Welcome to Financial Advisor IQ
Follow

Morgan Stanley and Goldman Sachs Continue Ramping Up Lending to Wealth Management Clients

October 22, 2018

Wirehouse Morgan Stanley and its rival Goldman Sachs are increasingly relying on boosting their revenues by lending to their high net worth wealth management clients, Bloomberg writes.

In January, Morgan Stanley said lending was one of the key priorities for its wealth management unit, which oversees $2.5 trillion, according to the news service. And last week, Goldman Sachs CFO Marty Chavez said in a conference call with analysts that lending presents “significant opportunities,” although the firm’s focus appears to be outside the U.S. in the near future, Bloomberg writes.

For both firms, lending remains a relatively small part of the firms’ wealth management business: Morgan Stanley’s loans in the wealth unit grew 7% in 2017 to $82 billion, although income on interest increased 22%, according to the news service. At Goldman Sachs, wealth management loans reached $17 billion in the second quarter, Bloomberg writes.

But there’s been substantial growth. Goldman Sachs only had $4 billion wealth management loans in 2012, according to the news service. Morgan Stanley has tripled such loans over the past five years, the news service writes.

Part of the reason for the growth is the ability of wealth management departments to process loans quickly — and offer more choices as collateral, according to Bloomberg.

"It tends to be very bespoke; you can’t go to your regular, mainstream bank to get loans on your artwork,” Christian Bolu, a bank analyst at Sanford C. Bernstein, tells the news service.

(Getty)

Morgan Stanley is prepared to offer bridge financing for clients who want to buy their next house for cash, according to Bloomberg. And it takes Goldman Sachs as little as five minutes to underwrite a loan for starting up a new business or to pay taxes, the news service writes.

By Alex Padalka
  • To read the Bloomberg article cited in this story, click here.