Alts Goose Wall Street’s Wealth Units in Third Quarter

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There’s always money in the wealth division.

Despite some clouds hanging over the economy — rising oil prices, a $40 trillion national debt, mounting trade tensions and a Big Mac costing $6 (Stop us, we’re spiraling!) — Wall Street’s biggest banks and investment managers have reported solid third-quarter results, with wealth management being a big part of that.

And it’s not just rising markets and higher fees. Firms are making strategic moves to attract clients and boost asset flows, with alternative investments emerging as a growth driver for some wealth divisions.

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Alternative Motives

Goldman Sachs reported more than $5 billion in revenue for its asset and wealth management division, up 14% year over year. The results reflected significantly higher management and incentive fees, along with higher assets under supervision. Fees from alternative investments reached $860 million, up 43% year over year. Alternative investment assets under supervision also climbed $32 billion to a record $491 billion.

“They have an incredible ability to leverage their institutional side to deliver top-tier alternative products to ultra-high-net-worth families,” said Gabriel Shahin, CEO of Falcon Wealth Planning.

Wells Fargo reported $603 million in net income from its wealth and investment management unit, up 19% from a year earlier. CEO Charlie Scharf said on the earnings call that the bank had increased alternative product offerings on its platform by 30% this year.

“Clients are hungry for yield and noncorrelated returns,” Shahin said. “Private credit and structured products are grabbing a lot of mindshare.”

Here’s a quick look at other results from this week:

• Morgan Stanley reported record wealth management revenue of $9.1 billion and $232 billion in net new assets.

• Bank of America reported $7.1 billion in revenue from its global wealth unit, which includes Merrill Lynch, with $20 billion in quarterly AUM flows.

Living in the Citi

Citigroup’s wealth division had a banger of a quarter, reporting $585 million in net income, up 93% year over year. Client investment assets rose 15% to $759 billion.

“Citi is a behemoth, but in the wealth management space, they’re the little guy relative to JPMorgan and Wells Fargo,” said Edison Byzyka, CIO at Credent Wealth Management. A few years ago, Citi’s wealth division faced multiple headaches including executive turnover and questions about its ability to capture more of its clients’ wealth. “It was a kind of organized chaos for a time at Citi, and it looks like that ship has definitely turned around,” Byzyka said.

Missed It by That Much. In a rare miss, JPMorgan Chase, America’s largest bank, fell short of analysts’ overall earnings expectations. Its asset and wealth division, however, reported $1.8 billion in net income, up 11% year over year. AUM reached $5.2 trillion, up 13%. And client asset flows were strong, hitting $263 billion.

“When you get as big as JPMorgan and you can still generate that much in net inflows, it’s really quite impressive,” Byzyka said.

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