Goldman Sachs' Marcus makes robo-advisor plea to everyday investors

  • Goldman Sachs’ digital-only consumer bank added an investment tool to bolster its fintech offering.
  • This positions it as a cheaper alternative to incumbents and a direct threat to fintechs’ own rebundling.
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The US-based financial services giant’s digital-only consumer banking app Marcus has launched an automated investment tool with a $1,000 account minimum and a 0.35% advisory fee, per Reuters.

Much like other robo-advisors, Marcus Invest will offer portfolios with low-cost stock and bond ETFs, including Goldman Sachs’ ETFs, based on users’ risk tolerance and goals. The Marcus app had over 5 million customers as of last September and already offers a savings account, consumer loans, and a personal finance management tool.

The latest launch broadens Goldman’s fintech offering into a new growth area, creating cross-selling opportunities among a wider consumer base. With Marcus Invest, the bank can capitalize on a booming sector over the coming years to drive customer acquisition: Insider Intelligence expects that $830 billion will be invested in robo-advisors in North America by 2024, up from $330 billion in 2019.

The new feature could also unlock more revenues from users, nudging those who already hold savings with Marcus to move their deposits to the robo-advisor where Goldman can earn its fee. This is especially valuable given that in its first three years after launch, Goldman had lost more than $1.3 billion on Marcus, primarily from soured loans. Marcus Invest also states that investors who pick Goldman ETFs for their portfolios will earn credit on their advisory fee, encouraging the use of the firm’s in-house funds.

Despite entering a crowded market, Marcus’ robo-advisory offering is more accessible than other incumbents’ and threatens to displace digital wealth managers that are also rebundling finance.

  • Marcus Invest’s minimum account threshold places it in a sweet spot between incumbents and fintechs. Incumbent wealth managers’ existing robo-advisory services come with five- to 50-times higher minimum account balances than Goldman, such as Schwab Intelligent Portfolios at $5,000 or Vanguard’s Personal Advisor Services at $50,000. Meanwhile, standalone robo-advisory platforms have strived to offer much lower thresholds, such as Wealthfront at $500 or Betterment at $0. At $1,000, Goldman is better positioned than its incumbent peers to scoop up consumers who would rather invest in a trusted established financial brand than a fintech startup: 64% of consumers across select markets, including the US, say they trust traditional wealth managers, compared with 49% who say the same for digital wealth managers.
  • And the new service brings Marcus closer to being a one-stop shop for everyday consumer finances, an area digital wealth managers until now had on lockdown. Fintech robo-advisors across the board have been diversifying their product suites to meet all consumer needs under one roof and replace incumbent services. Both Wealthfront and Betterment, for example, also offer savings accounts at 0.35% and 0.40% APY, respectively—lower than Marcus’ 0.5%. The latest launch highlights Marcus rebundling finance from a different starting point than the robo-advisors, but ending up at the same point. Marcus is also planning a checking account for later this year. Backed by the trusted and well-known brand of Goldman Sachs, Marcus should be a serious threat to digital wealth managers’ own growth trajectories.

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