Goldman Will Offer Wealth Management To Clients With As Little As $1,000

It has been a turbulent year for Goldman’s ongoing attempt to penetrate the consumer lending and savings account market, after Michael Cerda, the head of product for Goldman’s consumer bank Marcus, left in April after just over two years with the bank, followed by the September departure of Harit Talwar, the head of Marcus who was hired from Discovery Financial with the task of converting the “vampire squid” into a “lovable teddy bear.” The two departures sparked speculation that Goldman wasn’t getting much traction in penetrating a market that has traditionally been served by the other US megabanks such as JPM, BofA, Citi and Wells.

So in what is perhaps an attempt to fix the ongoing Marcus growing pains, this morning CNBC reported that in addition to loans and deposits, Goldman is preparing to rollout a new wealth management product “for the masses” via Marcus: “the bank has begun internal testing of a new automated investment service ahead of a broader rollout early next year, according to an email obtained exclusively by CNBC. Employees who sign on to the digital service, called Marcus Invest, will pay an annual management fee of 0.15%, according to the company memo.”

“As we prepare for the public launch in Q1 2021, we are pleased to invite consumer and wealth management colleagues to provide early feedback on Marcus Invest through our beta program,” the email said. The memo was signed by Tucker York and Stephanie Cohen, co-heads of the consumer and wealth management division.

The push to fully embrace a fintech offering, similar to that provided by peers such as Betterment, is the latest example of a shift toward Main Street that begun in 2016 with its Marcus brand of personal loans and savings accounts. The bank, which has long catered to the ultra-wealthy, corporate officers and institutional investors, is seeking new sources of revenue away from trading and investment banking. And, as CNBC explains, as part of that push, the firm hopes to broaden its reach in wealth management to the so-called mass affluent. For years, the bank has mostly targeted clients with at least $25 million to invest for white-glove service from its private wealth management group.

Then last year, Goldman acquired boutique wealth management firm United Capital to help it serve “single-digit millionaires”.

Now, as it aims even lower, the Marcus Invest account can be started with as little as $1,000. Users can choose among three model portfolios composed of ETFs from Goldman and outside providers.

“Marcus Invest helps take the heavy lifting out of investing with managed portfolios of ETFs based on models designed by our colleagues in the Investment Strategy Group, and featuring GSAM’s ActiveBeta and Access ETFs in select portfolios,” according to the memo. The firm’s Investment Strategy Group steers asset allocation for private wealth clients. It’s GSAM unit, which stands for Goldman Sachs Asset Management, is known for a popular series of smart-beta ETFs.

The latest product will be bundled with other offerings, including a personal finance tool called Marcus Insights, on the Marcus app and online portal.

So how much money does Goldman hope to make on a product best-known for its razor thin margins? Well, not much: According to CNBC, while the company wouldn’t say how much it plans on charging nonemployees, it’s likely to be in line with competitors’ pricing for automated investing, according to a person with knowledge of the plans. Morgan Stanley charges 0.35% and Bank of America’s Merrill division charges 0.45% on select tiers of service.

While the digital wealth management service was originally targeted to have a 2020 rollout, it was delayed by the coronavirus pandemic. The firm’s next move is likely to be a Marcus checking account that will be available through the app, part of the bank’s vision for the retail bank of the future (yes, a Goldman checking card is coming in addition to the Goldman-Apple co-branded credit card).

Before rolling out the new product to customers, Goldman invited consumer and wealth-management employees to try out the automated-investment service first continuing a tradition of testing new products with its employees to work out bugs.  “Portfolios are pre-approved by firmwide Compliance and do not require trading pre-clearance,” Goldman said. “After your account is set up, your account will be monitored daily and rebalanced periodically to help you meet your goals.”