Goldman Sachs to Acquire Robo-Advisor NextCapital

Goldman Sachs is acquiring NextCapital, a Chicago-based robo-advisor, as part of its continued expansion into asset and wealth management.

NextCapital partners with financial institutions to provide planning services for workplace retirement plans and individual retirement accounts. It currently has about $220 billion in assets under supervision, according to a press release.

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The acquisition will augment existing capabilities across Goldman Sachs' (ticker: GS ) growing asset and wealth management business, and coincides with a growing push in wealth management circles toward technological advances and the adoption of robo-advisors.

The bank has a history of working with employers to help them deliver retirement programs to employees, with total defined benefit and defined contribution assets under supervision of about $350 billion. Over the last 10 years, trends have gravitated in favor of customized solutions for individuals, like personalization and target date funds based on when the employee plans to retire, said Gregory Calnon, global head of multi-asset solutions.

"What NextCapital does is pull together trends from the defined contribution space for more personalization and customization," Calnon said.

For employees, this merger means that employers can offer retirement plans that have been tailor-made based on background information the company's human resources department may already have on the employee, he added. It will also provide these employees with more investment advice and support, he said.

NextCapital's robo-advisor capability is crucial to be able to offer the degree of personalization Goldman Sachs is aiming for.

"In order to customize for a large swath of clients, and in this case, employees, having the scale to do so is really important," Calnon said. "Technology plays a role in making it easier to customize for an individual's needs."

Calnon believes the defined contribution market, which currently stands at around $8 trillion to $10 trillion, could swell to up to $15 trillion over the next few years, marking one of the largest trends in the retirement sector.

Over the last few years, Goldman has been pushing to expand its wealth management capabilities. In 2020, the bank broke from tradition by holding its first-ever investor day, where it announced it would revamp its Consumer & Wealth Management segment. 

"This acquisition furthers our strategic objective of building compelling client solutions in asset management and accelerating our investment in technology to serve the growing defined contribution market," said CEO David Solomon in a statement.

The deal is expected to close in the second half of 2022, subject to regulatory and other approvals. Goldman didn't disclose further terms of the deal.

Shares of Goldman were up about 1% on Tuesday.

Source: Barron's