The Goldman Sachs Wealth Unit Is Coalescing Despite Delay of Digital Offering

Hundreds of referrals across the wealth management group could generate $800 million in new assets.

John Waldron, president and chief operating officer of Goldman Sachs Group Inc. (Paul Miller/Bloomberg)

John Waldron, president and chief operating officer of Goldman Sachs Group Inc.

(Paul Miller/Bloomberg)

The parts of Goldman Sachs’ wealth management unit are coming together and helping it bring in new assets. But the investment bank has slowed down its advisor recruiting and pushed back the launch of its digital wealth solution to next year.

Overall, the bank is performing well under the circumstances created by the Covid-19 pandemic. The global health crisis led to the fastest-ever bear market, the Cboe Volatility Index, or VIX, hit an all-time high, and credit markets “essentially closed over a period of days during March,” John Waldron, president and chief operating officer at Goldman Sachs said Wednesday during Bernstein’s 36th Annual Strategic Decisions Conference.

More than 1.7 million people have been infected with the coronavirus in the U.S. and at least 100,000 have died, according to a New York Times database. But the number of new cases is declining and some states and countries are gradually beginning to reopen businesses and move toward normalcy. About 25% of Goldman’s employees in the U.S. and London will begin returning to the office over the coming weeks, Waldron said during his presentation.

The pandemic has accelerated clients’ use of Goldman’s digital offerings, tested the bank’s own digital solutions, and strengthened its intentions to develop and rely on them further, according to Waldron. “We have learned valuable insights through this process that will inform our strategy going forward” he said about the adoption.

Visits to educational content for consumers at Goldman’s all-digital Marcus consumer bank were up 300% year-over-year.

“While we are clearly experiencing a more challenging market and business environment, we are seeing some very good signs of progress across a number of the KPIs we outlined related to our growth initiatives,” Waldron said.

Goldman’s wealth management unit was part of that, where the bank has been working to integrate its different parts and fluidly serve C-suite executives down to employees. “Our thesis was to combine an advice-led, digitally enabled wealth management strategy, with the corporate footprint and extensive counseling service of our longstanding Ayco platform,” Waldron said. There are already seven corporate mandates between clients of Ayco and Goldman Sachs Personal Financial Management, the RIA formally known as United Capital.

Other synergies are starting to take place, too.

There have been more than 300 client referrals to and from Goldman’s Private Wealth Management (which caters to ultra-high-net-worth clients) and Personal Financial Management. Those referrals equate to an opportunity for Goldman to manage another $800 million and “many [clients] are already in the process of being onboarded,” Waldron said.

However, the chief operating officer also said the wealth unit was “acting prudently” in the current business environment and slowing down its hiring of financial advisors this year. In addition, the bank is also delaying the launch of its digital wealth offering, or robo-advisor, until 2021.

Goldman recently acquired Folio Financial, a self-clearing broker-dealer and technology company, for an undisclosed amount. Before the deal was made public May 14, Folio told independent RIAs that custody assets with it that Goldman was “very interested in and committed to RIA custody,” one of the RIAs told RIA Intel.

Earlier this year, McKinsey & Company, a management consultant, suggested in a report there will be two “winning models” in the next decade as the wealth management industry evolves: A handful of big wealth managers will reach the necessary scale to be everything to every customer (what Goldman is trying to achieve), and all the others will have to remain focused on the wealthiest investors.

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