Goldman Sachs will offer digital wealth management services to individuals with as little as $5,000 (€4,507) from next year, bringing the Wall Street investment bank a step closer to Main Street under the watch of new chief executive David Solomon.
Joe Duran, founder of the United Capital wealth management firm that Goldman bought for $750 million in May, said his team was on track to launch a robo adviser in 2020.
He said the service would allow Goldman to create a solution for clients with as little as “$5,000, $10,000 or $15,000” to invest. United Capital has not finalised the minimum investment, beyond that it will be “significantly lower” than its traditional accounts serving people with $1 million-$10 million of investable wealth.
“It’s a pipeline for future clients,” he said, adding that the robo adviser would initially target clients “with low complexity, not that much in assets” and allow them to “experience the Goldman Sachs’ way”.
Goldman already offers savings accounts and personal loans to a broad spread of households on both sides of the Atlantic through Marcus, the digital bank it founded three years ago as a partial hedge against declines in some of its traditional business activities such as fixed income trading.
Goldman has also invested in Nutmeg, the British digital wealth adviser, which is set to launch a tax-free investment account under its Marcus brand in the UK next year. However, its foray into consumer finance has not been without incident – it is the issuing bank for Apple's credit card, which has faced accusations that its algorithms were sexist.
Mr Solomon, who will lay out his vision for Goldman at a long-awaited investor day on January 29th, has signalled a more significant departure from the firm’s trading and investment banking roots. As well as pushing into mass market wealth management, his team is building a cash management business, raising more outside funding for its investing and lending unit, and chasing smaller deals.
Mr Duran said that United Capital’s integration with Goldman was progressing “a lot quicker than I would have guessed” and that he now saw a much bigger opportunity than the original goal of doubling its $25 billion of assets under management within three years.
However, investor expectations for the business are modest. Devin Ryan, analyst at JMP Securities, said he hoped the investor day would “connect the dots on how [Goldman’s] push into wealth management intersects with the broader consumer initiatives” under way at the investment bank.
Mr Duran said United Capital has already carried out trials with clients introduced through Ayco, Goldman's employee financial counselling service, which officers investment management advice, tax planning and other services to clients' employees depending on their needs and seniority.
“We’ve already picked up millions of dollars of new clients from those relationships,” Mr Duran said. “The demand is higher than I expected – corporate entities love having a local adviser who can meet with them face to face.”
He also said that referrals from Goldman Sachs’ private bank were a “much bigger growth area than originally envisioned”. The unit serves clients with at least $10 million in investable assets, and now sends prospective clients with lower levels of wealth to United Capital.
The robo adviser will be offered both to United Capital’s direct clients, and to outside advisers who use United Capital’s Finlife wealth management platform. It was developed centrally at Goldman and other parts of the firm – including Marcus – may also deploy it in future.
“We have a lot of clients who have kids and are in relationships with people who don’t have their [level of] assets,” said Mr Duran. He said he expected the typical account size to be higher than other robo advisers such as Betterment, which has no minimum investment threshold, “because of the kind of people the [Goldman] brand attracts”. – Copyright The Financial Times Limited 2019