The Lesson from Goldman Sachs’ $1,000 Product

The Lesson from Goldman Sachs’ $1,000 Product

Goldman Sachs has unveiled a product which makes it possible for anyone with $1,000 to invest via its automated platform. No matter how you see it, this is a new playbook: GS has seen the power of volume. Yes, the company which used to serve extremely wealthy people is now competing for $1,000 from mainstream America. It tells you the redesign which is happening in the markets. With information asymmetry well diminished, those rich people may not need those expensive products from Goldman Sachs.

A case in point: why pay investment bankers so much to take a company public when web companies can be independently assessed on how they are doing? In the past, investment bankers were evidently key to serve as buffers. But today, from Alexa, from apps downloads, and other secondary data, investors can make sense of the health of a business without the old high priests like GS guiding them. That explains why most of these firms disintermediate Wall Street banks, and go straight to the trading platforms on IPO days.

Yes, they do not need anyone to explain anything to investors because they are already known!

So, with that reality, GS has to move to the mass market, offering products like checking accounts, credit cards (via Apple), and other things you would not have expected from this iconic American bank. If you look at at very well, it is responding to a changing market condition. And that condition requires that a $1,000 portfolio is part of the future of Goldman Sachs.

Goldman Sachs Group Inc. took another step toward going mainstream, launching an investing app for customers that want to put at least $1,000 to work.

Investors using the service, which went live Tuesday, can put money into automated portfolios rather than individual stocks and bonds, according to the company. The move expands the Marcus platform, which also offers a high-interest savings account.

Goldman, which has traditionally served a wealthier client base, is taking steps to broaden its reach through new digital products. The investing platform features exchange-traded funds that focus on traditional stock and bond benchmarks, impact investments and smart-beta products designed by Goldman.

The advisory fee is 0.35%, according to the Marcus website. The move comes as the New York-based company inches closer to also providing a checking account through Marcus, with the goal of collecting more than $100 billion in consumer deposits

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2 thoughts on “The Lesson from Goldman Sachs’ $1,000 Product

  1. More relevant that ever before is the bottom of the pyramid by C. K. Prahalad. It seems the end of the world is near. Who would have thought that a time will come that the “almighty” Goldman Sachs that you need $10 million or no deal to get into its wealth management advice would now be settling for 0.01% of what it used to be.

    Much more than a strategy to reach the mass market, I also see this as a demonstration of the risk strategy of David M. Solomon. Consumer banking gives more recurring income and it has better consistency compared to the sporadic trading and investment banking sectors.

    The beauty of this package is that it looks like a perfect fit for passive investors looking to plan for long-term goals. Would there be plans to extend this beyond the shores of US to other interested investors in a place like Africa who can afford the “new sachetization initiative?” and what would be the implication of such “affordable” investment with the capability to contest with local investors in Africa?

    Reply
    1. Great contribution Mr Oyelere, this where my exact thought. Prof. Ndubisi Ekekwe your economic insight is high and I appreciate your daily updates

      Reply

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