HSBC’s head of wealth and personal banking, Jose Carvalho said that the bank is eyeing one of the top five positions in the United Kingdom supported by its global presence to attract customers in more than one market or who are from overseas.
“International connectivity is our competitive advantage and is driving growth.” news agency Reuters quoted Carvalho as saying. The bank’s asset management business is worth $712 billion worldwide and plans to hire more advisors as part of the push.
The division’s head also said that they aim to duplicate the assets under management in the British wealth business to 100 billion pounds ($131 billion) in the next five years, joining rivals to target even larger fee income from the country’s ‘mass affluent’.
Britain’s wealth management market had AUM of 168 billion pounds by the last year and is currently led by St James’s Place.
The biggest UK banks monitored by research firm Coalition Greenwich made $12 billion from wealth management in last year, increasing by 11 per cent every year, and St James’s Place is expecting a 7 per cent future growth in the overall wealth market.
HSBC competitors Barclays and Lloyds also plan to gain a larger income from the ‘mass affluent’, which according to Lloyds are customers with deposit balances of 75,000 pounds to 250,000 pounds. As per, Lloyds and the Investment Association the sector collectively manages around 4 trillion pounds which is the half of Britain’s wealth market.
This push demonstrates banks’ desire to expand in sectors that are invisible to decreasing interest rates, and where technology has simplified to compete with independent providers as according to experts warn it’s a crowded market.
Nigel Moden, EMEIA banking & capital markets leader at EY, said, “The demand for wealth management services continues to grow… but competition is high as almost every major bank has now declared its ambition to take a bigger slice of the pie.”
Big banks have conventionally side-eyed the mass affluent to go after the super rich, leaving them to independent financial advisors such as St James’s Place.
Carvalho said that he wanted to focus on the segment, “where we see an opportunity thanks to a culture shift away from some of the IFAs that dominate some 55 per cent of the market”.
HSBC’s strategy focuses on cross-selling more products to its affluent customers through improved mobile and digital banking channels. Additionally, encouraging wealthy customers with savings deposits to think longer term about investments.
Grace Miu, head of wealth at Coalition Greenwich, said, “For the mass affluent market, banks are pursuing a hybrid model of digital technology combined with advisers… banks are able to offer better services, and younger clients especially are more willing to use them.”
Lloyds is offering a similar strategy via its new Lloyds 360 digital tool, and Barclays via its newly combined Private Bank and Wealth Management unit.
Christian Edelmann, the managing partner for Europe at Oliver Wyman, however said the collective set of ambitions across all banks “is above what the market is likely to deliver”, adding “There will likely be disappointments.”
