(Barron's Advisor) - Goldman Sachs is closing Marcus Invest, an automated-investing service, and is selling Marcus Invest’s digital investing accounts to robo-advisor Betterment.
The news comes as Goldman Sachs has been exiting some consumer-focused products and businesses, and underscores the challenges companies face in growing digital advice businesses.
Goldman says on its website that Marcus Invest is no longer accepting new investment accounts. Customers have until June 20 to opt out of transferring their accounts to Betterment; accounts will otherwise transfer on June 29. Goldman Sachs will continue to offer other services via its consumer-focused Marcus business, such as high-yield savings and certificates of deposit.
“As we increase our focus on our growing Marcus Deposits platform, we made the decision to transition away from our digital investment advisor offering and wanted to find a great home for those customers,” said Marcos Rosenberg, global head of Goldman Sachs Marcus. “Betterment was the obvious choice for those accounts as we share a deep commitment to customer satisfaction. We look forward to continuing to serve our Marcus Deposits customers with great products and a great experience.”
Goldman has been scaling back its ambitions to build more Main Street focused businesses. Last year, Goldman sold lending platform GreenSky to a consortium of institutional investors. The bank also sold Goldman Sachs Personal Financial Management to Creative Planning. At the time, Personal Financial Management had about 200 financial advisors and $29 billion in assets.
The bank faced challenges in growing its robo-advisor business and didn’t keep pace with the sector’s evolution, says David Goldstone, manager of investment research at Condor Capital Wealth Management. “Goldman Sachs has now reached a conclusion that many others have,” Goldstone says. “Robo advice today is a competitive landscape, and customer acquisition costs are high compared to the low revenues generated from small-dollar investment accounts.”
Terms of Goldman’s deal with Betterment, which is subject to closing conditions, weren’t disclosed by either company.
A representative of Betterment declined to comment while a representative of Goldman could not be reached for comment.
The deal helps advance Betterment’s growth. The New York-based company launched one of the first robo-advisors in 2010, offering investors professionally managed portfolios at a fraction of the cost of a traditional advisor.
Betterment has since expanded into retirement plans and serving as a custodian for registered investment advisory firms. Today, it serves more than 850,000 customers and manages more than $45 billion in assets, according to the company.
“This acquisition further cements our leadership in the digital investing space,” Betterment CEO Sarah Levy said. “We are excited to welcome these customers to Betterment where our scalable technology platform will continue to support them on their investing journeys.”
But while Betterment and Wealthfront, another robo-advisor pioneer, have survived and even thrived, many other digital advice start-ups floundered, unable to gain sufficient scale to become profitable. Large financial institutions such as Vanguard have come to dominate the digital advice sector. Vanguard launched purely digital and human-digital hybrid robo-advisors in 2020 and 2015, respectively, and has amassed $312 billion in combined assets.
But the backing of a big financial institution is no guarantee of success. In December, JPMorgan Chase said it would discontinue its purely digital robo-advisor, J.P. Morgan Automated Investing, in the second quarter of 2024. The bank cited profitability challenges. The decision didn’t affect JPMorgan’s hybrid robo-advisor.
At most large firms, robo-advisors have become part of a spectrum of wealth management services intended to serve wealthy clients as well as investors with more modest sums. For example, Bank of America has an online brokerage for self-directed investors, a robo-advisor, and Merrill Lynch financial advisors. The bank’s online brokerage offering, Merrill Edge Self-Directed, and robo-advisor, Merrill Guided Investing, launched in 2010 and 2017, respectively. They have more than $456 billion in combined assets, according to the company.
