Goldman Sachs doesn't have far to fall in the estimation of high net worth investors, according to Millionaire Corner research.
A scathing opinion piece in The New York Times yesterday drove Goldman Sach’s stock down 3.4 percent, but the global investment bank had already starting sliding in investors’ esteem, according to Millionaire Corner research.
The piece, titled “Why I Am Leaving Goldman Sachs,” served as a very public resignation for Greg Smith, head of the firm’s U.S. equity derivatives business in Europe, the Middle East and Africa.
“To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about money,” said Smith, of the company he joined 12 years ago. “The firm has veered too far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.”
The letter – intended as a wake up call for the firm’s Board of Directors – has met with some cynicism among Wall Street insiders. (What’s the next shocking headline, quipped one, prostitution in Las Vegas?) The piece also elicited denials from Chief Executive Officer Lloyd C. Blankfein and President Gary D. Cohn – both personally targeted in Smith’s letter.
“In a company of our size, it is not shocking that some people could feel disgruntled,” said Blankfein and Cohn in a written statement posted on the company website. “But that does not and should not represent our firm of more than 30,000 people.”
A recent survey of Goldman employees found that 89 percent of Goldman staff feels the firm provides “exceptional service” to clients, said Blankfein and Cohn, noting, “Our firm has had its share of challenges during and after the financial crisis” but employees’ pride in Goldman is clear.
These challenges have included a $550 million payment to settle a fraud lawsuit with the U.S. Securities and Exchange Commission and accusations by the U.S. Permanent Subcommittee on Investigations that the firm has misled clients, according to Bloomberg News.
Such events appear to have tarnished Goldman’s reputation with high net worth individuals long before Smith’s blistering resignation, according to Millionaire Corner research. The share of high net worth investors – those with $5 million to $25 million - who reported a “positive impression” of Goldman Sachs fell to 6 percent at the end of 2011 from 16 percent in 2009.
Only 2 percent of high net worth investors indicated that they are likely to start using or increase their usage of Goldman Sachs in 2012, down from 4 percent in 2009. The investors also rated Goldman as least likely to fulfill their investment needs. Less than three-fourths reported being “familiar” with Goldman Sachs, which ranked below Bank of America, Merrill Lynch, Wells Fargo, JPMorgan Chase, Citi and Morgan Stanley Smith Barney.
“How did we get here?” asked Smith in his opinion piece. “The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.”
Clients are advised to trade whatever will bring the biggest profit to Goldman Sachs, and to invest in products “we are trying to get rid of” because they do not appear to have a lot of potential product. “Call me old-fashioned,” said Smith, “but I don’t like selling my clients a product that is wrong for them.”