Goldman Sachs, a brand most associated with the very wealthy, is making a new move into the middle class via a blending of online and offline strategies.
Goldman is restructuring its two-year-old online retail-banking division, Marcus, into its investment management division, according to an internal Goldman memo obtained by Financial Planning. The platform already offers personal loans and deposit accounts. Expanding its digital wealth management would enable more cross selling of investment products.
"We started the digital finance business because it was clear that technology and data are fundamentally changing how individuals consume financial services products," the memo says. "By aligning the potential of Marcus with the longstanding strengths of our investment management business, we see an important opportunity to serve a broader spectrum of individual consumers and investors."
Since its launch, Marcus has originated more than $4 billion in consumer loans and grown well beyond its initial plan to help clients refinance credit card debt. The division claims more than two million customers with more than $30 billion in deposits already.
Goldman did not comment on precisely what Marcus may offer clients in the future, but it has ambitions to expand credit cards and retirement-planning products.
Even for a brand as powerful as Goldman’s, that may not be a slam dunk.
“We know this is a competitive and complex commoditized business, and we know that we have to differentiate ourselves and earn our way into it,” Goldman’s Chief Financial Officer Marty Chavez said during a conference call with analysts in July. “That’s what we’re doing.”
One expert agreed that the competition will be stiff.
While a new digital offering has the potential to steal market share, the robo industry may already be at saturation point, says Scott Smith, a director at Cerulli Associates.
“I just don’t see pent up demand for another robo advisor right now," Smith says. “It’s a chance to build a business, but there’s not going to be an avalanche of people in the short term."
“Everyone has a desire to be a single platform where everyone comes for all of their financial goals,” he adds. “The easy part is getting the strategy. The hard part is executing.”
Indeed, Goldman isn’t the only bank dipping into its retail banking client pool.
Robo advice has fueled an explosion of new discretionary accounts that topped 27 million in 2017, up from just 15 million in 2013, according to research from Aite Group. Assets on digital platforms are expected to top $1.5 trillion by 2021.
HSBC, for one, launched a robo advisor this month available to retail banking customers with at least $5,000 in an individual retirement account and $10,000 in discretionary accounts for an annual 50 basis point fee. Others include Fifth Third Bancorp’s securities, which teamed up with Fidelity to offer automated advice in June. BankMobile, a division of Customers Bancorp, and MemoryBank, a unit of Republic Bank & Trust, also have launched mobile-only units of their own.
The biggest potential pitfall for a major bank looking to shift client assets could come from within, Smith says.
“People don’t want to see money coming into the wealth management platform from other segments,” he says. “It’s very territorial.”