Goldman Sachs to Debut Robo-Advisor in 2020
Earlier this year Goldman Sachs purchased the wealth management firm United Capital for $750 million. Along with the company came its founder Joe Duran. Now, in a recent interview with Financial Times (via Barron’s), Duran revealed that Goldman intends to launch its own robo-advisor platform sometime in the new year.
If you’re unfamiliar, robo-advisors are a rapidly growing investment segment that attempt to make it easier for new investors to build and manage a portfolio. In most cases these robos will ask users a series of questions regarding their risk tolerance, investable assets, and more in order to create a custom portfolio. Moreover some higher-end products also include such features as auto-rebalancing and “tax loss harvesting.” Currently the space is occupied both by start-ups, such as Betterment and Wealthfront that have made robo platforms the cornerstone of their offerings, as well as established brokerages such as Charles Schwab, which maintains its Schwab Intelligent Portfolios platform. Additionally other FinTechs have expanded their product line-up to include robo-advisors. For example SoFi launched its SoFi Invest Automated option earlier this year, allowing users to start with as little as $1.
According to reports Goldman’s robo-advisor is expected to have a minimum initial investment as low as $5,000. However Duran notes that a final number has yet to be determined. If the $5,000 figure were to stick, it would put the new offerings well above what several of the startups require but is right in line with Schwab’s account minimum.
News of Goldman entering the world of robo-advising comes as the bank has made several efforts to reach new types of customers. These initiatives include launching their digital banking product Marcus and acquiring the personal finance app Clarity Money. Incidentally the purchase of United Capital likely falls under this umbrella as well. Elsewhere the bank also launched its first credit card earlier this year, partnering with Apple for its Apple Card.
To the point about this upcoming offering representing a way to bring in a different kind of customer, Duran told FT that the robo-advisor would be “a pipeline for future clients.” He added the offering would attract those “with low complexity, not that much in assets” and would give them a chance to “experience the Goldman Sachs’ way.”
Considering Goldman’s recent track, their apparent expansion into robo-advising makes a lot of sense. That said there are still some notable numbers to be filled in before we have a clear picture of what the offering will look like. Not only does this include the previously touched upon account minimum but, perhaps more importantly, the advisory fee the platform will charge (other popular robo products range from 0% to 0.75%). Hopefully these questions and others will be answered early in the new year.