What Banks Can Learn From the United Capital Acquisition

Last week, Goldman Sachs agreed to buy United Capital, a wealth management business, for $750 million. The move revealed a clear strategy by Goldman Sachs to go into the wealth management business on a broader scale.

Goldman Sachs manages wealth, but only FOR the top tier of individual investors with more than $20 million on average. United Capital’s clients are generally from $1.5 million on the low end to about $8 million in net worth. But United Capital has an impressive $25 billion in assets under management and close to one hundred offices.  

David Solomon, chairman and CEO of Goldman Sachs said, “United Capital will serve as a cornerstone of our business as we execute on our long-term strategy to offer clients solutions across the wealth spectrum. United Capital will help accelerate this strategy by broadening our reach.”

The move by Goldman Sachs means that large financial institutions are looking to diversify the business even if it means more volume and in a sense, a client base that moves them down market.   The bet, which seems sound, is that United Capital can leverage the Goldman Sachs brand to expand its client base even further to America’s growing millionaire population without hurting Goldman’s cache up market.  

The founder of United Capital has a compelling story as an immigrant coming to the United States in his late teens and rising step by step to build his empire in California. In a recent interview since the acquisition, he stated that he would like to double the business under the Goldman Sachs brand within a couple of years.  

One of the things that midsize banks can learn from the rich price of $750 million is that United Capital has a sophisticated digital platform that advisors can use for portfolio management. This was a compelling part of the acquisition consideration. The assets are impressive, and the niche within the market is one that was also appealing to Goldman Sachs. But United Capital’s valuation was no doubt enhanced due to its technology platform that is widely used within the industry.