Goldman Sachs' revenue from wealth management fees reached a record high in the first quarter as the Wall Street giant completes its pivot away from retail advisory services.
Goldman reported on Monday that it collected $2.45 billion from asset and wealth management fees in the first three months of the year. That was up 18% year over year and set a record for the storied Wall Street dealmaker.
Chief Financial Officer Denis Coleman noted in a call with analysts on Monday that those strong results followed Goldman's sale of its former retail advisory division, Personal Financial Management, last year. Goldman sold that unit to the Overland Park, Kansas-registered investment advisor Creative Planning for $349 million after having acquired the same business, then known as United Capital, for $750 million about five years earlier.
Coleman noted Goldman's Personal Financial Management division had produced $60 million in management fees in the first quarter of 2023. The absence of that business in the first quarter of this year, he suggested, made Goldman's record fee performance all the more remarkable.
Goldman CEO David Solomon said the results show the firm is moving in the right direction.
"We had talked about broadening our wealth platform to get much more broadly into what I'd call kind of high net worth wealth management," Solomon said on Monday in a discussion with analysts. "And with the sale of United Capital we continue to be very focused on our ultrahigh net worth platform."
Largely helped by its fees, the wealth management unit's net revenue was up 18% year over year in the first quarter, rising to $3.79 billion. That came on nearly $2.85 trillion in assets under supervision, also a record for the firm. Goldman has been seeking to rely more on management fees rather than returns from investments held on its balance sheet.
For more on the first quarter results, scroll down.
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Note: Goldman Sachs doesn't break out many specific figures for its wealth management business, including the number of financial advisors and client assets. The numbers below are for Goldman's Asset & Wealth Management division.
Wealth and asset management client assets
Goldman's assets under supervision rose because of strong market returns as well inflows of long-term holdings like stock and bond investments.
Goldman reported a $36 billion increase in assets under supervision for the quarter. That was driven by $51 billion in market gains and $24 billion in equity investments and other long-term holdings but was offset by outflows of $39 billion in cash and other liquid assets.
The firm's nearly $2.85 trillion in assets under supervision was up from $2.7 trillion at the end of the same period a year ago. This year's assets consistsed of $1 trillion in the firm's institutional division, $845 billion in wealth management and $955 billion in its third-party distributed channel, which supervises assets on behalf of broker-dealers, registered investment advisors and similar firms.
Management fees
A little more than half of Goldman's $2.45 billion haul in fees came from $1.3 billion in wealth management fees, a figure up 7% year over year. The other part was from asset management fees, which were up 8% to roughly $1.1 billion.
Alternative assets
Goldman also reported a $1 billion increase for the quarter in private equity, credit, real estate and other alternative assets under supervision, bringing the total to nearly $296 billion. It made $286 million managing those holdings, a figure down 2% year over year.
Like many large wealth managers, Goldman sees even greater opportunities for growth in its private markets business.
"We continue to expect to raise between $40 billion and $50 billion in alternatives across private equity and other strategies this year," Coleman said. "More broadly, we are leveraging our long-standing leadership position in private credit to capitalize on the secular growth opportunity and expect to grow our assets from roughly $130 billion to $300 billion over the next five years."
Private banking and lending revenue
Goldman's revenue from private banking and lending was up a whopping 93% year over year to $682 million. That spike stemmed mostly from the first quarter 2023 results being depressed by the sale in that period of loans held in Goldman's Marcus consumer lending unit. That transaction led to a reported loss of $470 million for the year-ago period.
Wealth and asset management earnings
Goldman reported $692 million in net earnings on its $3.79 billion in net revenue. It had slightly more than $2.9 billion in operating expenses in its wealth management unit and a pre-tax margin of 23%.
Remark
Goldman reported strong results not only from wealth management but all of its business units for the quarter. All told, the firm reported $4.13 billion in net income on $14.21 billion in revenue in the first quarter. The net income figure was up 28% year over year.
Coleman said much of Goldman's strong first quarter results rested squarely on the shoulders of the wealth management unit. And a lot of that, he suggested, comes down to decisions to reset the bank's priorities.
"Simply put, we are delivering on the things we said we would do," he said. "We are focused on our strategic objectives and the execution focus areas in 2024 that we laid out in January which will help our businesses produce mid-teens returns through the cycle."
