Aside from Muppets, Goldman Sachs has four other types of clients, Greg Smith writes in his tell-all ‘Why I Left Goldman Sachs.’
He makes this observation shortly after Passover in 2009, after Bear Stearns had been sold to JP Morgan, after Lehman went bust, and while the Street was going bananas.
According to Smith, everyone at Goldman had become more aggressive in this scary environment. Fiduciary responsibility was eroding, and in this new light, relationships changed for the worse.
Here are the Four Clients (if you know the Passover Haggadah, this will sound familiar):
- The Wise Client: Large hedge funds and institutional investors with tons of resources — specifically smart employees who often used to work for Wall Street banks.
- The Wicked Client: A smart client who pushes the envelope and tries to game Goldman (this is where Raj Rajaratnam gets a shout-out).
- The Simple Client: Often large asset managers and pension funds who are big and have outdated systems. Smith points out that Goldman used to take these clients by the hand and guide them, but after the financial crisis things changed.
- The Client Who Doesn’t Know How To Ask Questions: Simple, trusting clients with lots of money and confidence that Goldman traders would take good care of them. Think of someone running a charity or an endowment. These clients might buy complicated “exotic” products and get in way over their heads.
The Client Who Doesn’t Know How To Ask Questions, writes Smith, would likely end up on Goldman’s list of top 25 clients according to fees generated.
“There is something highly disconcerting about seeing a global charity of philanthropic organisation or teacher’s pension fund in the top 25 of a firm’s clients.”