Goldman Sachs Global Head of Wealth Management on market sentiment from investors

Tucker York, Global Head of Wealth Management at Goldman Sachs, joins The Final Round to review comments from Fed chair Jerome Powell, the sentiment from ultra high-net-worth clients, and initiatives Goldman is launching including the Goldman Sachs Fund for Racial Equity.

Video Transcript

SEANA SMITH: Welcome back to "The Final Round." I want to bring in our next guest. We have Tucker York, global head of wealth management at Goldman Sachs. And Tucker, it's great to have you on the show. Thanks so much for taking the time to join us.

Let's start with what the Fed said this afternoon, saying that market conditions have improved, but the extent of the downturn remains uncertain. So I'm curious what you're hearing or what the sentiment, I should say, is among Main Street investors among your clients today.

TUCKER YORK: Seana, thanks. It's nice to be with you. And I appreciate being with you all today. I agree with a lot of what was just said. That's what we're hearing from our clients, as well as what our research tells us, as well as, like, we're in the middle of something right now.

Clearly, the shock of events leading to the downturn in February and bottoming so far in March is in the digestion mode right now. And it's impressive to see the government policy specifically in the US, but also globally about the sharp response about this. It's a validation that this is a serious matter and likely to be serious for some time.

And so on the one hand, that gives investors a lot of confidence that people recognize the issues and are looking to use the considerable powers that they have to be able to address them. On the other hand, the fact that this much firepower is seemed to be required makes people nervous.

And I think over the course of this, we're going to continue to have a raise of good news, green shoots about employment numbers and things of that matter, and the possible reopening of the economy. And then we're also going to going to hear, frankly, more troubling news about perhaps hotspots and the virus or things that haven't cooled down, et cetera.

So I think this is a time where people need to be comfortable with the fact that views are going to change pretty regularly. And so the most important thing is to understand what's that long-term orientation you have to risk, and where are you in your own setting up against that benchmark.

ANDY SERWER: Hey Tucker, following up a little bit on Seana's question, though, you're hearing this debate about in this recent upsurge, upswing, flurry, that it's dumb money, that it's retail. And, you know, on the other hand, you can make the case that the Paul Tudor Jones's and the Stan Druckenmiller's and the Warren Buffet's missed the boat. So is this a time where retail money was smart?

TUCKER YORK: You know, I can-- we won't know for a while, right? But I can tell you what we're seeing amongst our clients. And again, it's the high net worth client that has the advantage in the sense that they're really not held to year to date, quarter to date returns. They're really measuring what their portfolios will look like over years.

And that perspective, they have other considerations to take into account as well, such as paying taxes. So the idea of a lot of trading back and forth in a market that has, broadly speaking, been up for more than a decade, there are a lot of capital gains. And there are other issues to consider that way.

And so while we have been in the mode of calling out to people that valuations have been very high up against historical times for now years, the reality is we have said in spite of that, in spite of risks in the market, we would not be underweight equities versus that long term exposure.

And so what we have seen over these last couple of months and specifically in March is amongst our client portfolios, a slight reduction in fixed income assets moving to cash and frankly, an increase, a slight increase, in equities during the month of March.

That's something we hadn't seen in the, I'll call it, more or less, preceding six months. Because the market had been up a lot. People were positioned to be high in equities. So for some, there was a bit of a buying opportunity. But again, I would say this was at the margin.

RICK NEWMAN: Hey, Tucker. Rick Newman here. If fixed income is-- Jay Powell is basically saying fixed income is going to be a dog for the next several years. What do you do if you need that safety, but you need some yield?

TUCKER YORK: I think that's-- I think that the Fed is basically telling you that. That's part of what this process has been is it, in effect, forces risk taking. I'd say over the last couple of years, we had versus historical norms, we saw more money moving into fixed income in search of that yield out of cash.

And so a little bit of what I just described, we saw in March is some of that coming back to create some liquidity for potential buying opportunities, et cetera. And for all of you, and you're the experts on this, but obviously, there will be opportunities for dividend yield and stocks, what people feel comfortable in taking that risk.

