Goldman Sachs has an interesting problem on its hands. And it’s a problem that many of its rivals are becoming more and more comfortable exploiting over the past 6-9 months. The problem is one word: payout. It is much worse for Goldman advisors than previously believed.
It has been well known in wealth management circles that Goldman Sachs pays its wealth managers a stunted grid for a couple of reasons – the brand name that brings deep-pocketed clients to the firm, and the deals that flow through one of (if not ‘the’) the most exclusive and well-kown global investment banks in the world. Advisors benefit from both; because of that Goldman essentially caps payouts at 30% for even the best of its earners.
But that isn’t the entire story. A full 25% of an advisor’s grid payout is tagged as deferred compensation. So the top end grid payout is actually closer to 20% – less than half of what some of the best earners at Morgan Stanley, Wells Fargo, First Republic, and others are paid on a monthly basis makes its way to the paychecks of Goldman Sachs wealth managers.
That real disparity is why you are seeing an uptick in “Goldman Sachs team move to …” headlines across the wealth management industry. UBS has been aggressively recruiting Goldman teams and has found significant recent success. The success UBS has had has spurred the interest of other firms in the wired category.
Goldman teams are not being discounted as they once were. Their value is attaining a ‘par value’ alongside other recruited wirehouse teams that firms are engaged within the current environment. The opportunity for Goldman advisors to explore their options have gotten remarkably profitable – in both the short and long term.
Keep an eye on movement out of Goldman; we expect it to continue.