Goldman Sachs execs lay out plans for its new robo-advisor as it takes on fintechs like Wealthfront and Betterment in a fiercely competitive space

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  • Goldman Sachs launched its robo-advisor, called Marcus Invest, to the public on Tuesday.
  • It’s launching into a crowded space, competing with startup and bank-owned robo-advisors.
  • Sonali Divilek and Andrea Finan, executives overseeing the roll-out, laid out the product’s plans.
  • Visit the Business section of Insider for more stories.

Goldman Sachs is finally launching its do-it-yourself wealth management offering to the public, marking a milestone in the elite firm’s quest to appeal to Main Street. 

The bank rolled out Marcus Invest, its automated investment tool with a $1,000 account minimum, on Tuesday after having previously faced delays as a result of the pandemic.

Marcus Invest is set to compete with startup robo-advisors and bank-run products like Bank of America’s Merrill Guided Investing, and will charge an annual advisory fee of 0.35%, billed quarterly. Wealthfront and Betterment, the standalone robo-advisors that launched around a decade ago, both charge an annual advisory fee of 0.25% for investment accounts that do not pair clients with advisors.

“Investing is something that is core to Goldman Sachs, and something the Marcus platform is really allowing us to bring to a much broader audience,” Sonali Divilek, the head of product for consumer, said during a call with reporters.

Like other robo-advisors, the tool is built on largely passive, relatively low-cost investing products.

The tool, which sits inside the Marcus app, assesses users’ financial situation and places clients in some 50 portfolios built by the firm’s Investment Strategy Group (known as ISG) made up of ETFs. Those funds are a mix of competitor investment managers’ products and the firm’s own ETFs, Andrea Finan, head of digital investing, said during the same call with reporters. 

In a twist that encourages the use of the firm’s in-house funds on the platform, if clients’ portfolios include Goldman ETFs, the firm will apply a credit toward a user’s advisory fee for the ETF fees that would normally go to Goldman.

The firm’s Alternative Investment and Manager Selection team, known as AIMS within Goldman’s asset management arm, is responsible for the due diligence and selection of third-party ETFs that go on Marcus Invest, taking into account factors like ETFs’ total assets and trading activity.

Goldman wants to cross-sell Marcus Invest to existing customers

Goldman is betting on existing customers who hold savings accounts at Marcus finding the robo-advisor attractive enough to move their deposits to Marcus Invest. 

Divilek, a managing director who last month was named head of product for the consumer business, said on the call with reporters last Wednesday that “we aim to make it really easy” for savings customers to transfer those funds over. 

“We actually have an existing customer base that has been asking for this as a product, so we have savings customers that are looking to invest. They love our experience, and we know that we have some high adoption that we can expect there,” Divilek said.

The product is launching at a highly competitive moment for automated investing products that can lock in customers for the long haul and generate predictable revenue. Part of the driving force in Morgan Stanley’s E-Trade acquisition was creating a pipeline between E-Trade’s brokerage clients and Morgan Stanley’s massive wealth business.

Truist, the result of the 2019 merger between BB&T and Suntrust, is also entering the robo-advisor business, Kelly King, the bank’s chairman and CEO, said at a financial services conference in December.

“It is a crowded space,” Finan said. “I’d say we’re differentiated in that the people powering and the processes and the different teams powering this advisor, this digital experience, is different.” 

The space isn’t just crowded; robo-advisors tend to operate with razor-thin margins because of their low-cost offerings. The widespread consolidation across digital wealth last year showed “how difficult the robo space can be to compete in as margins are low and differentiation is hard to establish,” robo industry research firm Backend Benchmarking said in a report published in February. 

Marcus Invest is designed as a digital-first product, Finan said, but clients interested in advice from a human are referred to Personal Financial Management, the wealth business formerly known as United Capital

Goldman’s downmarket dreams 

Goldman has long held ambitions of adding a wealth management offering to Marcus, which was first formed four years ago and is named after the bank’s founder, Marcus Goldman. During a May 2019 presentation to an industry conference, the firm said on a slide that a priority was adding “wealth management capabilities” to the digital bank.

Executives also teased out the robo during its first-ever investor day in January 2020. It was slated to launch later that year, but the pandemic introduced new uncertainties. Chief Operating Officer John Waldron said last May that its digital wealth offering would come out in 2021.

The launch now comes after feedback through surveys, focus groups, and user-testing, including existing Marcus customers, employees of the firm through a beta testing program, and “mass-affluent prospects,” Divilek said. 

The launch of Marcus Invest marks a transition point for Goldman Sachs’ consumer and wealth management division, which was established as an independent unit in September 2020 and is run by Stephanie Cohen and Tucker York. 

A spate of new hires, promotions, and reshuffling at Marcus has put the spotlight on the bank’s retail strategy more recently. Partner Adam Dell — the founder of Clarity Money, which Goldman bought in 2018 — is leaving the firm while former top Stripe executive Swati Bhatia is joining this month to head up direct-to-consumer strategy.

It’s all part of a plan to tie together Goldman’s core strength in its institutional businesses — particularly within Goldman Sachs Asset Management — and its newer consumer products in an effort to build out a retail bank that can rival JPMorgan and Citi.

Expanding wealth management, particularly for the so-called “mass-affluent” with far less money to invest then the millionaires and billionaires the bank has long served, is another key part of its firm-wide strategy

Goldman plans to do it by relying on tech development within the bank and partnerships and acquisitions, like Clarity Money, outside of it.

“We really like our model of having a proprietary platform for Marcus, but then also, given our corporate relationships, the potential for partnerships is very, very strong for us,” Chief Executive David Solomon said on Goldman’s fourth-quarter earnings call in January.