How Goldman Sachs plans to conquer the mass affluent space

When massive fires broke out in Cynthia Loh’s hometown of Boulder, Colorado, in December 2021, the first person who texted her wasn't her mom or a friend or a family member. 

"Are you OK?" her financial advisor at Goldman asked. He lived across the country, but knew she had recently bought a house in Boulder.

"It's a little thing," said Loh, head of product for Goldman Sachs's Personal Financial Management Group, speaking at the FP INVEST conference in June about her experience as both a client and employee of the growing PFMG division at Goldman.

Welcome to the new face of Goldman Sachs's financial planning services: closer to you than your own family. 

For Loh, it was just one example of the hyperpersonalized, comprehensive 24/7 service that qualifying customers can get from PFMG. "He's got me. He's taking care of my whole financial life," Loh said of her advisor. 

"That's very different than saying, here's a website, please log into your website and there's some people you can call if you need support, and you don't necessarily know who you'll get," Loh said, referring to robo-advisor platforms for managing wealth, where she previously worked. While there are many companies in that space, Goldman wants to serve the customers who are ready for more. 

Loh's team is planning to roll out digital tools that track and respond to each customer's needs, complementing what she considers a unique advantage of PFMG: the attentive advisor staff, who she said are "the core" of the business. 

Today, Loh said, people have come to expect an Amazon-level of intimacy in their customer experiences. "If you're an advisor and say you have 100 clients, there's only so much a human can do in 24 hours a day. But leveraging technology, you can have that association that's much closer," Loh said. 

Essentially, thanks to advances in technology, Goldman can now aim to become the Amazon of personal finance. 

Donna Alberico

'A coach at all levels'

Goldman Sachs, based in New York, created PFMG in 2020 as a rebranding of Joe Duran's former RIA, United Capital Financial Advisers, which Goldman had acquired in 2019. Duran, now a Goldman managing director, leads the Personal Financial Management half of the program and is head of PFMG alongside Larry Restieri, who runs a sister program called Ayco, the product of an earlier acquisition, that offers financial planning for corporate employees. 

PFM's main targets are in the mass affluent customer segment, a population best thought of as almost rich or newly wealthy. Definitions for the term vary in the industry, with some saying it includes people with at least $100,000 of assets and others putting the floor at $250,000 or $500,000. 

Goldman aims higher: PFM serves those with $1 million to $10 million of assets, a Goldman Sachs spokesperson said. The minimum to qualify for advisor service in the program is $500,000 of assets, with some exceptions, according to documents filed with the SEC. 

PFMG has over $100 billion of assets under management, including Ayco and PFM combined, the spokesperson said. 

However, Duran said, "at PFMG, we deliver [financial] planning to everybody. And that includes the mass market, because we're providing planning, it's digitally led, but you get access to a coach at all levels," he said, referring to Ayco's entry-level wellness group with coaches that corporate employees of all ranks can access. At that price point, he said, small investors are looking to keep it simple, so a strategy of diversification with index funds is broadly recommended. 

For Main Street consumers not enrolled in Ayco, who may someday qualify for PFMG, Goldman offers retail banking and robo-advising through its Marcus brand. 

Once a client gets to the quarter-million or half-million mark, Duran said, "or you have a level of complexity that requires that you have a financial plan, that can cost as much as a couple of thousand dollars a year, we have planners that can do that for you on a dedicated basis." For ultra high net worth people, a team of planners can offer more complex services. And for C-suite executives, "we have an executive Financial Management Group. And there we're doing concierge level white glove service, where we actually do your tax returns. We prepare and help you maximize your benefits," he said. 

As Goldman Sachs heads out of a mixed second quarter that saw the investment bank shoulder a loss in net income of 48% year over year to $2.9 billion, one of the bright spots in its portfolio has been the record-setting consumer and wealth management division. The group, which includes PFMG, saw revenue increase 25% to $2.2 billion year over year, even with the unstable market environment this spring. The exact amount PFMG earned in profits was not disclosed in the earnings report. The group has over 80 offices and more than 250 advisors at PFM, plus over 300 advisors and more than 130 coaches within Ayco, the bank said. PFMG had a total of 13,104 individual clients who were not high net worth as of October, according to SEC disclosure files. 

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As it continues to battle many other banks, firms and boutique offices to manage the coveted assets of this promising customer class, the bank is scaling back its hiring in the company at large but has planned continued hiring and growth in its wealth management units, which notched consistent gains in recent quarters. 

And although it's not the first to the mass affluent race, under Duran's leadership Goldman aims to come out on top through its aggressive advisor-plus-digital strategy. 

A winner-take-all race?

The financial planning side of wealth management used to be a business line in which big banks were less interested, and to some extent that's still true. 

"Typically, most of the large firms in the country are investment-centric," said Duran. "Planning was something done by independent firms that wanted to differentiate and really help people with enhanced financial life," he said in an interview. 

Goldman Sachs

But that's changed, as the country's largest retail banks have grown interested in the profit potential financial planning represents. 

Rival Bank of America reported a 32% drop in profits in the second quarter but had a 7% revenue growth across its Merrill and Private Bank wealth management divisions, the former of which serves the mass affluent. "Our talented group of financial advisors, coupled with powerful digital capabilities, allowed modern Merrill to gain nearly 4,500 net new households," out of 5,100 net new households the wealth management division brought in that quarter, Brian Moynihan, BofA's chief executive and chairman, said in the bank's earnings call. 

