- October 15, 2020
- Posted by: Stratford Team
- Category: Markets
David Solomon, the chief executive of Goldman Sachs.
Jose Luis Magana/AP
- In Goldman Sachs’s quest to move down-market, part of its newly reorganized wealth management division is preparing to expand.
- Joe Duran, CEO of Goldman Sachs Personal Financial Management, told us in a recent interview that the business is looking to hire dozens of financial advisors over the next year.
- Duran also said he plans to open eight new offices on top of roughly 100 he currently has.
- The wealth management unit is also seeing a boost from corporate clients that want to ensure employees are getting good advice as they face layoffs or early retirement offers.
- Visit Business Insider’s homepage for more stories.
To anyone who doubted if Goldman Sachs would continue aggressively growing the wealth management platform it bought last year for $750 million, the leader of the business has a definitive answer.
“I think we’re in the early stages of the exponential part of the growth curve,” Joe Duran, chief executive of Goldman Sachs Personal Financial Management (PFM), told Business Insider in a recent phone interview. “We’re still learning how to do this.”
The wealth unit, which focuses on ultra-high-net-worth clients, has also received a significant boost from corporate clients.
With business in many sectors suffering due to the coronavirus, companies doing layoffs or offering early retirements have reached out to PFM to advise affected employees to make sure they are aware of and take full use of their benefits, he said.
To that end, Duran has ambitious hiring plans over the next year. He said he would be making many outside hires, with other additions to come from internal transfers from the private wealth management unit or Ayco business, which offers financial advice to company executives.
“I suspect we’ll end up adding dozens of advisors over the course of the next year,” Duran said, adding that those plans are “all contingent on what happens in the world” during the pandemic that’s ushered in layers of economic uncertainty. Goldman Sachs Personal Financial Management has nearly 250 advisors across 100 offices.
Ramin Talaie/Corbis/Getty Images
Duran said Goldman also has plans to open at least eight new offices before the end of 2021, an increase of 8% over the current footprint.
“I think we’ll certainly do a couple before year-end,” and the business would likely see another half-dozen locations open next year, Duran said, adding that may mean both new offices or satellite locations to existing offices.
“We have a very adaptable world,” Duran said. “We just need to be geographically close. We don’t need to be local. I suspect that will change. I certainly hope that will change.”
He’s also considering steps like whether to acquire or recruit new advisors in different markets: “We have a very open-minded view as to what is the most commercially efficient way to enter a new marketplace,” he said.
The expansion plan is part of Goldman’s quest to move down-market and manage money for clients less wealthy than the multi-millionaires to whom the bank has long catered. The PFM unit caters to those clients with roughly $1 million in investable assets, though the business will make exceptions and take clients with less, Duran said.
Duran joined Goldman Sachs in mid-2019 when the bank bought the registered investment advisor he founded, United Capital, for $750 million in cash. United Capital oversaw some $25 billion when it was acquired, a number that has likely grown, though the bank no longer discloses assets under Personal Financial Management, the unit’s new name.
It was the bank’s largest purchase in two decades and part of a sweeping long-term vision under Chief Executive David Solomon to beef up wealth offerings — and tap into more stable revenue streams than volatile businesses like trading — for investors who are wealthy, though not, at least traditionally, Goldman Sachs-wealthy.
There were questions about how the two cultures would fit. In the interview, Duran put his business and Goldman’s legacy franchise in terms of brand-name hotels. Goldman is like a Ritz-Carlton, for instance, with many professionals on staff serving each person paying for a room, he said. His business? A little different.
“We run a really nice — maybe it’s a Sheraton, maybe it’s a Westin, but we have a lot more people staying in our hotel,” Duran said. “They’re bigger hotels. We have a lot of very high-touch, very high service, but it’s slightly different. That I would say has been a mindset that is different.”
As Duran brings on new clients, he’s aiming for roughly a third to come from referrals out of the private wealth management division, a third from partnering with Ayco, and a third from its existing client referral network.
On a call Wednesday morning to discuss third-quarter earnings with analysts, Goldman’s CEO said the relationship between PFM and the firm’s ultra-high-net-worth clients had resulted in 700 referrals so far this year, representing an opportunity of more than $2.5 billion in assets.
In the interview with Business Insider, Duran said PFM has also added 10 new corporate clients since it became part of Goldman Sachs, a boost to the firm’s potential client pipeline.
“We’re seeing some very good momentum in the corporate marketplace,” he said, adding that corporate HR departments want to make sure their employees get good advice when it comes to layoffs and early retirement offers.
“Like, should I take the package? What does it look like? And do it in a caring and empathetic way, but also provide tangible, really deep qualitative and quantitative advice,” he said, adding “so we have advisors with decades of experience getting on the phone with people that will never be our clients to provide advice and guidance on whether to take these packages or not.”
The New York bank’s Consumer & Wealth Management division, part of the bank’s new business lines established earlier this year, oversaw $575 billion through September 30. The firm reported third-quarter earnings on Wednesday.
Where the bank’s long-awaited robo stands
Other client segments include a more mass affluent segment that will be served with an automated wealth management offering. The robo-advisor was originally set to launch in 2020 with a minimum balance of somewhere in the neighborhood of $5,000, Duran told the Financial Times in December 2019.
But with the pandemic’s onset, the product has been delayed until 2021, Chief Operating Officer John Waldron said during a virtual industry conference earlier this year. That hasn’t kept employees from using it, and the platform is now being used by a segment of Goldman’s own people, Duran said.
“It is still a high priority. It’s still being worked on. We’re just putting, first and foremost, the things that go directly to our target market,” Duran said. “A lot of our advisors are so busy onboarding and meeting with new clients; introducing a robo solution is very low on the list of things they care about right now.”