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Goldman Sachs is considering paying referral bonuses to investment bankers and traders who refer business to its private bank as part of an effort to expand its asset-management business.
Top executives at the New York bank are drawing up a plan to use a formula to calculate bonuses for employees who refer lucrative clients to the bank's private wealth division, according to people familiar with the matter.
Employees are now rewarded for collaborating with other divisions with discretionary bonuses rather than flat fees, a move that has long been controversial at Goldman, where some have argued flat fees are unnecessary.
Goldman is currently reviewing its plans, but people familiar with the matter cautioned that no final decision has been made.
A bank spokesman declined to comment on the compensation issue.
For decades, Goldman has operated largely as a collection of siloed businesses. From the start of his tenure as CEO, David Solomon has tried to get Goldman's bankers to work together more effectively in a program he called “OneGS.”
The hope was that clarifying how bonuses are calculated would encourage greater cooperation among Goldman employees who regularly interact with wealthy clients to advise them on trading and investment banking.A Goldman spokesman said OneGS had improved relationships with clients, but “of course, we are always looking at ways to enhance our business, including through referrals.”
UBS had considered a similar incentive program for investment bankers who refer clients to the group's asset-management unit, but executives abandoned the idea because they felt it would be too complicated to administer and decided highly paid investment bankers didn't need the extra bonuses, according to people familiar with the plans.
Expanding Goldman's private bank is central to Mr. Solomon's efforts to make the bank's business more durable and less reliant on volatile investment banking and trading activities.
The growth of the asset-management division, which has looser capital requirements and more predictable earnings based on assets under a bank's control, has helped longtime investment-banking rival Morgan Stanley leapfrog Goldman's market capitalization.
Under Solomon's leadership, Goldman initially aimed to manage assets for a broad range of clients, from wealthy individuals with a few hundred thousand dollars to ultra-high net worth individuals with billions of dollars in assets.
The bank now targets so-called ultra-high net worth clients, with a minimum of $10 million required to open a private bank account, with the average account size being about $70 million.
Goldman manages about $2.85 trillion in assets through its asset and wealth management division, led by Mark Nachman.
Additional reporting by Owen Walker