Similarly, Morgan Stanley reported strong wealth management income that helped offset a drop in revenue from investment banking in its second quarter. "Despite the decline in global asset prices, our expanded product set in Investment Management proved supportive to that business," Sharon Yeshaya, chief financial officer, said on an earnings call. She noted that "collaboration with our Wealth Management business as well as other U.S. wealth management platforms is a driver of strength of our customized offerings." 

Smaller banks like Citizens have also been on an acquisition streak buying up wealth management firms. 

"Certainly over the last three to five years, we've seen that that trend accelerate," said Simon Zais, a senior consultant at Capco. "You see that through the acquisition activity. You see that through the launching of new products."  

Some see it as the result of fintechs like Robinhood, which rolled out a popular app in 2014 offering zero-commission trades. The move spread to other investment platforms that were forced to keep up. "The self-directed space used to be more lucrative; now it's not as lucrative because for the big banks, they're not charging any commissions," said Milan Doshi, a consultant for bulge-bracket banks. 

Doshi does not count Goldman among his clients, but he works with several of its rivals, and has seen a similar urgency in recent years for banks to bulk up on wealth management offerings that can provide a steady income stream from asset management fees. "The urgency to gather assets becomes all the more pressing," he said.  

The massive generational transfer of wealth, already underway, is expected to bring a wave of younger potential clients in this class. "They're trying to get them earlier in the life cycle so that when they do become ultramillionaires and ultra-, ultrabillionaires, they have that relationship from 10, 20, 30 years ago," Doshi said of banks like Goldman. "Because it's much harder to get the Mark Cubans of the world when they are already the Mark Cubans of the world." 

Newly enriched individuals coming out of the last bull market run, who are poised to become multimillionaires, are also up for grabs. 

But for a while, this emergent subset of the upper middle class was ignored, experts say. "What happened was," banks had a high-net-worth offering and they had a mass-market offering. And they thought that mass market could be a lead generation [tool], which did happen," said Nikhil Sharma, head of U.S. digital wealth management at Capco. "But everyone missed the mass affluent, who are the underserved in the market, and now they realize that this is the focus," he said. 

At PFM, Duran said, "what is newer is our ability to deliver dedicated financial plans for people outside of the C-suite." 

"We now have hundreds of people who could deliver planning to the next segment of folks, and those tend to be the VP's or the managing directors of a company, not just the C-suite," he said. 

Duran also said an underserved segment he noticed was people 10 years away from retirement, who have complex financial lives with children and spouses. 

The stakes are higher for everyone in banking the mass affluent. "Small banks are also looking to bolster their wealth management, because otherwise someone else is eating their dinner," Sharma said. 

If a smaller bank doesn't level up with similar wealth management offerings, not only will it lose the client's business in that area, but as Goldman wraps the customer into other in-house services, they could abandon their old bank and embrace Goldman as their primary relationship for banking and financial services. 

"Anyone whose offering has holistic financial wellness at the heart of it, built on a foundation of banking, wealth and insurance convergence, is going to leapfrog the competition in the mass affluent," Sharma said, citing Capco research that he said shows "customers specifically in the mass affluent segment … when it comes to finances, they want a one-stop-shop experience." 

Zais says firms have always been "obsessed with the best ways to grow their assets under management." But the technology to do so "really caught up and provided the capabilities in the last handful of years," he said, citing financial planning software as an example of this new scalability. "You need the technology in order to do effective financial plans. A lot of these plans use Monte Carlo simulations. It's a lot more complex than a simple spreadsheet," he said. 

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'Cradle to grave' financial planning careers

What Goldman offers this crowded space is not only highly targeted and personalized solutions for customers, but also a sense of security and ease for advisors, who are often solo practitioners or small practices fighting for market share with the bigger firms. 

"The truth is, most financial planners have to find clients and they have to basically sell to find those clients. And we're one of the few places where you don't have to do that," Duran said. 

Like Creative Planning and other such firms, Duran's unit claims to pitch itself rather than having individual planners make the sales pitches, since its brand is well known and the bank offers its own in-house referral system through clients in other programs.

Duran added that, while there are perks to being independent, "the world's becoming more complicated and people want their lives simplified," while at the same time, "every advisor, whoever you are, is going to need to offer more and more services for less and less price," whether that's tax prep, benefit management or dealing with end-of-life issues, he said.

At a place like Goldman, which is more than 150 years old and offers the weight of its other arms, advisors would have the benefit of easily accessing the full gamut of other services, from banking and lending to alternative investments, Duran said. 

Duran said his goal for staff is "growing a cradle-to- grave financial planning experience" where planners can be hired "right out of college, where we can get diversity" and start as a coach, then grow up the ladder to planner, personal financial manager and executive.  

He made a pitch for talent to join the firm, saying the quality standard of care was higher than at other big banks' wealth teams: "We think that there's an interesting opportunity that we deliver, unlike anywhere else, a consistent unified experience to our workplace partners," he said. "So when they come to us they know we have a fiduciary approach with a consistent financial planning-led experience, which is not true if you go to a Morgan Stanley, or one of the other large firms, where they'll have brokers delivering solutions." A company spokesperson confirmed that all financial advisors at Duran's division are fiduciaries. 

For next steps, Duran doesn't see more acquisitions on the horizon, just "organic growth" by adding talent. "Almost all of our existing original advisors are still with us," he said.  

"We are very married to the corporate workplace. So we're always expanding wherever we sign a new corporate. One of the areas we're very focused on right now is to build up regions where we have powers of excellence in financial planning," Duran said. PFMG currently has four distinct regional hubs, he said. 

Duran, who grew up poor in Zimbabwe and began working when he was 11, saw his parents' marriage fall apart from lack of financial stability. This is where he feels Goldman can help: "Financial anxiety is a permanent part of almost every American and every person's life."