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Goldman Sachs is exploring paying referral bonuses for investment bankers and traders who send business to its private bank, part of a push to grow its money management business.
The New York bank’s top executives are developing a plan to use a set formula to calculate bonuses for employees who refer lucrative clients to the firm’s private wealth division, according to people familiar with the matter.
Employees are currently rewarded for collaboration with other units through a discretionary bonus, rather than a fixed formula. Having a fixed fee has been controversial among some at Goldman in the past who have argued that such a move should not be necessary.
Goldman is now revisiting the plans, though the people familiar with the matter cautioned that no final decision has been made.
A bank spokesperson declined to comment on compensation matters.
For decades, Goldman operated primarily as a cluster of siloed businesses. David Solomon has sought to make Goldman’s bankers work more effectively together since his earliest days as chief executive under a programme dubbed “OneGS”.
The hope was that clarifying how any bonus is calculated would encourage greater collaboration from Goldman employees who regularly interact with wealthy clients to give trading and investment banking advice. The Goldman spokesperson said OneGS has improved client relationships, “but of course we’re always considering ways to enhance our operations, including referrals”.
UBS has considered a similar incentive structure for investment bankers who introduce their clients to the group’s wealth management arm. But executives there decided not to pursue it as they felt it would be too complicated to run, and that well-paid investment bankers did not need additional bonuses, according to people with knowledge of the plans.
Growing Goldman’s private bank is central to Solomon’s efforts to make Goldman’s business more durable and less reliant on volatile investment banking and trading.
Growth in wealth management, which has lighter capital requirements and where revenues are more predictable based on assets under the bank’s control, has helped longtime investment banking rival Morgan Stanley leapfrog Goldman’s market capitalisation.
Under Solomon, Goldman had initially looked to manage the wealth of customers ranging from affluent clients with a few hundred thousand dollars to the super wealthy whose wealth stretched into the billions.
The bank has now narrowed its focus to so-called ultra-high net worth clients, with $10mn the minimum needed to open a private bank account. The average account size is about $70mn.
Goldman has about $2.85tn in assets under supervision at its asset and wealth management division, which is led by Marc Nachmann.
Additional reporting by Owen Walker
