Major acquisitions have been rare in the post-crisis world as Wall Street firms focus on avoiding the wrath of regulators and politicians.
Goldman Sachs is aiming to diversify away from trading, a troubled part of the bank in recent years.
All major US banks suffered revenue declines during the first quarter in fixed income, commodities and currencies, with Goldman’s 11% plunge leading the way lower, according to Keefe, Bruyette & Woods. Trading revenue is expected to shrink again during the second quarter due in part to slower trading activity.
“Wealth management revenue tends to be stickier. That makes it attractive,” said Brian Kleinhanzl, a KBW analyst.
As part of the deal, United Capital founder and CEO Joe Duran will join Goldman Sachs. United Capital’s employees and more than 220 financial advisors across the United States will also be joining the Wall Street firm.
Kleinhanzl said that while United Capital is a “fairly well-regarded” investment adviser, the firm’s clientele is not as affluent as the typical Goldman Sachs client. He said regulatory filings show that United Capital’s average account size is in the $300,000 range, compared with about $50 million for Goldman’s private wealth business.
Goldman Sachs can leverage that technology to improve the platforms it uses for its private wealth management and Ayco businesses. Ayco caters to corporate executives and employees, providing financial advice and investment management tools to more than 400 major companies.