For years, Goldman Sachs’s private-wealth team has focused on providing investment advice to the ultrarich. Now, it wants to organize their financial paperwork, manage their house staff and find them home insurance.
Goldman recently rolled out a family office within its private-wealth management division, part of a broad effort to expand services it provides to the most affluent. Those clients are increasingly important for the firm’s strategy to diversify its revenue beyond dealmaking and trading.
The bank is pitching clients a personal chief financial officer as part of a team that manages their day-to-day lives and prepares for big life events—everything from tax and estate planning to paying their bills to helping them get financing for a jet. Have a charitable foundation? Goldman can help run it. Need a cybersecurity firm to make sure hackers can’t break through your personal Wi-Fi? It’ll do that too.
Goldman is touting this offering as an alternative to the headaches wealthy clients may get from hiring employees for their own family offices and managing family dramas that can come along with it.
The fees Goldman charges clients for their private family office go into a critical revenue-generating bucket it calls management and other fees, which hit a record $2.62 billion in the third quarter. The bank made $7.6 billion in these fees through September and says it is on track to hit its annual target of $10 billion. That’s up from $6.8 billion in 2020.
That kind of recurring revenue is less volatile than fees produced from dealmaking and trading, which can rise and fall on world events out of Goldman’s control. Expanding them is central to Chief Executive Officer David Solomon’s plans for the bank.
“It very much feeds into the firm’s broader strategy to continue to invest in this space,” said John Mallory, co-head of global private-wealth management.
Goldman had tried to expand in consumer lending but after incurring billions of dollars in losses is walking away from lending to the masses. Instead, it is pouring money into catering to the wealthiest. Its private-wealth clients on average have about $70 million with the bank.
“I used to remember, 10 years ago, I’d go home on Saturday, OK, and I’d be wondering where we were going to get a dollar of revenue on Monday,” Solomon said at a September conference. “Now, with businesses like management fees, I know we have some revenue on Saturdays and Sundays, too.”
“Joking aside, we’ve doubled the management fees of the firm,” Solomon added.
The family office is mostly aimed at clients with a net worth of at least $100 million, a group Goldman executives say have been asking for a broader range of services to help run their complex financial lives. The bank has spent more than a year building plans for how to serve those needs.
Goldman has for years provided family-office services to senior executives and other employees of large companies through a unit known as Ayco. And the private-wealth team would refer clients to Ayco for that sort of work.
Now, the private-wealth team is taking over the family office business from Ayco.
The bank sees another potential benefit from that change. Goldman wants to turn more Ayco clients into Goldman private-wealth clients, which could boost assets under supervision in Goldman’s asset and wealth management group broadly. Total assets under supervision exceeded $3 trillion in the third quarter.
Goldman is teaming up with financial technology firms to improve its digital offerings for private-wealth management clients. In August, Goldman rolled out the ability for clients to see their private investment holdings, regardless of which firm is managing them, in one place.
Early next year, it plans to launch an estate flow mapping tool that it says will give clients a clear view of how their assets will be split up among heirs, help them make changes to those plans and include a “digital vault” for clients’ documents.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com