Goldman Sachs Group Inc. is making another go at a business that not so long ago fell out of favor with U.S. banks: catering to the super wealthy, from Switzerland.
The U.S. investment bank plans over the next three years to hire more than 30 wealth advisers to cater to clients in the country, as well as in Germany and the U.K. In total, the bank wants to add 100 client-facing staff from 250 currently.
They would serve individuals with disposable assets of at least $30 million, according to Stefan Bollinger, who co-heads Goldman Sachs’s wealth management operation in Europe with Chris French.
The plans follow Switzerland’s move years ago to abandon its notorious banking-secrecy laws on pressure from U.S. and European authorities. Banks had to pay billions in fines for helping foreigners dodge taxes in their home countries.
Since then, Switzerland’s wealth industry revamped its image by stepping up compliance procedures, signing on to global tax-information agreements and abandoning undeclared assets. The country is still the biggest center for offshore wealth in the world, even after many U.S. banks left and smaller firms disappeared due to eroding profitability. Goldman’s growth plans in Europe are focused on Switzerland, Germany and the U.K. It never left Switzerland and has been serving wealth clients there since the 1970’s.
Familiar Strategy
Bollinger’s pitch: Private-equity firms’ hunger to deploy cash for deals creates liquidity events for company owners -- money they need to invest. At the same time, negative interest rates force investors to think harder about where to put their assets, and they need advice.
The proposal echoes what Credit Suisse Group AG and UBS Group AG have been doing in recent years: using their investment-banking know-how to provide a broader offering to wealthy clients, who often need advice on both their business and private assets. On the downside, such customers tend to squeeze margins because they’re very price-sensitive to the choices offered by different banks.
“If you look at ultra-high-net-worth individuals, they often want services in addition to traditional wealth management,” Bollinger said. “With QE, the Japanification of Europe -- or low to negative rates for longer -- you will see clients needing more advice on how to go into private markets, manage risks and sell their companies given demand from private equity.”
Private banking has been one of the most attractive profit generators for banks since the financial crisis because of its low capital consumption and as asset prices rose. But pressure on wealth managers has been climbing as asset prices retreat, clients pull money to avoid charges on cash holdings and compliance costs increase.