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Goldman Sachs Donut Hole: Advisor Payouts Much Lower Than Previously Believed

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.

 

SEI Expands Virtual Advisor Educational Programs

John Anderson, director of practice management solutions at SEI, is all-in when it comes to
digital solutions. “Advisors no longer have to get in the car, drive to the office, find a place to
park, and sit in the office for hours,” he stated in a press release earlier this week.

SEI is trying to lead by example when it comes to digital engagement. They’ve implemented a
shorter meeting format for training and offer it exclusively online. They’ve even gone so far as
to replace the inhouse meal they previously offered with free UberEats delivery.

Surprisingly, many advisors turn down the free meal. UberEats offers that are not redeemed
are donated. SEI has given over $200,000 this year to local food banks.

“This is happening at a client level also,” Anderson claims. “Zoom and WebEx meetings are
shorter and more meaningful. Advisors now have the ability to set meetings where they’re not
just dumping data. They can be more engaging to their clients that way.”

It doesn’t stop there. The new mindset extends to recruiting. Prior to the pandemic, SEI did a
two-day in-house training seminar for new recruits. That’s been changed to a “Discovery Day”
that lasts sixty to ninety minutes in an online format.

For current advisors, SEI runs “Webinar Wednesdays,” offering practice management training
and planning tips for both brick and mortar and virtual advisors.

Schwab Offers Full Time Positions to Virtual Summer Interns

Like most financial firms, Schwab moved their summer internship program into virtual mode
this year. Elizabeth King, the SVP for enterprise learning and talent management, reports that 240 interns in over 130 cities went through the program this summer.

“Everyone’s been working in their kitchens and bedrooms,” King said in an interview with
Business Insider this week. “Many of these interns are aspiring seniors in college who will be
offered full-time jobs at Schwab in the upcoming weeks.”

According to Schwab policy, those offers should number over one hundred, roughly half of the
current class of their Intern Academy Program. The positions will be in finance, investor
services, corporate risk management, and technology.

Goldman Sachs Goes Virtual but shortens Internship Program

Goldman Sachs delayed their virtual internship program this summer, choosing to shorten the
program and start July 6th instead of back in June. It typically takes ten weeks of training, hands-on working, and networking with management to cultivate a top-quality analyst prospect.

With the abbreviated time frame and lack of personal contact, the Wall Street investment bank
is experiencing uncertainty over what the internship program will produce this year.

Citi also ran a shortened five-week virtual internship program this summer. Unlike Goldman,
they are being pro-active about hiring. Earlier this week, the bank guaranteed full-time offers to
interns in New York, London, Hong Kong, Singapore, and Tokyo.

Competing banks and private equity firms started much earlier and are also making hiring
decisions. Morgan Stanley was one of the first to offer a virtual summer internship this year.

“Once we realized what the timeline was for Covid-19, it was an easy decision,” stated Jeff
Brodsky, chief human resources officer at Morgan Stanley. “It’s all about execution now. We’re
preparing to make our full-time job offers in the next few weeks.”

 

Questions Abound over Santomassimo hire at Wells Fargo

The much-beleaguered Wells Fargo announced a new hire this morning. Mike Santomassimo,
formerly of BNY Mellon, will be taking over the role of CFO, replacing John Shrewsbury, who is
retiring in September. Santomassimo will report directly to CEO Charlie Scharf.

Wells Fargo stock (WFC), down 54% year-to-date, immediately jumped 5.61% in early morning
trading after the news broke. The Aroon indicator is still down trending.

Is this the final piece of the restructuring that was announced back in February or a new
beginning? Santomassimo brings twenty years of experience to the position. That includes four
years at BNY Mellon and eleven years in financial leadership roles at JP Morgan.

CEO Charlie Scharf, just nine months into his role at Wells Fargo, describes his new hire as “a
strategic-minded CFO with success in building and leading global finance teams that help drive
business improvement.” That statement suggests additional changes are coming.

