Future of Investing

‘Our research shows that consumers find investing to be intimidating’: Marcus by Goldman Sachs debuts automated investment service

  • Goldman Sachs debuted its flagship digital investment platform Marcus Invest.
  • The offering requires a minimum account balance of $1000 and charges an annual fee of 0.35 percent.
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‘Our research shows that consumers find investing to be intimidating’: Marcus by Goldman Sachs debuts automated investment service

Goldman Sachs’ consumer banking unit Marcus launched its digital investment offering this week. Marcus Invest offers consumers automated management of their stock and bond ETF portfolios based on users’ risk tolerance and investment timelines. It also offers individual and joint investment accounts as well as three types of individual retirement accounts. 

The robo-adviser connects consumers with the investing resources of Goldman Sachs through portfolio models designed by the company’s Investment Strategy Group at a minimum account balance of $1000. It charges an annual advisory fee of 0.35 percent for trade commissions, transfer fees, daily monitoring, rebalancing and management. 

“We are excited to deliver our investment acumen and advice to a wider audience. Our research shows that many consumers find investing to be intimidating or don’t have the time to spend on it,” said Andrea Finan, head of digital investing at Goldman Sachs.

“Marcus Invest helps reduce these pain points by recommending a diversified investment portfolio for you based on the information you provide with vetted ETFs, and then taking care of daily monitoring and periodic rebalancing.” 

Marcus was launched in 2016 to expand and diversify Goldman Sachs’ revenue sources. It offers consumers fixed rate personal loans, savings accounts and Marcus Insights, a financial management tool. In September of last year the Marcus app had over 5 million users.

The Marcus Invest launch is emblematic of Goldman Sachs repositioning its services to accommodate consumers across a variety of financial backgrounds. The investment bank has traditionally served high income clientele during its 150 year tenure.  

Marcus Invest’s low minimum account balance gives the platform a customer acquisition advantage over its competitors like Schwab Intelligent Portfolios, which requires an account balance of $5000, and Vanguard’s Personal Advisor Services, which requires a threshold of  $50,000. 

According to research, there is a major trust gap between consumers who prefer traditional wealth managers to digital alternatives. 64 percent of consumers say that they trust traditional wealth management resources compared with 49 percent who lean towards digital wealth managers. 

“Fintech startups can innovate a lot faster than traditional banks. While still regulated, they have a lot less legal red tape to get through to innovate and change what a traditional investment experience would look like,” said Ryan Jue, co-founder of investment management app Ursa. 

“On the flip side, because they don’t have the same stress tests and limitations, edge cases can be messy such as margin capital issues in the recent GameStop and Robinhood event.  In robo-advisers like Wealthfront and Betterment, users sacrifice tailored advice for portfolio model templates, but more accessible at lower costs.”

As a fintech powered by Goldman Sachs, Marcus’s digital investment offering is uniquely positioned to cater to consumers across the spectrum of the fintech trust gap.  

Recent interest in stocks following the GameStop trading saga, championed by enthusiastic retail traders on the WallStreetBets subreddit, led to soaring Google searches on “how to buy stocks” in the last week of January. 2020 saw a boom in individual investors using online trading apps like Robinhood. Despite all the excitement, Marcus Invest does not offer consumers the opportunity to buy individual stocks. 

“The last few weeks have been unprecedented in terms of market volatility and trading volumes. Through Marcus Invest, we are looking to provide advisory services to retail customers who are looking to invest for the long term,” said Finan. 

“We take a strategic long-term approach to investing when we design our portfolios. That longer-term approach allows our portfolios to balance both risk and returns over time, and not overreact to short-term market turbulence.”

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