Last year, Goldman Sachs private wealth division expanded its lending business in the US, launched lending capabilities in EMEA and this year plans to do so in Asia.
“We’ve always done margin lending, but now we are committed to being in the business of lending to our clients for a broader range of activities,” says Tucker York, global head of private wealth management at Goldman Sachs. Private loans to clients might include business loans, personal loans and real-estate loans.
The move comes as Goldman appears to be moving the business into having a full-service private banking and wealth management offering.
“There have been a series of innovations and investments we have made over the last few years around open architecture, wealth planning and philanthropy," says York. "Now we are adding lending to those competencies. It’s a hugely fragmented market and there is an opportunity for us to engage more with our clients.”
Goldman focuses on the ultra-high-net-worth (UHNW) client and its average account size is north of $40 million.
“It’s helpful to us to have that narrow focus,” says York. "It’s never confusing who our business serves. We don’t have the distractions of client segmentation. And it’s a natural fit for our organization as a whole. Our clients want ideas, they want to know how their peers are thinking about issues and they want a global perspective.”
York says the shift in strategy, which now will put Goldman on an even keel with big balance-sheet players in the UHNW space globally such as JPMorgan and UBS, has already had a big impact on the business.
“This is very big for us and we expect a large impact on the business internationally to come from lending,” says York. "It’s a natural extension to offer to the people we already know and it allows us to talk about other parts of their financial needs. It has been very powerful for us.”
Deposits at the firm have increased to more than $46 billion, as of September. And the annual results show a credit book of more than $10 billion for the bank, as of December 2013 (the bank only publishes those results annually and 2014 has not been filed yet).
Within the UHNW space, Goldman is particularly known for its focus on tech and energy entrepreneurs, and entrepreneurs in general.
“We’ve been in that space for decades in the investment bank, financing tech firms and IPOs, and those relationships and opportunities tend to flow both ways between us and them,” says York. "It also means that we see great ideas in the tech sector or in start-ups that are of interest to our client base as investment opportunities."
York says the year ahead is going to provide some challenges for returns, adding: “In the US, we had an incredibly strong run in risk assets from a performance standpoint over the last few years. It may be hard to continue to make the same returns over the next few years, so it’s important to keep remembering the long-term investment horizon of our clients.”