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Greg Smith Said Nothing Goldman Clients Didn't Already Know

The fact that Greg Smith’s very public resignation from Goldman Sachs went viral should not be a surprise. That the financial media felt compelled to mock his reasoning is the real surprise. The defensiveness and simplistic distinction, charity versus making money, are quite astonishing.

“If you want to dedicate your life to serving humanity, do not go to work for Goldman Sachs. That’s not its function, and it never will be. … it is not charity work. Goldman’s clients are mostly very well-off. Smith’s lament that the bank no longer serves their needs above and beyond its own does not tug at our heartstrings.”

UHNW clients of Goldman Sachs do not expect a philanthropist to answer the phone when they call. They do expect, however, a professional who will act in their interest while transacting business with them. Inside their online community, investors acknowldege the naive hope that this expectation will be consistently met, but nonetheless insist that this goal is an imperative for any family or investor working with a financial services firm.

A few pertinent comments reveal investors’ pragmatic view:
“ [Consider] the marketing and relationship language about putting the client first. This is of course just rhetoric. The registered rep or wealth manager’s legal obligation is to the firm, not to the client and the “suitability” standard is both minimal and fluid.”

“I’m not sure any “provider” is taking care of you or watching out for you. They are providing a product or service that you are buying.”

“[Service providers] over-promise and under-deliver on their services and products.”

“[There is a] conflict between a family’s desire to fully customize services to its specific family unit versus a for-profit entity’s desire to seek homogeneity in the delivery of services to maximize profit through scalability. It’s very hard to find a good balance.”

“We have found that it is best to monitor and coordinate the services [inside the family office], allowing us to focus on firms that do the best at A, B or C individually.”

“Everyone is entitled to make $$. The firms are in business to make money and if you negotiate an extremely low fee the only way for the firm to make money on you is to minimize the effort.”

“We try to compensate by being incredibly specific upfront about our expectations and putting as much as possible in writing. We also try to confirm expectations with multiple individuals (especially in the operations and account management area) to minimize over-promising by the business development/marketing types. Finally we ask for more than we really need under the assumption that we will receive less than promised. It is disappointing that even great providers can change and become sub-standard over time. Sometimes due to personnel changes, sometimes organizational focus, sometimes because you are taken for granted with the passage of time.”

The ultimate lesson for advisors and investors? Set mutually agreed to expectations before the relationship gets started. Why is this so difficult? Because salesmen are taught, don’t go past the sale, just take the order and leave. Once financial services professionals recognize the need to discuss specific expectations, both the client and the firm will benefit enormously – and both will make money!

IPI is a 20-year old membership organization that connects 1,100 ultra-high-net-worth investors to one another inside an online community and at events throughout the year, seeking to change the way investors work with advisors, and advisors work with investors, for the benefit of both.

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