The Wall Street powerhouse is muscling into wealth territory with the latest in a series of acquisitions. Can the leopard change its spots?

As hidebound European banks lament they are being left behind by U.S. rivals and Swiss firms like UBS and Credit Suisse fail to show many new ideas, Goldman Sachs’ wealth strategy is emerging as the next big idea. Two years ago, the Wall Street giant launched Marcus, an online retail bank, then snapped up personal finance app Clarity Money.

Last week, Goldman spent $750 million for United Capital, a $25 billion asset wealth manager with 22,000 clients in the U.S. The ballsy trading house is attempting to reinvent itself as a wealth manager with finance, tax, and pension planning for the U.S. middle class.

Everything That Goldman Isn't

What brought CEO David Solomon, a died-in-the-wool investment banker, to splash out on Goldman's most expensive deal in ten years for a wealth manager whose average client size is $300,000, and where margins are a measly 25 basis points? Why is Goldman paying a rich 3 percent of assets under management to go down-market?

The answer lies in the simple fact that United Capital is just about everything that Goldman Sachs isn't. CEO Solomon didn't spent $750 million in the hope of boosting Goldman's wealth and asset management arm.

Fintech via Smartphone?

Instead, the acquistion is meant to get Goldman closer to a strategic target, argues investor and adviser Lex Sokolin, who pens the «Future of Finance» blog. «It is about building a full fintech bundle for the American mass-affluent consumer in the smartphone,» Sokolin says.

Goldman Sachs didn't get quite that specific in its statement on the deal, but the strategic direction the U.S. bank is taking supports this view: its wealth management is moving more down-market from the super-rich it normally caters to.

GS WM Strategie

Europeans and Asians know Goldman Sachs as the private bank which demurs on clients with less than $10 million. In the U.S., Goldman wants to cater to everyone from mass affluent clients, where wirehouses like Morgan Stanley and J.P. Morgan dominate, to ultra-high net worth finance, where trust companies rule. 

To do so, the New York-based bank wants digital services to play a huge role – and that's why Goldman is willing to pay top dollar for United Capital. The Newport Beach, CA-based firm's platform, Finlife, which matches clients and advisers, has been its growth engine in recent years.

Tech Firm with Banking Platform

Goldman Sachs read the writing on the wall under previous Lloyd Blankfein, who was vocal about turning the bank into a tech firm which operates banking on a platform. Online retail bank Marcus, which hoovered up £5 billion (£6.4 billion) in three months after launching in the U.K. last year and is poised to enter the German market, is a result. 

The ever-increasing regulation of securities trading has also spurred a rethink at Goldman. Blankfein's successor Solomon, who spins electronic dance music in his free time as DJ D-Sol, reinforced Goldman's investment banking advisory arm and overhauled its wealth management entirely when he took over last fall. An Apple co-branded credit card for iPhone users is further evidence of its tech shift.

Solomon, unlike Paradeplatz's highly-paid wealth executives, has understood that retail banking and mass affluent business is the most vulnerable to the onset of financial start-ups and other digitized competitors – and also represents the best chance for a financially potent and adaptable giant like Goldman.