US investment bank Goldman Sachs decision to sell off its US-based wealth management ( WM ) business catering to high-net-worth investors ( HNWIs ) and focus more on the ultra-HNWIs ( UHNWIs ) is a clear indication that the bank is suffering from the impact of adverse market conditions much more than market watchers originally thought.

Its decision to focus on the UHNWI space makes this market segment very crowded and competitive, especially in Asia, where its peers are also focusing more attention and resources on the UHNWI market.

In Asia, although there is optimism that in 2023 the wealth of UNHWIs will increase – following a contraction in 2022 – this optimism has been dampened somewhat because of the delayed recovery of the Chinese economy.

However, expectations of wealth increasing in this space remain high, according to the most recent Knight Frank wealth report, in India, Taiwan, Japan and Australia.

The sale of Goldman’s HNWI business, Goldman Sachs Personal Finance Management ( GS PFM ), to Creative Planning, one of the largest registered investment advisers in the US market, which has US$245 billion in assets under management and 2,100 employees, was announced on August 28.

GS PFM has 74 offices in the US and manages US$29 billion in assets, with an average customer portfolio of US$1.3 million. The bank’s UNHWI business is known as Goldman Sachs Private Wealth Management and serves clients with at least US$10 million in investable assets.

Goldman Sachs says Creative’s wealth management teams will continue to have access to investment solutions and services from Goldman Sachs Asset Management as Creative builds an investment management platform. In July 2023, Creative entered into a strategic custody relationship with Goldman Sachs Advisor Solutions.

The sale of GS PFM comes in the wake of poor financial results announced by the bank last month, which reported a 58% drop in overall profit to US$1.2 billion year on year. The transaction is expected to close in the fourth quarter of 2023 and result in a gain. As well, the bank’s investment banking revenue, according to its latest earnings report, declined by about 20% in the second quarter of 2023. Trading revenue also fell by 14%.

The sale is a reversal from its earlier plans to build a consumer bank and follows poor financial performance since last year in the wake of the crash in the global investment banking market.

The bank has also been plagued by its involvement in a series of scandals. Most notably in Asia, it was implicated in the scandal stemming from some US$6.5 billion in bond sales in 2012 and 2013 that the bank helped arrange for Malaysian sovereign fund 1MDB. The scandal brought down the government of former prime minister Najib Razak and, in 2020, resulted in the bank paying a US$3.9 billion settlement to the Malaysian government.