Competition hitting wealth management sector
Goldman Sachs’ investment management revenue fell by 18% in this year’s second quarter. Wealth management teams are increasingly selling lending products to wealthy individuals rather than facilitating in trading as robo-advisors and index funds offer a faster and cheaper trading service, making them particularly popular among millennials.
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One of Wall Street banks' biggest businesses is taking heat from competitors old and new. Many big banks are seeing fees from wealth and investment management divisions fall, putting a crimp in critical revenue at a time when Wall Street is having an increasingly tough time matching their return on equity targets. related investing news This regional bank can benefit from the online betting boom, JPMorgan says Goldman Sachs ' most recent earnings report noted that investment management net revenue of $1.35 billion fell 18 percent from the second quarter of the prior year, and on the bank's earnings call CFO Harvey Schwartz noted that average fees are coming down. While fees are falling all over Wall Street, there's a chance that at least Goldman can make it up in the long run on volume: the bank said it saw client inflows in both cash and long-term assets. Other wealth managers are seeing top clients add to cash holdings on fears of market turbulence and geopolitical conflict. And falling fees on Wall Street rarely come without job cuts too far behind them.

Fewer transactions, more loans

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UBS ' wealth management Americas business has grown increasingly dependent on recurring income from products including investment funds, according to its earnings reports, and less on transaction-based revenue, which is on the decline. The bank did not respond to a request for comment. Investors' declining trading activity comes as yield has become increasingly scarce, and if the trend persists, it could mean that other investment alternatives, whether robo-advisors or index funds, gain traction. "Brokerage fees are already being eroded in both of these jurisdictions as cheap beta products become readily available and increasingly accepted," said a joint report covering wealth managers last month from Deutsche Bank Markets Research and consulting firm Oliver Wyman, entitled "Running faster to stand still." At big banks, at least, wealth management teams have increasingly turned to selling lending products to wealthy individuals, more than helping them make trades, the report said. At Morgan Stanley , the bank's second-quarter numbers reflected a 24 percent increase in loans within its wealth management division. The bank declined CNBC's request for comment.

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