David Solomon's brief preview of Goldman Sachs' strategy update
Only a few more months to go. After postponing the announcement of the new strategy resulting from his 'front to back' review of Goldman's operations from the first quarter of 2019 to early 2020, Goldman Sachs' CEO David Solomon has been referencing the coming strategy presentation once again.
In a podcast recorded in late September but released by Goldman today to coincide with Solomon's one-year anniversary as CEO, Solomon said the strategy review will be all about "where we want to take the firm in the medium term." This is a new concept for Goldman, Solomon said: "This organization has always been very adaptive and very flexible." As of early next year it will have a plan and a "multi-year commitment" to change.
What will that plan entail? Solomon isn't saying exactly, but he's dropping some heavy hints. It's all about, "adding more durable, recurring fee based revenues," he said, before referencing the bank's wealth and asset management businesses, and its digital platforms and applications like the Apple credit card and Marcus, which is, "bringing everyday Americans" onto the wealth platform.
Solomon's podcast was recorded before today's big Bloomberg article on a year of 'frantic upheaval' and high turnover among Goldman's partners. Solomon, therefore, clearly isn't addressing those accusations directly, but he does suggest that the new plan might have had something to do with the recent exits. "The process of saying this is what we’re doing for the next five years let’s be a part of it, naturally has shaken out some people," he said, adding that staff need to be "energized" about the new plan and that some have "opted out." Even so, partner turnover is no higher than normal, Solomon added.
Little reference was made to the securities business where revenues are notoriously non-durable and non-recurring and where many of the exits have happened. Solomon did, however, praise Marquee, the platform that's giving clients direct access to Goldman's risk and pricing tools. He said Goldman excels at "bespoke risk intermediation," and is investing heavily in "platforms" to strengthen its position. 25% of people who work for the firm are engineers - the same as this time last year.
If you want to get ahead at Goldman today you therefore need to get with the program and embrace change. You also need to be prepared to do different things as you become more senior. Goldman has always done this, but Solomon seems a particularly big believer in flexibility and says he's all about, "taking people from around the organization and putting them into other jobs," in preparation for senior roles. Some former insiders don't seem entirely pleased with this. Bloomberg notes that 'two former members of the C-suite' have been venting that disbursing investment bankers to other jobs won’t help grow businesses.
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