Goldman Sachs’ Lloyd Blankfein: Wealth management unit ‘should be bigger’

The Goldman Sachs Group Inc. is eager to expand its wealth management business for wealthy individuals — and to distribute more of its asset management products through third-party brokers and advisers — according to chief executive Lloyd Blankfein.

The Goldman Sachs Group Inc. is eager to expand its wealth management business for wealthy individuals — and to distribute more of its asset management products through third-party brokers and advisers — according to chief executive Lloyd Blankfein.

“That should be bigger than it is,” he said of the wealth management unit in a brief interview Tuesday at a conference in New York.
Goldman, which has several hundred advisers worldwide selling investment products to high-net-worth individuals and families, has to “do more and be in more places” in wealth management, Mr. Blankfein told investors at the conference, which was sponsored by Bank of America Corp’s Merrill Lynch & Co. Inc. subsidiary.
He would not discuss specific hiring goals but said in the interview that the firm “has to get into the high hundreds, before we can talk about thousands,” of advisers. A Goldman spokeswoman said the company has not disclosed the current number of its wealth management advisers.
Goldman considers wealth management a natural adjunct to its core corporate advisory, financing and investing businesses, because wealthy investors are eager to buy into the equity funds, initial public offerings and other core and alternative investment products originated by the investment bank.
Mr. Blankfein emphasized that Goldman has no interest in creating a broad brokerage business for “mass affluent” investors, which Wall Street generally defines as those with between $100,000 and $1 million in investible assets.
The Goldman CEO, who made $67 million in 2007, also said the company has no plans to become a large deposit-taking institution, since it is not interested in retail-banking products such as credit cards and mortgage lending. However, Goldman takes a more democratic view of asset management. It plans to double the size of its asset management unit’s third-party-distribution sales force this year, Mr. Blankfein said in his conference address.
In an interview in August, Mark Hancock, a managing director at Goldman Sachs Asset Management, said he planned to expand the unit’s broker-dealer sales force to 53 salespeople from 44 and to double the registered investment adviser sales force by year-end to 28 salespeople. (To read about another asset management business beefing up on its sales force to target advisers, click here. )
Goldman has stumbled somewhat in its managerial efforts within wealth management. Peter Scaturro, who joined as global head of private wealth management in the summer of 2007, left at the end of 2008 and has not yet been replaced. Mr. Scaturro previously was a private-banking executive at Bank of America, Citigroup Inc. and was the former chief executive of U.S. Trust Corp.
Goldman converted into a bank holding company last year in the heat of the financial crisis, but Mr. Blankfein said the company retains its investment-banking culture and profile. Raising capital, advising and coinvesting with clients is a complex business model, he said, but much more manageable than the supermarket models of its behemoth-like commercial banking competitors. Goldman had 31,700 employees at the end of September, compared with more than 280,000 at Bank of America and 220,861 at JPMorgan Chase & Co.
Some critics resent Goldman, the most profitable company on Wall Street, for achieving headlong growth while the rest of the economy is imperiled.
Simon Johnson, a professor at the Massachusetts Institute of Technology and a former chief economist at the International Monetary Fund, said in a radio interview with Bloomberg on Tuesday that the Goldman empire should be broken up. “What have we gained from a societal perspective from Goldman Sachs’ becoming four times bigger” over the last decade, Mr. Johnson asked, according to Bloomberg News.
Mr. Blankfein defended Goldman’s social value at the conference, noting that the firm remains a flexible provider of liquidity and capital, stimulating the world economy through areas such as new senior loan and mezzanine debt funds at a time when traditional commercial banks have cut back lending.
The company’s ability to stay close to its clients helps guide its investment and capital allocation choices, he added.
In addition to jockeying for more wealth management business, Goldman continues to expand quickly into emerging markets such as Brazil, Russia, Indian and China, and sees opportunities in buying distressed assets that continue to weigh down the balance sheets of major financial institutions. “I would have though that more [selling of those assets] would have happened by now,” he said, adding that Goldman “will be there” when new capital requirements and liquidity needs force such sales.
Mr. Blankfein said his most significant challenge today is monitoring the twists and turns of financial-reform legislation and proposed regulation, but he endorsed “the critical role the government has played” in managing the financial crisis.
He even said he welcomes the dozens of employees of the New York Federal Reserve Bank who now work out of Goldman’s offices, drink its coffee and monitor its credit decision and capital ratios. “I like those controls and redundancies,” he said.