The financial needs of the “mass affluent” may not be quite as complex as the needs of those higher up the wealth chain, but they still require a level of sophistication above the norm – which is exactly where HSBC is pitching its Premier banking service. Andrew Carruthers, head of HSBC Premier Australia, says the group defines “mass affluent” as those with between about $500,000 and $4 million to their names.
Officially, HSBC will offer Premier membership to individuals with at least $500,000 in loans or $200,000 in savings/investments or a total of $500,000 across debt, savings and investments. This is not an elite club, but it’s fair to describe it as exclusive and Premier aspires to offer services above the typical high street bank. “But we’re still a bank – we’re not about selling esoteric products like a Swiss private bank,” Carruthers says.
And it’s true that most of Premier’s offerings fall under the heading of routine financial services: bank accounts; loans; term deposits; credit cards and the like. Like many private banks, though, the Premier service hinges on the role of a “relationship manager” who provides clients with an aerial view of their current financial position and potential needs.
“The relationship manager is vital,” Carruthers says. The Premier relationship managers – there are about 120 in Australia – do not, however, give financial advice and are trained not to stray across that line. “They are not financial advisers. The relationship managers are there predominately to discuss banking products with the clients,” he says. “If they identify a need for financial planning they will refer the clients on to our in-house financial advisory group.”
Typically only about 5 per cent of Premier clients make the leap across to HSBC financial planning, but Carruthers aims to lift that referral rate to about 20 per cent over the next few months. “We’ve got some strategies in place to achieve that,” he says. While those strategies remain secret for now, Premier clients already receive a 50 per cent discount on the cost of having a financial plan drawn up by one of the HSBC advisers.
Wealth management is one of Premier’s “four pillars” (which also include international recognition, international services plus prices/rewards) but Carruthers is realistic about the chances of converting the bank’s entire client base to HSBC’s financial planning services. “Research tends to show that people don’t want to get all their financial services in one place,” he says.
For example, many high net worth individuals will favour independent advisory groups as opposed to tied networks such as HSBC’s. Carruthers says the HSBC financial planning group operates like most others with a list of approved products (investment and insurance) and the usual compliance mechanisms. He says the HSBC advisers generally operate under a fee-for-service arrangement but not exclusively.
Until now, too, the financial planning group did not sell any in-house funds – mainly because it didn’t have any. (HSBC Australia sold its investment management arm to Challenger several years ago.)
This year, however, the Australian HSBC advisers have begun offering clients a new BRIC fund – a closed-end fund manufactured by its offshore parent. According to Carruthers, this is not the start of a full-scale re-emergence of HSBC as an investment manufacturer. The bank is merely testing the waters for its specialised funds (particularly in emerging markets). “HSBC is interested in bringing some of its global products into Australia – we’re gauging demand with the BRIC fund,” he says.
At a broader level HSBC is also looking internationally with its Premier brand and is pushing the bank’s cross-border facilities as a major selling point to its mass affluent clients. Premier operates in 35 countries now with clients able to treat any branch pretty much as a home office. As well, HSBC can, for instance, arrange a host of international financial services for the Premier clients. “For example, if an Australian Premier client wanted to refinance a French property, we can get Premier in France to handle it,” Carruthers says.
He says this “unique” global banking service is convenient for business clients and overseas travellers alike. It also enables Premier to keep its clients when they emigrate. In Australia, for example, almost 40 per cent of the Premier client base is sourced from the ex-pat community – most from the HSBC strongholds of the UK, Hong Kong and China. Despite offering full-blown private banking services in many other parts of the world, HSBC will content itself with Australia’s mass affluent for now, Carruthers says.
The prospect of a high-end private bank launching in Australia “depends on the HSBC strategic plan”. “But we do get a number of disenchanted private bank clients coming across to Premier now,” he says.