The Death of the Banker

In Investment banking on 22/06/2016 at 2:24 pm

The Decline and Fall of the Great Financial Dynasties and the Triumph of the Small Investor

The above is a title of a book That I read in the noughties. I  was reminded of the book and its thesis that the fund mgrs that manage the “little people;s” money dominate the financial landscape where once investment and commercial banks ruled the roost.

NYT Dealbook reports that Goldman Sachs is courting retail money: US$1 is enough to open an account:

GOLDMAN SACHS HEADS TO MAIN STREET You used to need $10 million to become a customer at Goldman Sachs, but now you can get in with just a dollar, Nathaniel Popper reports in DealBook.

GS Bank, started in April, promises “peace-of-mind savings” and “no transaction fees.” It is aimed squarely at ordinary Americans – the sort of clientele the company scrupulously avoided during its first 147 years in operation.

Goldman, which previously favored tycoons and plutocrats, is hunting for new businesses, just like other marquee banking companies. Regulations have squeezed deal-making activity and the bond trading desks that generated most of Goldman’s precrisis profits now only make a fraction of what they did before.

Goldman has also been preparing to introduce 401(k) accounts, loans for people saddled with credit card debt and new investment funds that can be purchased by anyone with an E-Trade account. All of these services will be offered online only, saving Goldman on the expense of traditional branches and tellers.

Goldman executives have been debating whether they want to end up to with something resembling a full-service online bank, they could still back off if the initial experiments fail.

So far, interest has been strong. Stephen Scherr, the chief of strategy for Goldman, said the bank had opened tens of thousands of new accounts in its first few weeks, in addition to the 150,000 it acquired from GE Capital.

Its 50-person call center in Cedar Rapids, Iowa, was unprepared for the surge of interest. And soon after the bank’s debut, a columnist at The Wall Street Journal wrote about the problems he encountered trying to open an account.

The bank’s moves have prompted some head-scratching in the industry as it has so little experience in retail banking. It also faces the challenge of persuading Americans to use a bank that has been maligned as a symbol of Wall Street greed. The bank would have to pull in huge numbers of people to make even a tiny difference to its annual revenue. Goldman’s big test comes later this year when it starts offering relatively small loans of around $15,000 to $25,000.



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