The US group has agreed to buy a US wealth management shop, adding to its United Capital Financial Partners deal last year and signifying its ambitions to step up its presence in this market.

Goldman Sachs has agreed to buy the 20-year-old US wealth management house Folio Financial, having started talks last year. The closing of the deal, which is subject to regulatory approval, is expected to take place in the third quarter of this year.

The deal comes a year after New York-listed Goldman Sachs completed its purchase in July 2019 of United Capital Financial Partners for $750 million in cash, a deal that put the Wall Street titan into the HNW wealth management arena. Until that point, the firm’s wealth business was more focused on the upper cohort of ultra-HNW clients. 

Steven Wallman, Folio’s chief executive, said of the deal in a statement: “This transaction is another landmark event in Folio’s history, as it will further enhance our innovations and bring scale to our business, particularly in the execution, clearing, and custody space.”

Folio said more details about the transaction will be issued later; it did not mention financial terms.

A report by Reuters said that a Goldman Sachs spokesperson confirmed plans for the purchase but gave no other details.

Such a move fits with Goldman Sachs’ push to expand its wealth management reach because such a business is typically less capital-intensive than investment banking and brokerage, traditionally the firm’s staple businesses. Wealth management is less volatile and earnings more “sticky” – attractive qualities when markets are volatile and capital requirements go up. Banks such as Deutsche Bank and UBS have switched emphasis toward wealth management in recent years, for example. The big US firms such as Morgan Stanley and Merrill Lynch also face competition from new breakaway registered investment advisors and the upheavals expected from multi-trillion dollar assets transfers as Baby Boomers pass on.

Recent figures have shown that M&A in the wealth management space slowed in the first quarter of this year - although the big Morgan Stanley/E*trade deal held up the numbers to some extent. That this Goldman Sachs/Folio deal has been inked suggests that the underlying drivers of acquisitions, such as the need for scale to pay for technology, haven't gone away and may even be accentuated by the COVID-19 pandemic.