Goldman Sachs called out its Asset & Wealth Management segment as a highlight in its second quarter results, reporting total net revenue of $3.88 billion for that segment, up 27% from a year ago and 2% sequentially. The firm’s wealth management and other fee revenue was $1.44 billion, up 8% from the year-ago quarter.
The firm posted a record $2.9 trillion in assets under supervision and an increase in wealth management client assets to about $1.5 trillion. It had $31 billion of long-term net inflows during the second quarter, including $18 billion in alternative investments, $7 billion in fixed income and $6 billion in equities. The wealth management business saw $9 billion in client inflows.
“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,” Goldman Sachs CFO Denis Coleman said on an analyst call Monday morning. “A great example of the power of this unique platform. We expect continued momentum in this business as we also deepen our lending penetration with clients and grow our advisor footprint. Our pre-tax margin for the first-half was 23%, demonstrating substantial improvement versus last year and approaching our mid-20s medium term target.”
The firm attributed the segment results to net gains in equity investments, higher management and other fees and higher net revenue in debt investments. That was partly offset by lower net revenue in private banking and lending.
In a July 7 analyst note, JMP Securities’ Devin Ryan said the positive momentum in this business is underappreciated by the market.
“We see Goldman Sachs' Asset & Wealth Management business becoming an increasingly significant contributor to the top and bottom lines,” the analyst note stated. “The firm already operates a scaled platform with ~$3.5T in client assets, growing at a low-double-digit CAGR over the past five years, but we see room for continued growth at better economics to the firm.”
Overall, Goldman reported second quarter GAAP earnings per share of $8.62, up 180% year-over-year but down 26% sequentially. That beat analysts’ expectations by 20 cents, according to SeekingAlpha.com. Revenue for the quarter was $12.73 billion, up 16.9% year-over-year, beating expectations by $360 million.
Last November, Goldman Sachs closed on the sale of its Personal Financial Management unit to Creative Planning. And at an event in May, Goldman Sachs President and COO John Waldron said the firm has no ambition to launch its own RIA business. Instead, the bank would like to become what Waldron called a “trusted advisor” to RIAs with services that complement those offered by other providers and fill gaps in the market, addressing RIAs’ “pain points.”
The firm continues to gain traction in its RIA custody business, Goldman Sachs Advisor Solutions, which now has API integrations with 42 tech vendors.