Goldman Sachs investment strategy once reserved for wealthy
Goldman Sachs is seeking to engage with a wider range of investors in order to enhance its fee revenue.
The bank intends to make available certain advanced investment strategies, previously exclusive to its affluent clients, to customers of robo-adviser Betterment.
Goldman is creating portfolios for regular investors that aim to assist them in reducing their tax expenses. This is achieved by shifting their funds from extremely secure bank accounts to fixed-income exchange-traded funds, which carry a higher level of risk. The funds will invest in short-term Treasurys, municipal bonds, and investment-grade corporate bonds.
The portfolios were created by Goldman’s teams that oversee over $1 trillion of investments for clients such as corporate pensions and sovereign-wealth funds. Allocation varies based on the investor’s federal and state tax brackets, along with other factors.
The Wall Street firm has a history of tailoring investment portfolios to provide tax advantages for its institutional clients and high-net-worth individuals and families who typically have around $70 million invested with the bank.
On the other hand, Betterment’s platform only asks for a minimum investment of $10, making it accessible to a wider range of individuals. The newly designed portfolios are specifically tailored for those with an annual income of approximately $190,000 or more. According to Betterment, a significant number of clients were taken aback by the unexpected tax consequences of keeping their money in high-yield savings accounts.
Goldman Sachs has shifted its focus away from Main Street and is now prioritizing profit generation through providing services to companies that work with consumers, with the exception of deposit accounts. The bank is focused on increasing fee revenue in order to balance out fluctuations in its larger dealmaking and trading operations.
Last month, Goldman Sachs sold the accounts of Marcus Invest to Betterment. Marcus Invest was launched in 2021 with the aim of providing digital investing services to individual investors. Now, it will generate revenue from the underlying fees that Betterment’s customers will pay for the Goldman ETFs, further strengthening the partnership between Betterment and Goldman that was established in 2016 when Goldman first introduced investment portfolios on the platform.
Goldman Sachs has partnered with Betterment, a third-party wealth team, as part of its asset and wealth management division. The firm has been actively seeking fee revenue through this collaboration. The team hired Greg Weiss, who previously worked at BlackRock’s managed accounts and portfolio consulting, in the latter part of last year. The company’s objective is to increase the distribution of its investment products to registered investment advisers, banks, and other financial institutions that serve individual investors.
Goldman is currently ranked ninth among asset managers in the U.S. for the amount of money it manages in asset-allocation models that are accessible to third parties. As of the first quarter, Goldman has $17.3 billion under management, according to Cerulli Associates.