But I think it's going to be-- it's going to be a challenge. It's going to be a challenge to meet some of those income needs, just by thinking about fixed income.

SEANA SMITH: And Tucker, I just want to quickly-- I have two questions for you, the first one just being Goldman, obviously, has been prioritizing the wealth management business over the last couple of years. You've recently bought United Capital last year. There was talk in the beginning of the year about hiring more advisors globally, also possibly expanding either organically or through acquisitions. So where do these plans stand, and has coronavirus altered your plans at all?

TUCKER YORK: So we have been in the ultra high net worth business for decades. We've been exclusively focused on that. Over the last couple of years, as the firm has continued to think about their broader business model, we have thought there was an opportunity, if we could do it, in a scalable way with additional people to take some of what we know and what we believe we have an expertise with at the ultra high net worth business and apply that to the high net worth business.

That was the acquisition for last year. I would say, in both cases, the key for us is we believe in an advisor-led orientation towards guiding people on making these decisions and answering just the kinds of questions that we're talking about now.

At the same time, the same time, we also saw an opportunity in the digital space and we're committed to building out a digital offering, which we've done in our Marcus brand.

The advantage for all of us at Goldman working together on this is while I would say the key investment for the wealth management business would be hiring people to give advice, the key part of the digital part of our business is continuing to invest in technology for that client interface. The reality is we benefit from that as well. And so putting those two together is how we think we create value ultimately for clients and thereby shareholders.

Now as far as this year goes, we've actually continued to hire. But as a practical matter in this environment, we're very sensitive to it. It isn't just the hiring. It's how do we bring in the right people in the right way in our culture and apprenticeship orientation in an environment that, as recently as a few weeks ago, we are still 98% working from home.

And so we're trying to figure out how to balance all those. In general, I would say the plan and the ambition are unchanged. But we're a bit more measured these last couple of months, given the virus and how we are in this work from home mode. Very anxious, though, given conversations and everything else to kind of get back into that as soon as we think it's correct.

SEANA SMITH: And Tucker, I also want to ask you about a new fund that Goldman Sachs just announced. Because over the last week, we heard from another a number of companies vowing to fight racism, taking their own initiatives. In order to do so, Goldman Sachs announcing a $10 million fund. It's called the Goldman Sachs fund for Racial Equity.

So talk to us about the vision for this fund and also the role that you think the business community can play and should play to make sure we do see change at this time.

TUCKER YORK: Thank you. There's a lot there, but I would start by saying by far, this is-- this has been-- not the fund, but the issues of the last couple of weeks have been the largest-- have occupied the largest amount of time and conversation within Goldman. I can also tell you in my conversation with clients, market movements notwithstanding, overwhelmingly, this issue is one that's come to-- is one that's come to the fore.

And I would say, I'm very proud of what we're doing as a firm and what David Solomon, our CEO, has laid out around that. I would also say that there's a very good spirit right now amongst my colleagues in thinking about this. We've been a philanthropic institution for some time with our own money, with partners' money, with involvement in the community.

That is not a new thing. Some of the things we're known for is kind of doing some of our-- doing our research and then putting some of those philanthropic dollars where our wallet is. And 10,000 small businesses would be an example of that.

We believe in the economic growth is driven very much by small business, that if we can help small business owners be better managers through education and other best practice sharing, that they would be better. That's an area where we've put money. By the way, that also goes a long way, given those small business owners, towards some of the racial equity issues.

For this fund, what we're looking to do-- I should say this initiative-- is we're looking at doing some more work on how we get that. Our preliminary thinking is around three themes. One is around education, dovetailing with what I just mentioned before. One is around justice and the fact that the justice system sometimes is not equal, and it needs to be reviewed in that context. And we're looking at those.

And then, finally, it would be economic. Where can we help out more on economic empowerment? And those are areas, some of which we know of more about than others, but we'll be continuing to do some research around that, partnering with clients who have thoughts and ideas around that to build that out.

SEANA SMITH: All right, Tucker, you are the global head of wealth management at Goldman Sachs. We really appreciate you taking the time to join us this afternoon. We hope you come back. Thanks so much.

TUCKER YORK: Thank you for having me. Good being with you.