Pension freedoms have turned the saving and investment industry upside down over the past 12 months, and HSBC is one of many institutions planning to make the most of it.
The chief executive of HSBC Global Asset Management tells Melanie Tringham he sees great change ahead for the industry, but remains coy about the firm’s soon-to-be-launched retirement product.
Andy Clark, chief executive of HSBC Global Asset Management, said: “We have to be aware that people will have defined contribution pension money to invest. We can supply the building blocks that people can invest in.
“For people investing over the next 20 or 30 years, they want something simple and fairly priced. There’s a level of suspicion about wealth managers and pension managers, they have to feel they’re getting excellent value for money.”
As a consequence of the new freedoms, HSBC is launching its own retirement product in September, although Mr Clark will not say much about it at this stage.
He said: “No one’s come up with the accumulation and decumulation all in one product. I have a fear that it doesn’t exist.”
He is worried about the emergence of very complicated products. He said: “I have known products that have come and gone, but it’s about transparency, that people can understand what they’re buying into.
“For us, we want to help investors on that journey with something that is simple, transparent and easy to understand. It’s going to be a very big opportunity, but it’s a very sensitive client group, and as it grows we need to be very comprehensive.”
HSBC Global Asset Management is spread across the range of asset classes. It offers passives – ETFs and trackers – fixed income, multi-asset, with 75 per cent invested in active and 25 per cent in passive, although this is influenced by the services to the institututional market.
Mr Clark has seen a dramatic increase in the passive sector on the retail side, with particular interest in ETFs. The company cut its index pricing in 2009, and it has launched a number of ETFs in recent years.
No one’s come up with the accumulation and decumulation all in one productHe said: “The passive debate is huge and will end up driving down the cost of active. There has to be a process where you have to pay for funds, but I think the industry will come down, and we have to understand that the competition is there.
“There is this middle ground where you have an average-performing fund – it’s benchmark-hugging and charging 1.5 per cent, that’s where the pressure point is felt.
“There are some really clever funds and there’s a price to pay. I don’t think the industry overcharges. It’s like in any industry, as you get more choices and more options, prices come down.”
But as the industry adapts to the changes brought about by pension freedoms, and fund managers start to move into the life offices’ territory, so we will see life offices changing.
Mr Clark said: “The industry will look very different in 10 years’ time. It’s a huge growth industry. I just think the winners and losers will be very different. Those with a large capital base and large distribution will do very well, and there is a place for small boutique operations.
“There’s some big shifts we have to be on the right side of. Developing relationships with clients is the key to the market, and partnering with platforms and big providers – working together to keep costs down, that will be the shift that gradually happens.
“There are not enough key clients to go around – if you’re a large insurance company, you will be increasingly looking at being a little more selective about who you partner with. Do you want 80 group fund relationships or do you want 10 really good ones?
“Open architecture was really good but the amount of choice can create costs and confusion.”
Mr Clark is a stockbroker by background – he started out at Barclays de Zoete Wedd before moving to Fidelity to be sales director. After launching and then selling DWS Investments, part of Deutsche Bank, into the UK retail market, he then became head of UK retail at HSBC Global asset management before eventually becoming chief executive of the UK Asset Management business in 2011.
While Mr Clark and his colleagues have been beavering away figuring out the new landscape, they cannot ignore the bigger picture of the troubles that HSBC has endured, namely the fine it received to settle money-laundering allegations involving Latin American drug cartels and countries under US sanctions. The bank was also hit with tax evasion allegations in its Swiss private banking arm.
All Mr Clark will say on the issue is: “Clients haven’t withdrawn money.”
But his main focus is positioning the business to take advantage of the changing shape of the retirement industry. He said: “I’m really passionate about the fact that investments are a good thing, and making sure people engage with and understand what they’re buying. I’m seeing so many complicated products and confused clients.
“If you have to sell something really hard, you have to question whether it meets the creiteria. From an integrity point of view, are you able to demonstrate to the end consumer exactly what he’s buying?”
Melanie Tringham is features editor of Financial Adviser
2013 to present Chief executive, HSBC Global Asset Management UK
2011 Became regional head of wholesale, Emea
2008 Given additional responsibility for wholesale distribution in MENA region as well as UK
2005 rejoined HSBC Global Asset Management, head of UK Retail
2002 Deutsche Bank - launched DWS Investments into UK retail market, sold to Aberdeen in 2005
1998 Fidelity Sales director
1995 HSBC Asset Management, Head of UK intermediary sales
1992 Henderson south west sales manager
1989 Barclays de Zoete Wedd, dealer and advisory broker
