Private banks widen net for affluent customers

Financial firms have realised that clients with HK$500,000 in liquid assets are worth cultivating with special services BANKING CLIENTS WHO are building their financial assets no longer need to worry about accumulating the magic figure of US$1 million to qualify as a high net-worth individual and secure the benefits from private banking services. Eager for growth, many financial institutions, including retail banks, are targeting the mass affluent, usually those with investable assets ranging from US$100,000 to US$1 million, as an attractive market opportunity beyond the traditional focus on ultra-high net-worth and high net-worth (HNW) individuals. Retail banks that offer privileged service and benefits to HNW clients are realising that the customer with HK$500,000 of liquid assets today is worth cultivating in the hope they will have millions in the future. In Asia, where the growth of HNW individuals is among the fastest and biggest in the world, competition to manage these assets is increasing among private banking providers. William Leung, Hang Seng Bank general manager, personal financial services and wealth management, said that over the past few years retail banks had stepped up their wealth management offerings to include securities processing, portfolio management, multicurrency capabilities, trust services and estate planning. He said clients were increasingly using Hang Seng's investment products as part of their wealth management strategies, and as the bank expanded its products and services to clients in the HNW bracket, similar services were being offered to the mass affluent market. Demand in the mass affluent market is being generated by younger businesspeople who are focused on investing their wealth for growth and are prepared to take more risks. Mr Leung said the bank was looking for trusted partners with whom to build a relationship. This involved taking care of their day-to-day banking needs and providing investment solutions to achieve wealth creation. 'Our private banking service acts as a benchmark for our wide range of services designed to meet a customer's different needs. We are able to offer sophisticated products to both the high-end and mass affluent markets,' Mr Leung said. Hang Seng offers private banking services to HNW clients with more than HK$8 million in liquid assets. The bank also offers a range of privileges to clients with liquid assets of HK$500,000. Mr Leung said the idea was to attract emerging-wealth clients early in their affluence and build a close working relationship. 'When they get to the point where they need additional services, the relationship has been established. The rationale is very simple, if we don't look after them, another competitor will,' he said. As clients reached financial milestones they had the option to migrate to the next tier of Hang Seng's wealth management structure, where they were looked after by designated relationship managers. Mr Leung said one of the biggest challenges was not attracting clients, but finding and training enough qualified staff to service them. Because of the proliferation of investment choices, the work of wealth management employees was becoming more complex. 'Customers are becoming more demanding, so we have to make sure we have a well-trained talent pool that can provide solutions to meet their expectations,' Mr Leung said. Bruno Lee, HSBC head of wealth management, said wealth management depended on a customer's risk appetite and financial position. 'We don't want to give the impression we only target ultra-high net-worth individuals at the expense of anyone within our broad customer base.' Most investment options offered to Premier customers are also available to other banking clients. Exceptions would be structured products and private placement investments, which under the Securities and Futures Commission regulations require investors to have access to more than HK$1 million in liquid assets. Mr Lee said HSBC operated a none advisory wealth management business model that allowed clients to make their own investment choices. However, the firm had developed checking systems to help clients establish investment goals and match investment strategies that met their financial needs and risk appetites. 'Risk profiling is an important part of the investment process and something we rely on to develop long-lasting customer relationships,' Mr Lee said. Recently, the bank introduced a company-wide information system operated by frontline employees to provide consistency about different types of investment tool. Mr Lee said winning over wealth management customers reliant on objective information depended on whether a firm could convince them that it consistently acted in their best interest. He said the retail workstation available to frontline employees allowed them to provide clients with investment information that was reliable and consistent. 'A client can walk into any Hong Kong HSBC branch and they will be given the same facts and detailed information.' Information included fund and various investment choices, real- time stock market movements, interest rates and currency flows. Mr Lee said this type of information was previously only available to HNW clients. Arvind Sankaran, CitiGold's director of customer franchise, said the earlier that customers formed a relationship with the bank the more value it could add as clients increased their wealth. 'We are seeing a more commoditised approach to wealth management and the importance of a strong client and wealth management relationship should not be overlooked,' he said. CitiGold investment tools that comprised in-house and open architecture products underwent a stringent checking process before being recommended, he said. In addition to offering retail banking services, Citibank provided services to affluent customers for their total wealth management. Using a proprietary CitiGold Wealth Planner system helped the client define specific growth and investment goals. Mr Sankaran said clients often had financial priorities at the early stages of wealth accumulation, but lacked a structured plan. 'At a basic level we can help clients devise a simple programme of saving and investing to achieve designated goals. As investors accumulate wealth we can assist them with portfolio construction,' he said.