Goldman Sachs Asset Management Review 2020

This article will review Goldman Sachs Asset Management solutions.

After reviewing USB recently, and speaking about my general issue with the banks on the Adam Fayed podcast last week, is Goldman Sachs’ solutions any better for high net wealth individuals and expats?

If you are looking to invest, or have any questions, you can contact me on this page.

Introduction

Goldman Sachs are one of the leading companies in their niche globally.

Asset management is owned by investment management on behalf of others.

This process substantially has a dual mandate — estimating customer assets over time while reducing risk levels. In every service, there are fixed minimums, which means that this service can be a good option for wealthy individuals, government agencies, and corporations.

The main role of an asset manager is to determine which investments to make or avoid that will increase the client’s portfolio.

Strict researches are carried out using both macro and micro analytical tools.

This includes a statistical analysis of predominant trends in the market, interviews with the enterprise officials, and the rest that will help achieve the stated goals of increasing the value of client assets.

Most often, the financial advisor you choose will invest in commodities such as stocks, fixed income, real estate, goods, mutual funds, or alternative investments.

Accounts under the control of financial institutions often include credit and debit cards, margin loans, automatic money balance replenishment in the money market fund, and even brokerage services.

Today we will review one of the famous financial companies called Goldman Sachs Group, Inc., which is in the leading position in global investment banking, investment management, and securities that provides an extensive range of different financial services to a significant and varied client base which includes financial institutions and high-net-worth individuals, also governments.

Founded in 1869, the company is headquartered in New York and supports its branch-offices in all financial centers all around the world.

  1. GSAM Overview

Goldman Sachs Group, Inc. is an American multinational investment and financial services company. It offers services in the areas of investment management, asset management, primary brokerage and underwriting of securities.

The Bank is one of the largest investment banking companies in the world, the main dealer in the US Treasury securities market and, in a broader sense, a major market maker. The group is also the owner of Goldman Sachs Bank USA, which was founded in 1869 and is headquartered in Manhattan, also additional offices in many other international financial centers.

Let’s start from the company’s 4 business units as investment banking, global market, asset management and wealth management.

  • Investment Banking – according to recent results, investment banking services made up 21% of all company revenues. This service includes financial advisory (mergers and acquisitions spin-offs, corporate protection and restructuring) also underwriting (capital increases, public offering of shares and private placements of capital and debt tools). Goldman Sachs is one of the prestigious M&A (merges & acquisitions) consultancy companies, frequently exceeding Thomson financial league performance by transaction size. The company has gained a high enough reputation in the M&A sector, teaching its clients how to avoid enemy’s takeovers. In the 1980s, Goldman Sachs was the only huge investment bank to pursue an exact policy against assisting to initiate an enemy takeover, which significantly increased the company’s reputation among the current management teams of those times.
  • Global Markets – global markets make up the 37% from total revenues. The segment is consisted of a few divisions and includes 1. Fixed income (trading of a rate and credit commodities, mortgage-backed securities, securities related to insurance, as well as structured and derivative goods), 2. Currency and commodities (trading in currencies and different goods), 3. Stocks (trading stocks, stock derivatives and structured products, options and other contracts) and the last division 4. Major investments (commercial banking investments and funds). This segment consists of revenue and profits, which they get from the Bank’s trading activities, both on behalf of its customers (known as streaming trading) and at its own expense (known as private trading).
  • Asset Management – the segment we will talk about in a more detailed way in this article, asset management accounted for 18% of the company’s total revenue. The asset management partition provides investment advisory and financial planning services and offers investment tools (mainly through singly managed accounts and mixed vehicles) for all main asset classes for a varied group of institutions and individuals around the world. This segment provides clearing securities, financing, custody, lending and reporting services to institutional customers, including mutual funds, hedge funds, and pension funds. Asset management generates incomes mainly in the form of spreads or commissions for management and transactions. 
  • Wealth Management – the segment includes management and other fees, incentive fees, and the results of deposit activities related to the company’s wealth management segment. This also includes the results of granting loans through a private bank of the company, suggesting unsecured loans and admitting deposits with the aid of the digital platform of the company, and the provision of credit cards.

Pros:

  • They have a global presence . In many cases, the advice is portable, which means that clients can still continue to invest if they move overseas.
  • Significant high net wealth solutions are on offer.
  • There have been signs in recent years that they have tried to move with the times and adapt their model although they are very conservative in changing some of their structures.
  • They have many excellent corporate solutions across the Goldman Sachs brand.

