Goldman Sachs to Sell Investment Advisory Unit, PFM, in Reversal of Expansion Strategy
Goldman Sachs, the well-known investment banking giant, has made the surprising decision to sell its investment advisory unit, the Personal Financial Management (PFM) unit. This move marks a reversal of CEO David Solomon’s recent attempt to expand the bank’s clientele beyond the ultra-rich.
According to sources, Solomon has been facing criticism from both partners and employees for his leadership style and the bank’s declining earnings. As a result, this latest decision comes as a second blow in the past year to Solomon’s plans. In 2019, Goldman Sachs acquired United Capital for $750 million but is now seeking to sell off the PFM unit.
The PFM unit manages approximately $29 billion in assets and is just a small component of Goldman’s overall wealth franchise. Despite its relatively small size, the bank is still evaluating various alternatives for the business, aiming for an outcome that benefits both clients and advisors.
This announcement of the sale follows Goldman Sachs’ decision earlier this year to put its online consumer lending business, GreenSky, up for sale. However, it is expected that the bank will face a significant writedown for GreenSky, as the offers from potential buyers fall below half of what the bank paid for the company.
Notably, former CEO Lloyd Blankfein has denied reports suggesting that he offered to return to Goldman Sachs to assist Solomon. Blankfein allegedly lost $50 million due to the bank’s declining stock price and was dissatisfied with Solomon’s performance as CEO.
The news of Goldman Sachs’ decision to sell its investment advisory unit comes as the bank reported a 58% drop in earnings for the second quarter, falling below Wall Street estimates. As a result, shares of Goldman Sachs were down 1.28% as of 2:30 p.m. Eastern time on Monday.
Overall, this unexpected move by Goldman Sachs reflects a shift in its strategic direction and highlights the challenges facing the bank under Solomon’s leadership. The sale of the PFM unit and the struggles with GreenSky indicate the need for the bank to address its declining earnings and find new avenues for growth in the ever-changing financial landscape.
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