February 14, 2018
Lloyd Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc., speaks during a discussion at the Goldman Sachs 10,000 Small Businesses Summit (Andrew Harrer/Bloomberg via Getty Images)
Goldman Sachs Group, long an investment banking and trading powerhouse, is putting a new emphasis on its wealth management business that was long a corporate afterthought, company CEO Lloyd Blankfein said in a presentation on Tuesday.
Taking a page from such retail brokerage juggernauts such as Morgan Stanley, Blankfein touted the benefits of having a “diversified franchise” and broke out statistics to show it.
The company’s Private Wealth Management division is part of the investment management division that fueled 19% of Goldman’s 2017 revenue (up from 11% in 2016), and has the potential to provide $1 billion of annual revenue, surpassing investment banking, he said.
Though Goldman’s brokerage force comprises only about 700 advisors—compared with more than 15,000 at its biggest U.S. competitors—Blankfein aims to increase the size of the force by about 30%, or some 210 brokers, by 2020, according to his presentation at a Credit Suisse financial services conference in Florida.
Notwithstanding its small size, Blankfein boasted that his wealth managers added $17 billion of net “long-term fee-based” customer assets last year and produced a staggering average of about $4.5 million per broker. That’s “much higher than our large bank competitors,” he said.
Morgan Stanley, which has around 15,700 advisors, reported average annualized production per advisor of $1.12 million in last year’s fourth quarter. Merrill Lynch’s 14,900 advisors produced around $944,000 annualized per advisor.
“Wealth creation is expanding at a fast clip, and given the strength and offering of our brand, we haven’t seen the limit to where this segment of the market can grow,” Blankfein said. “The world seems to be growing rich people faster than we can grow advisors to cover them.”
Goldman, which in the past has said that it has no expertise in serving retail customers, has changed its tune as its traditional strengths in trading have been weakened by post-financial-crisis rules and regulations.
Its small wealth unit was aimed primarily at servicing executives of its large banking clients. but Blankfein said that ultra-wealthy focus is paying off as they generate around $4.5 million in annual revenue on average, which is “much higher than our large bank competitors.”
Goldman has recently expanded into consumer lending. While headlines have focused on its Marcus online loan business and possible plans to buy personal financial startup Clarity, Blankfein on Tuesday said that private wealth advisors are adding fuel to the business. The wealth unit made $3 billion of collateralized loans to high-net-worth customers in 2017, driving lending revenue in the unit up 30% from 2016.
Goldman also last year launched Goldman Sachs Private Bank Select, which offers securities-backed loans to customers of registered investment advisors through third-party wealth management platforms serving $4 trillion of client assets.
“GS Select is just getting started,” Blankfein said.
To be sure, Goldman suffered some attrition from its wealth unit last year, despite its unusual requirement that top advisors take several months of “garden leave” if they want to collect deferred pay when they resign. As previously reported, Goldman lost big teams in 2017 in Washington D.C., Chicago and San Francisco.
A Goldman spokesman said he could not immediately elaborate on Blankfein’s remarks.