Cons: 

  • They are relying on their brand name too much. Countless clients join Goldman because they assume it is either safe, or glamorous to boast to friends and associates that they are a client.
  • They have been involved in countless scandals in recent years.
  • Compared to a robo advice firm, or a company focused on a niche like expats, there aren’t as many clear value added services that Goldman Sachs provide
  • The fees are very high and this erodes net returns.
  • They aren’t the best option for individual investors in most cases.
  • Client reviews are very mixed online.
  • They have an incentive to sell their own fund and ETF ranges as opposed to being independent. This can cause conflicts of interests. It would be better if Goldman Sachs charged fees but sold third party funds including Vanguard and BlackRock.
  • The average net performance, adjusted for fees, is often worse than simpler strategies.
  1. How does GSAM get income?

Investment banking is a service that has made Goldman Sachs famous.

The investment banking segment includes services like financial advisory for all kinds of companies, underwriting of capital and underwriting of debts. In the last years, Goldman Sachs Investment Banking has been providing initial public offerings for companies such as the social networking titan SNAP, another company called REDFIN which is a real estate listing website, the SFIX fashion subscription retailer and other enough popular companies. In 2018, the company sought to increase the reach of more than 1,000 new companies.

Investment management is a necessary element of every investment bank, which strives to have success in financial sphere. Investment management is when a wealthy client or representative of a large institution or foundation sits down with a Goldman Sachs officials and says: “Grow my funds.” Investment management does not seem so technologically advanced, but it requires qualified knowledge of a tiring theme. Only a few companies have that intellectual potential to manage the gigantic investments of their customers. But GSAM is the one that does.

Most part of the income in asset management segment comes from incentive remuneration paid by shareholders to asset managers for their ability not to weaken or ruin the investments. Investment management brought Goldman Sachs revenue of $ 7.02 billion last year, which is comparable to the performance for each segment, with the exception of institutional services for clients. 

About Future Plans*

According to the latest annual report, Goldman Sachs plans for the future include strengthening its existing business by deepening existing customer relationships and suggesting new business opportunities to better serve new partners and other users. The company, in particular, seeks to increase some of its paid and recurring income streams, by at the same time providing increased efficiency throughout the company.

Since the change of CEO in 2018, Goldman Sachs has undergone a major audit and potential restructuring of each of the four main segments. Look forward for the company to continue to review and improve its offerings to better match its growing customer base, without the need to change its core business strategy. 

  1. How Goldman Sachs Asset Management work?

Goldman Sachs’ Asset Management (GSAM) works with a wide range of world-class institutions, high-income individual investors and retail users around the world to reach their investment goals and financial well-being and to implement an innovative approach to traditional banking. Goldman Sachs is one of the largest asset managers in the world, with assets valued at approximately $ 1.8 trillion across all asset classes and strategies. The company’s global specialists strive to help customers navigate the markets and achieve their investment goals.

The Asset Management team is consisted of:

  • Thought Leaders, ensuring timely understanding of macro, social and tactical topics to help our clients make investment decisions.
     
  • Investors, offering products and services covering public and private markets, which include fixed income, money markets, public and private stocks, goods, hedge funds, and real estate.
     
  • Advisors, willing to help offer objective investment advice and products that are important for our customers.
     
  • Innovators, suggesting a kit of digital solutions to help our retail customers meet their financial purposes.

The Consumer and Investment Management Division include Goldman Sachs Asset Management (GSAM), Goldman Sachs Wealth Management, and its Consumer business. Goldman Sachs serves a wide range of customers, starting from individuals and finishing with institutions, who fully trust the company which helps them maintain, protect and increase their capital to achieve their financial goals.

  1. Goldman Sachs Fees.

Goldman Sachs charges clients for advisory services offered by private wealth consultants in accordance with one of two payment models: 1. A single advisory service payment structure or 2. A strategic advisory service payment model. The first payment option is recommended for clients who invest in several asset classes, rather than in a small number of manageable strategies. This will depend on many factors whether the client will more or less pay for a particular model.

An important fact you must know is that Goldman Sachs Private Wealth Management usually requires customers to invest at least US $ 10 million to build a private wealth management account. To open an advisory or managed account, customers must have at least $ 1 million assets under Goldman Sachs or a net worth surpassing $ 2.10 million. The customer’s total net worth may include assets that are being held with the spouse.

Let’s see and discuss every fee method for every amount you invest in a more detailed version. 

  • A single advisory fee structure

If you invest $10 million the total fee will be equal to 1.75%, for an amount of $10-$25 the total fee is 1.15%. If you can notice with a higher amount the company charges lower fees, but anyways this kind of service is only for high-net-worth individuals and although the lower fees, the minimum required amount is super big. For $25-$50 million assets your fees will be 1.05%, for $50-$100 million – 0.95%. The lowest percentage is 0.80%, which will be charged for more than $500 million invested funds. 

