Wall Street Investment Banks "Target Ultra-High Net Worth Individuals"

JP Morgan, UBS Lead in PB Sector

Goldman Sachs Recently Joins

Asset Management Department Established at Japan Headquarters

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] As wealth becomes increasingly concentrated among a few, investment banks are changing their strategies. From traditional businesses such as IB (investment banking) and trading, they are recently shifting their focus to fintech and consumer finance utilizing IT. In particular, asset management targeting the "ultra-wealthy" is known as one of the few business areas that can generate stable high returns, making "consumer finance for the wealthy" a new growth area for investment banks.

On the 6th, Nihon Keizai Shimbun reported, citing a report from Swiss financial firm UBS, that the financial assets of the ultra-wealthy have more than doubled over the past decade to $6 trillion (approximately 7,100 trillion KRW) in Europe and the United States alone. The ultra-wealthy are defined as those with assets of $1 billion (approximately 1 trillion KRW) or more.

Investment banks manage the funds of wealthy individuals and earn fees. These fees are generally known to be around 1% of the assets.

Previously, most Wall Street investment banks, including JP Morgan and UBS, have entered this field. Along with JP Morgan and UBS, Citibank, Standard Chartered, and HSBC are leading in the private banking sector.

Recently, Goldman Sachs has also joined, heating up the "PB boom." According to Nihon Keizai Shimbun, Goldman Sachs established an asset management department at its Japan headquarters last month and began recruiting private bankers responsible for asset management and advisory services targeting wealthy clients. Goldman Sachs aims to secure customer deposits worth 1 trillion yen (approximately 10 trillion KRW) within the next 5 to 10 years. According to Japanese investment bank Nomura, there are about 84,000 households in Japan alone with net financial assets exceeding 500 million yen.

The "ultra-wealthy" targeted by Goldman Sachs are individuals holding financial assets of 10 billion yen (approximately 100 billion KRW) or more. This is a much higher threshold than the criteria used by other investment banks (around 35 billion KRW). The minimum deposit amount is 1 billion yen, and corporate clients such as asset management companies are also included, not just individual clients.

Goldman Sachs' late entry into this field is due to poor performance in its core areas over recent years.

According to major foreign media, the financial industry has begun to take a conservative approach to risk investments as the profitability of capital markets weakens due to global economic slowdown and increased uncertainty. Additionally, as the importance of information and communication technology (IT) in finance has risen, consumers have shifted to internet banks, and Goldman Sachs has failed to adequately respond to both trends.

David Solomon, CEO of Goldman Sachs, stated at an investor briefing at the end of last month, "We will transform into a broad financial services and funding provider bank," and "We will also expand our asset management business." Nihon Keizai Shimbun reported that Goldman Sachs' entry into the ultra-wealthy business in Japan appears to be a measure to strengthen consumer finance.

However, it is uncertain whether Goldman Sachs' new business will succeed. The business targeting Japan's ultra-wealthy is already dominated by Japanese financial giants such as Nomura and Daiwa. In the past, global major financial firms like HSBC and Standard Chartered entered the market but withdrew after being blocked by Japanese financial companies.

This content was produced with the assistance of AI translation services.