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Goldman's Folio Financial Buyout to Aid Wealth Management Arm

With a view of strengthening the wealth management unit, The Goldman Sachs Group GS has inked a deal to acquire Folio Financial. The transaction is expected to close in third-quarter 2020.

Folio Financial is a boutique wealth management custodian and technology company with $11 billion in assets under custody for registered investment advisers.

The move comes one year after Goldman’s purchase of United Capital to expand its client base and get access to the latter’s enhanced digital platform.

The latest acquisition will bolster Goldman’s current offerings by giving it access to Folio Financial’s technology and ability to earn fees from being the custodian of assets for other firms.

“The combination of Folio’s patented technologies and services with Goldman Sachs’ investment solutions and access to global resources will create material value for our clients.” said Steven Wallman, CEO of Folio Financial.

Wealth Management Expansion Drive in Wall Street

In February 2020, Morgan Stanley MS entered into an all-stock acquisition deal with Arlington, VA-based E*TRADE Financial ETFC, per which, the former will acquire the latter for $13 billion. Post the deal completion, Morgan Stanley will be well positioned as a leader in the Wealth Management industry across all channels and wealth segments, with a significant increase in the scale and breadth of its franchise.

Franklin Resources’ BEN wholly-owned subsidiary and a global wealth manager, Fiduciary Trust Company International, inked a deal to acquire Athena Capital Advisors. The asset manager entered into the deal with a view of fortifying the wealth-management business through diversification of investment solutions.

Our Take

Goldman’s efforts for revenue diversification and stability bode well. Its consumer lending business seems impressive as well. It is tapping into the large addressable market of consumer deposits via the digital consumer lending platform — Marcus. However, Goldman continues to encounter probes and queries from several federal agencies, which remains a concern.

Shares of the company have lost 20.6% in the past three months compared with 19.8% decline of the industry.

Goldman currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Franklin Resources, Inc. (BEN): Free Stock Analysis Report
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