  • A strategy-based advisory fee structure

By choosing this payment option, your equity fees will be the same, but instead you will have to be charged for two more services; Index Oriented and other fees like fixed income fees. For $10 million your index oriented fees will be 1.40% and other fees will be about 0.75%. For an investment of $10-$25 you will be charged 0.80% for index oriented fees and 0.55% for other fees. For $25-$50 million funds the index oriented fees will be 0.70% and other fees 0.50%. And the lower fee percentages are for investments more than $500 million, index oriented fees – 0.45% and other fees about 0.30%.

Actually we are not done with the fees and payments, customers may also pay different commissions, commission equivalents, mark-ups and markdowns and others. Custody fees, family office services, and summary reporting may also apply. Customers will also be responsible for paying any costs or fees associated with mutual funds and private equity funds.

  1. How to open an account and more about the advisors.

To create an account with Goldman Sachs, you have to sign an investment advisory agreement. Users should also choose an investment goal and portfolio goals that are consistent with their larger investment goals and level of risk tolerance. In addition, customers must follow the Goldman Sachs minimum requirements in order to create an effective account.

At Golden Sachs Wealth Management, teams are focused on providing differentiated services offered to customers across a wide range of wealth. Let’s see who each spectrum advisors are and what kind of responsibilities they have.

  • Private Wealth Management (PWM)

The company’s PWM consultants improve and control relationships with ultra-high-income individuals, their families, family offices, organization and also endowments. They assist their clients achieve their asset management goals through specialized advice, insightful investment management and access to the full kit of needed capabilities and network of Goldman Sachs.

  • Personal Financial Management (PFM)

Next one is the PFM asset management advisors, who work closely with highly profitable clients to grow and execute their personal financial plan according to their personal goals, to play an essential role in their lives they want to have. Company’s ‘FinLife’ platform, is a comprehensive customer service, allowing consultants to provide world-class financial advice.

  • Ayco, a Goldman Sachs Company

Ayco provides financial advice to companies across Corporate America. Ayco’s consultants train and guide implementation on a wide range of financial issues, including employee benefits. Ayco believes that companies best serve their stakeholders and the big economy when their employees’ financial histories are clear, understandable, and under their control.

  • GSAM Portfolio Management

GSAM Portfolio Management teams create client portfolios across a diverse range of asset classes, including stocks, fixed earnings, alternatives and multi-asset solutions, to customize customers’ solutions that meet their unique investment objectives.

  1. GS Disclosures.

Over the past decade, Goldman Sachs has been a subject to disciplinary actions. It identifies two specific events in the form of ADV (SEC documents). In 2010, Goldman Sachs paid SEC $ 550 million, one of the largest fines ever paid, to settle charges against the company and one of its employees for one secured debt transaction. The SEC claims that Goldman Sachs and his employee tricked investors by “misrepresenting and omitting key facts about a financial product related to mortgages as the US housing market begins to fluctuate.” The company did not commit offenses, but changed some methods of doing business.

Another one happened in 2008, Goldman Sachs entered into an arrangement with state securities controllers after statements that it “misled customers by untruly assuring them that Auction Rate securities were as safe and liquid as cash, “the North American Securities Administrators Association said. When the Auction Rate markets afterwards froze, investors were incapable to withdraw their money from their own accounts. Goldman Sachs paid a fine of $ 22.5 million and did not recognize or deny the declarations.

  1. Final Opinion about Goldman Sachs Asset Management.

Goldman Sachs Inc. works with a huge number of teams and individuals throughout the firm to help its clients control changing markets and navigate their financial lives/histories.

Professionals who can thrive in a rapidly changing environment where attention to detail, strong communication skills, entrepreneurial spirit, and customer service are necessary to support and develop the business.

Goldman Sachs Asset Management is a part of Wall Street Bank’s Investment Management Division.

In total, the investment management unit has a team of 1,502 financial advisors and controls about $ 1.77 trillion for clients. Goldman Sachs Asset Management, with offices in the United States, currently manages $ 198 billion in assets.

Yes, Goldman Sachs is really a strong organization, where only high-quality services are provided to their clients and that’s why it is one of the competitive financial companies.

A lot of famous and serious political figures use GS services and are glad for them; they invest their millions and get higher returns. But anyway, this is another proof that Goldman Sachs works only with wealthy individuals and institutions, and an average man cannot use its financial services. 

In reality, Goldman Sachs isn’t the best place to put your money as a high net wealth or ultra high net wealth individual.

They are trading on brand name. It is far better to either DIY invest if you have the time and ability, or use a provider which has lower fees and a more specialised service .

Further Reading

The article below looks at investment options for UK expats living overseas.

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