Strategy

Mass Affluent Want to Invest Alone, Says HSBC

A staff reporter, 4 April 2001

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HSBC has added to the growing debate on the investor profile of the burgeoning mass affluent market in the United Kingdom. The bank's private client arm has released research conducted through third party firm Continental Research, which interviewed 500 individual investors that held £30,000 in net investible assets. From the findings, a growing portion of mass affluent investors feel confident to manage their own investments, although the majority - around two thirds - of those with more than £30,000 to invest rely on professional advice. The latter being a strong supporting argument for the increasing number of financial service providers populating the sector. The survey was conducted in December 2000.

Demographically, the research indicated that investors between 55 and 64 years old are more likely to seek information from a professional, while the young are likely to feel more confident about managing their own investments and assume greater risks in their fund allocation. However, the research also stated that 20 per cent of the mass affluent group surveyed did not hold any stockmarket-linked investments, despite the long-term growth potential of the stock market, noted an HSBC official disclosing details of the research.

The future of private banking players operating within this sector remains uncertain. The survey found that 46 per cent of investors obtain information and advice from IFAs, compared with 31 per cent who rely on banks. As many as 29 per cent go to friends and colleagues while 14 per cent use the internet. Private banks will need to focus not only on the end private client but also on gaining the confidence of the intermediary sector if they are to stand any chance of building market share, noted industry commentators.

The survey results have been announced just as HSBC plans to launch its UK online service for the mass affluent in conjunction with Merrill Lynch. The service offers banking and investment services through the internet for mass affluent clients. A particular focus has been on the wealth sector just below high-net-worth. The bank has since December successfully piloted the online service in Canada and Australia where it has opened 60,000 and 20,000 accounts respectively. The UK launch is on for this spring and is targeted at investors who hold between £50,000 and £350,000 in investible assets, Neal Jenkins, head of corporate communications for Merrill Lynch-HSBC, told Private Client Management.

The product will offer an integrated investment and banking account as well as a current account, debit card and cheque book. After its UK launch, HSBC-Merrill will take the venture to the rest of Europe and Asia, explained Jenkins. He declined to provide the fee structure for the new service, explaining that this would be detailed at the launch. However, Jenkins admitted there would be a small administration fee and trading charges for account holders.

The combined effect of Merrill Lynch’s product base and HSBC’s distribution capacity will allow them to attract the mass affluent market much more quickly than the traditional private banks, commented Adam Green, a partner at TMP Executive Search, where he specialises in private banking recruitment. “A lot of HSBC’s clients to date have been cost intensive, with a lot using deposit accounts and not very sexy products. Merrill Lynch has a very good product base but hasn’t got the same reach.”

“There is a huge potential for Merrill to move its retail clients upwards into the private client segment and also to expand the less profitable private client business through using the internet as well as relationship managers and branch networks,” he added. The joint venture was originally announced with much fan fare last summer when the two houses pledged to themselves to the £1 billion deal.

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