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Greg Smith is only 33-years-old but he longs for the old days...days when he says Wall Street firms put clients first.
Now those firms "try to extract the most money they can from clients," says Smith in an interview with The Daily Ticker.
Related: Ex-Stock Broker: I Realized That Most Of What I Did Was Bad For Clients—So I Quit
So he left Wall Street's most famous investment bank, Goldman Sachs (GS), after working there for 12 years, and he did it very publicly, with an op-ed in The New York Times headlined "Why I'm Leaving Goldman Sachs."
Smith, a VP in derivative sales, shares his experience as a Goldman employee in a new book called "Why I Left Goldman Sachs: A Wall Street Story." He told The Daily Ticker's Aaron Task that Goldman "used to be an institution that held itself to a higher ethic." But it has become just like every other bank by putting profits ahead of customers' best interests. The most profitable way to get more money from clients is to sell complicated products to unsophisticated investors, says Smith.
Related: Wall Street Compensation Bounces Back: NY State Comptroller DiNapoli
One example he recounts: a quant product called clorox that he writes was a "jazzed-up" complex asset allocation product that promises "very good things to clients but skims off $2-$3 million dollars at outset of the trades." Goldman targeted philanthropies and university endowments. He says "in a number of instances" he declined to sell such products.
Another example he cites takes place after he flies to Asia for a client meeting. The SEC had recently sued Goldman for $550 million for misleading investors. "One of the firm's biggest clients looks me and a partner in the eye and says 'We don't trust Goldman at all. We do business with you because we have to.'" Smith explains that he was upset after that comment but the Goldman partner thought it was great news because the client wouldn't pull his business.
Related: Goldman Banker Quits in Disgust, Blasts Firm for "Ripping Off" Clients
A Goldman spokesman responded to Smith's allegations in an email: "We take any issues raised by our employees seriously. In this case, we conducted a detailed review of Mr. Smith's claims, found no evidence to support them, and found nothing to suggest that he raised these issues before he was already heading out the door."
Smith says he eventually decided to leave Goldman because he didn't see the firm making any changes, at least positive ones. He wanted Goldman to adopt the attitude it had when partners cared first for their clients -- "a firm that actually values clients' trust, does right by clients, makes money alongside clients instead of seeing clients as an adversary," he explains.
Related: Are Goldman's Clients Really 'Muppets'? Henry Blodget Says 'Yes'
Smith says he will now focus his time and energy on reforming Wall Street.
"I want to be part of people within the industry who are trying to reform it for the better, to make it more sustainable," he says."The way Wall Street works now is an eat-what-you-kill system."
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