Longboat Retirement Solutions LLC

Goldman Sachs buys ‘robo’ investment adviser March 15, 2016

Filed under: Corporate Malfeasance,Economics,Investing Globally — larsfforsberg @ 1:53 pm
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BY:  Ben McLannahan

Goldman Sachs has made a move into the fast-growing world of “robo” investment, buying Honest Dollar, a start-up which aims to make it quicker and simpler to set up savings accounts for retirement.

Goldman’s new business is distinct from firms such as Wealthfront and Betterment, the biggest automated investment companies, which manage pots of cash according to customers’ stated goals and risk appetites. Honest Dollar, launched a year ago in Austin, Texas, does not select portfolios itself but charges a per-month, per-user fee for setting up and maintaining retirement accounts which are managed by Vanguard, the fund manager with $US3.3 trillion in assets.

Honest Dollar declines to provide numbers on how many users it has, but says it is targeting the roughly 45 million Americans – freelancers and small-business owners – who do not have access to employer-sponsored retirement plans.

The size of the acquisition, made through Goldman’s investment management division, was undisclosed.

“We’re trying something very new and innovative, and we love the validation [from Goldman],” said William Hurley, Honest Dollar’s chief executive. “Goldman did an incredible amount of work, putting in the effort of understanding what we are.”

A recent surge of private investment in financial technology companies has prompted the biggest banks in the US to consider whether they would rather buy, build or partner to keep pace with the newcomers.

Goldman, which prides itself on its vast team of software engineers, has mostly bought or built, last year launching an internal venture to challenge the likes of Lending Club in loans to consumers and small businesses. It is also a driving force behind Symphony, a big consortium of financial services firms aiming to unseat Bloomberg from its dominant position in messaging.

“Honest Dollar has created a simple solution to a complex retirement savings problem,” said Timothy O’Neill and Eric Lane, co-heads of Goldman’s investment management division, in a statement. “Together, we have the potential to help millions of people achieve their investing goals.”

Mr Hurley, 44, who prefers to go by the name “Whurley”, pursued a career as a bassist in a funk band before a serious car accident sparked an interest in computing. He worked at Apple, IBM and Symbiot before founding his own design firm, Chaotic Moon Studios, in 2010. He left the company – which was sold to Accenture last year – in 2014 to co-found Honest Dollar.

He launched his latest venture about a year ago in Austin at South by Southwest, an annual set of film, interactive media, and music festivals and conferences. By then he had raised $US3 million of seed funding, including a personal investment from Vikram Pandit, the former chief executive of Citigroup.

Honest Dollar, which now has 30 staff, will stay in Austin and operate as part of Goldman’s investment management division.

“As a software person, this is my first foray into financial services, but Goldman has a 100-plus year history and a lot of the brightest minds in this space,” said Mr Hurley. “So far we’ve built this on our own; imagine what we can do with access to that data.”

Financial Times

 

My thoughts on this transaction:

The tentacles grow.  This is probably the first time in history that the word “honest” has been used in the same sentence as Goldman.  Buyer beware.

 

 

Former McKinsey & Co. CEO hit with fine, 2-year prison term for insider trading October 26, 2012

Filed under: Corporate Malfeasance,Uncategorized — larsfforsberg @ 2:05 am
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Rajat Gupta, formerly one of the most respected CEOs in the US and a board member of financial giants like Goldman Sachs and Russia’s Sberbank, received a prison term and a $5 million fine for insider trading during the height of the 2008 crisis.

Prosecutors accused Gupta, the former head of the global consulting firm McKinsey & Co. and a onetime director of the huge consumer products company Procter & Gamble, of being “above-the-law” in feeding his close friend and partner Raj Rajaratnam insider knowledge between March 2007 and January 2009. Billionaire Rajaratnam is also a founder of the Galleon hedge fund.

During the trial which has been going on since May, the prosecution highlighted a September 23, 2008, phone call made by Gupta to Rajaratnam just minutes after Gupta had learned about Warren Buffett’s planned investment of $5 billion by Berkshire Hathaway in Goldman Sachs.

Shortly after the called ended, Rajaratnam purchased $40mln in Goldman stock, which made him nearly $1 million at the height of the financial crisis that had engulfed the country.

In sentencing the judge called the phone call “the functional equivalent of stabbing Goldman in the back.”

Judge Jed Rakoff said the punishment was sufficient for the 63-year-old Gupta.“… no one really knows how much jail time is necessary to materially deter insider trading; but common sense suggests that most business executives fear even a modest prison term to a degree that more hardened types might not. Thus, a relatively modest prison term should be `sufficient, but not more than necessary,’ for this purpose,” Rakoff said.

However, the sentence was well below the 10 years requested by government prosecutors, and well below sentencing guidelines, which made some experts question whether it’s a fair punishment.

Chicago attorney Andrew Stoltmann says Gupta “intentionally betrayed his duties to Goldman Sachs” and refused to take responsibility for his actions. Gupta’s sentence should have been closer to the 10 years prosecutors had recommended, as his actions were more serious a crime than those of his friend Rajaratnam, who was sentenced for 11 years in prison.

“At the same time Mr. Gupta did not trade and did not make money. Rather his motive was friendship. Here the fall from grace for him will be much harder than for most given his stature in the community. That may well be the worst punishment,” said Thomas Gorman, a former senior counsel in the division of enforcement at the Securities and Exchange Commission.

Prosecutors say Rajaratnam earned up to $75mln illegally through his trades while Gupta’s attorneys point out that their client earned nothing.