldman Sachs saw profits of $3.04 billion in the second quarter.

READ MORE: Goldman's wealth management unit shows dip amid tough quarter

In a Monday call with analysts, Chief Financial Officer Denis Coleman noted the success of the company's wealth management franchise.

"This business has been a key contributor to our success in increasing more durable revenues and provides us with a strong source of demand for our suite of alternative products, a great example of the power of this unique platform," Coleman said. "We expect continued momentum in this business as we also deepen our lending penetration with clients and grow our advisor footprint."

READ MORE: Goldman Sachs wants to hire in wealth and asset management units

Coleman's remarks expressed confidence in the firm's direction, which is driven more by its wealth and asset management services than in the past and turns away from providing retail advisory services. The firm sold its Personal Finance Management service to Creative Planning last year, which brought in $394 million.

Management fees

The firm again saw record revenues from asset and wealth management fees, posting $2.54 billion in income, which is an 8% increase from the same time last year. Fees from alternative investments increased by 5% from last year to $548 million.

The growth in revenue from fees mainly comes from greater assets under supervision.

READ MORE: Stepping away from retail advice, Goldman reports record for wealth management

Notably, Goldman Sachs saw an 84% increase in incentive fees to $46 million, indicating strong performance from the company's fund managers.

Goldman Sachs does not report advisor headcount for its asset and wealth management division.

Assets under supervision

Goldman reported a record $2.93 trillion of assets under supervision across the board, with the bank seeing net inflows across all asset classes and net market appreciation in equity assets.

Growth in assets under supervision was driven by alternative assets under supervision, which rose 17.6% from the second quarter of last year to $314 million, and equities, which rose 17.2% to $735 million. Fixed income under supervision grew 8.6% to $1.15 billion.

The company raised $36 billion in alternatives, year to date, which was "stronger than anticipated" according to Solomon. As a result, the company expects to surpass $50 billion in alternatives fundraising by the end of the year.

"This is a testament to our investment performance, track record and intense focus on client experience," Solomon said. "We are excited about the additional growth opportunities for our Asset & Wealth Management platform."

Revenue

Net revenues in asset and wealth management increased by 27% from the same time last year, reaching $3.88 billion.

Lower revenue in private banking and lending was partly a result of the company's sale of its Marcus loans portfolio last year, which netted the company $100 million and raised revenues above their normal level.

Equity investments brought the company $292 million, up from losses of $403 million from the same time last year. These gains were propelled by gains from real estate investments.

Expenses

Goldman Sachs reported lower expenses compared to the same time last year, spending $3.04 billion within its asset and wealth management unit.

Company operating expenses overall totaled $8.53 billion for the second quarter.

Remark

Solomon started off the call condemning the attempted assassination of former president Donald Trump.

"We are grateful that he is safe and also want to extend my sincere condolences to the families of those who were tragically killed and severely injured. It is a sad moment for our country," he said.

Solomon highlighted the prevalence of geopolitical instability, implications of upcoming global elections and stickier-than-expected inflation as areas of concern. However, he called the operating environment in the United States "relatively constructive."

The CEO reaffirmed his confidence that AI will have positive implications for the financial sector, noting that the company's board of directors recently traveled to Silicon Valley to discuss the technology with CEOs of AI-related companies.

"We all left with a sense of optimism about the application of AI tools and the accelerating innovation in technology more broadly," Solomon said. "The proliferation of AI in the corporate world will bring with it significant demand-related infrastructure and financing needs which should fuel activity across our broad franchise."

Solomon also noted the company's 25th anniversary as a public company, commending the bank's perseverance through financial turmoil.

"When I look back at how we overcame these challenges, I immediately think of our culture," Solomon said. "One that has evolved, no doubt, but always stayed true to our core values. I know that the preservation of our culture is paramount to serving our clients with excellence, maintaining our leading market positions, growing our businesses and continuing to attract and retrain the most talented people."