Goldman’s robo advisor is ready to run
SAN DIEGO — Goldman Sachs has built its own robo advisor and is ready to push it into the market. Now the Wall Street giant is considering how to launch.
The automated advice platform would be Goldman’s digital entry into the smaller investor market, said Rachel Schnoll, the new head of Goldman’s FinLife CX, its RIA platform, on the sidelines of Schwab’s annual Impact conference.
“Advisors struggle with small clients and what to do with them,” Schnoll said. “One of the things that we've been thinking about adding ... is a robo to help advisors. This is something that Goldman Sachs has actually built — we just haven't deployed yet.”
Mass affluent digital advice is being increasingly filled with robo advisors from some of the largest custodians and banks. The latest in early October was mutual fund giant Vanguard announcing it was piloting a digital-only robo advice service.
Schnoll did not say whether Goldman’s robo would be a purely automated offering, or a hybrid of human advice and algorithm-based portfolios. A spokeswoman from Goldman Sachs did not immediately respond to a request for comment.
A likely entry point into the market may be Marcus, the firm’s three-year-old online retail-banking division. In October, Goldman restructured Marcus and folded the department into its investment management arm, according to an internal memo obtained by Financial Planning at the time.
Goldman bought United Capital for $750 million in cash in May. United had approximately $25 billion in AUM, $230 million in revenue and close to 100 offices around the country at the time of the acquisition. The firm’s FinLife CX digital platform and financial planning software came along in the deal.
The Goldman acquisition of United Capital may have been a forerunner of Goldman’s upcoming robo launch.
“It’s been clear for a while that Goldman is lusting after the mass affluent segment,” said William Trout, a senior analyst at Celent. “And why not? Goldman wants to balance its established sell-side and UHNW activities with a growth play. The mass affluent market is uber-attractive from a demographic and overall asset perspective.”
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.
Along with United Capital’s AUM, the bank also acquired intellectual capital in the form of robo algorithms, Trout said. “Robo is nothing new, but algorithms remain a differentiator.”
Goldman may also choose to launch the technology to financial advisors on the United Capital platform, according to Schnoll. “Those are the kinds of things that we're thinking about,” Schnoll said.
While robo-advice may not be core to the Goldman Sachs strategy, it does provide an outlet for distribution of Goldman funds, Trout said.
Robo advice has fueled an explosion of new discretionary accounts that topped 27 million in 2017, up from just 15 million four years earlier, according to research from Aite Group. Assets on digital platforms are expected to top $1.26 trillion by 2023.
“It will put further pressure on independent robo advisors,” Trout said. “But I also think it may be understood as a longer-term threat by more established players, who have built their business by serving mass affluent investors.”