It is said that life is a journey not a destination. Nowhere may this be truer than in Goldman Sachs’ quest to gain retail customers.
Goldman is a pure-play investment bank, a white-shoe titan of institutional finance. But it doesn’t have commercial banks on the corner like JP Morgan Chase and Bank of America do; nor does it have the retail wealth management franchise of Morgan Stanley; nor does it have the mutual-fund name recognition of Fidelity or Vanguard.
So it has been a long, uphill battle for Goldman to balance, diversify and expand its revenue base by signing up the proverbial ‘mom and pop’ investors.
A Traders Magazine article from the late 1990s captured the state of play at the time.
Goldman Sachs to Become a Mutual-Fund Giant? Major Institutional Firms Need Retail Customers to Grow
Goldman, Sachs & Company, the last privately-owned U.S. blue-blood investment bank, seems to have it all: over-the-counter and listed trading that whips up envy on Wall Street, fixed income, corporate finance and equity derivatives business that dwarf most competitors.
But Goldman is still struggling to catch up in a less glamorous business selling to Joe Sixpacks, the retail customers that could transform Goldman into a serious mutual fund player.
Goldman, however, recently took a major step to reverse its fortunes, hiring Ammirati Puris Lintas, the advertising agency in New York that handles the accounts of Compaq Computer Corporation, the General Motors Corporation and United Parcel Service.
The agency will research Goldman’s public image before the firm decides whether to proceed with a major advertising campaign aimed at the general public.
But it seems increasingly clear that Goldman will follow the lead of other major institutional firms, like the former Morgan Stanley & Co., pitching for retail customer’s assets.
“It is a strategic imperative to be a retail player over the next twenty years,” said Peter Starr, an industry analyst at Cerulli Associates, a Boston-based consulting firm. “As baby boomers retire in the next two decades, investments will be more retail-oriented.”
Goldman currently has about $140 billion in assets under management, $8 billion in mutual funds.
Fast forward to today, and Goldman’s big recent push to crack retail is through its Marcus online savings bank. Marcus reached $72 billion in deposits as of earlier this year, and the platform has gained some traction and name recognition.
But as historically low interest rates constrain lending margins, the quest for the retail brass ring remains a slog for Goldman — the firm’s consumer banking initiative had lost a reported $1.3 billion as of September 2019. And bigger-picture, Goldman needs to be mindful of its core identity as a titan of finance, as expending brand capital to solicit $1,000 deposits can be likened to a Michelin star restaurant distributing a frozen-food line in grocery stores.
Through it all, Goldman Sachs perseveres and does things its own way, eschewing the big identity-changing acquisitions that some rivals have pulled off. In another 20 years, Goldman most likely will still be a tremendously successful franchise — and still be trying to boost its retail business.