As competition continues in the wealth management market and revenue growth slows, traditional wealth managers aim to find new avenues of growth. Goldman Sachs has announced it will be expanding its wealth management service to attract the mass affluent through a technology and human-influenced investment platform.
For Goldman Sachs, one of the investment and financial powerhouses of the world, its Q1 2019 investment management revenues were 12% lower than the first quarter of 2018 and 9% lower than Q4 2018.
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However, the company aims to combat this by continuing to focus on the mass affluent. Its next fintech-related initiative is to target these individuals with a wealth proposition, following its recent Apple Credit Card collaboration. Although nothing is set in stone, it’s CFO Stephen Scherr has stated it will be a technology and human-influenced investment platform – likely some version of a hybrid robo-advisory service.
New technology is opening the horizons of wealth managers that historically catered solely to the upper echelons of the world, allowing them to look to other segments to grow revenues.
This means the previously neglected mass affluent sector is now seen as a lucrative pool of potential clients by private wealth managers. In fact, GlobalData’s 2018 Global Wealth Managers Survey shows that 59% of global wealth managers agree targeting this demographic would make it easier to grow business.
It is no major surprise, therefore, this is the next venture for Goldman Sachs, especially following the introduction of its Marcus neo-bank in the UK and US retail banking markets. Adding wealth management to Marcus is a natural evolution of its existing offering.
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By GlobalDataProviders known for catering to the wealthy have struggled to go downmarket via a robo-advice offering. For example, UBS closed its SmartWealth robo-advisor – designed for investors with a minimum of £15,000 to invest – in the UK due to lackluster traction.
In order to compete, Goldman Sachs will need to tailor a package of services that offer value to clients, as well as leveraging its reputation as one of Wall Street’s premier banks. Its Marcus brand has shown the group can economically attract deposits from the mass market, so GlobalData believes it can build a hybrid-robo advice service that can economically attract investments from mass affluent investors.
Furthermore, according to GlobalData’s ‘Wealth Markets Analytics’, the mass affluent sector of the US held $27tn in liquid assets at the close of 2017 – almost $7tn more than the HNW segment. The size of the prize makes mass affluent individuals a worthwhile category to target.
Traditional private wealth managers have historically focused on the high net worth, with only a few universal banks looking to serve the lower tiers of the wealth pyramid. However, ongoing technological change is allowing a shift. Targeting the masses is a worthwhile move, and could bring in billions in AuM. But this will be dependent on how much value can be delivered to the segment.