Scharf Shifts Wells Fargo Power Balance to East Coast

In an attempt to reverse a downward spiral caused by the 2016 fake accounts scandal,
organizational restructuring was announced by Wells Fargo earlier this year on February 11th. It
was essentially a personnel shuffle, with various CEOs moving to new positions.

The only new executive hire during the restructuring was Mike Weinbach, former CEO of Chase
Home Lending at JP Morgan Chase. He is now CEO of Consumer Lending at Wells Fargo.

Prior to the restructuring, Charlie Scharf had hired mainly outsiders to separate the bank from
its previous history. On June 18th, he reached outside again and brought in Barry Sommers,
formerly of JP Morgan Chase, to be the CEO of Wealth & Investment Management.

Scharf is a former CEO of BNY Mellon and former CEO of Retail Financial Services at JP Morgan
Chase, so the sources for his new hires are not surprising. The Santomassimo move positions the top three Wells Fargo executives in New York. The company is based in San Francisco.

Consolidation Rumors Continue to Surface

A rumor surfaced in May that Wells Fargo might be contemplating a merger with New York-
based banking giant Goldman Sachs. With a fed-imposed asset cap of $2 trillion still hovering
over their heads, the deal is unlikely to happen, but the rumors are starting to resurface.

Wells Fargo owns more than 10% of all bank deposits in the United States. Goldman Sachs
could add $1.1 trillion to its balance sheet. With both banks tanking in the stock market, it
might be a survival move that’s being seriously looked at.

Goldman’s CFO, Stephen Scherr, has openly stated that the bank would be open to acquisitions
if they can boost their current projects. JP Morgan, where Wells Fargo’s new executive team
originally hails from, has always believed that partnerships can improve customer service.

Assuming that federal regulations are eased after the Coronavirus crisis, is the Santomassimo
hire at Wells Fargo the final move before making a consolidation deal? Or is the beginning of a
new chapter for the struggling bank? Pay close attention to how this plays out.

 

Did Goldman Knock This Down to Pick It Back Up

Two for two on Apple day trades as well, and I think Goldman Sachs may be up to something fishy right now…

Subject to quite a bit of skepticism, this exact scenario actually happens quite a bit…

Nio Incorporated (NYSE: NIO) is up about 100% over the past 30 days. Unless the company internally implodes or markets crash, the sky seems to be the limit for this electric car company.

But what if some financial professionals missed out on any bullish profits on NIO’s massive spike over the past 30 days or simply want to make the same money twice? What are they supposed to do in order to be offered another chance at making some money on NIO themselves?

Now, I’ve said this before and I’ll say it again… Financial professionals can move markets with one click of a mouse or by issuing one press release.

And the fat cats at Goldman Sachs did exactly that about 22 hours ago by issuing a downgrade on NIO. The stock instantly dropped 4%.

But here’s what makes me really interested…

Just yesterday, option players came in and bought $104k worth of call options on NIO, anticipating NIO’s price-per-share rallies to $7 or higher by tomorrow’s closing bell.

Did Goldman knock NIO’s price down only to pick it right back up at a discount? It actually happens pretty often, and we may be seeing that exact scenario play out on NIO right now.

NIO Daily Chart

While moves of this nature do come with some skepticism from retail traders who cannot manipulate a stock’s price-per-share and move money in or out of it at will, I don’t really care too much…

I’m just looking to make a move or two on NIO in the hours or days ahead and make some money on it myself.

Shown in green in the chart above is NIO’s 20-day simple moving average line (20 sma), a critical support level. If NIO holds, I may buy call options alongside yesterday’s $104k option player for a fast-moving trade opportunity.

Below NIO’s 20-day simple moving average line and I’ll follow the money flow prior to making any decisions. Oftentimes stocks like NIO are knocked down in price only to be picked back up at a discount, and I don’t want to be betting against a stock while a six-figure buyer comes in and makes a potential bullish bet.

I’ll be in touch mid-day with updates and a watchlist.

Let me know how YOU do today!

 

Yours for TrackStar trading,

Davis Martin
America’s #1 Options Trader