CompaniesApr 6 2016

HSBC rolls out simplified advice for smaller savers

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
HSBC rolls out simplified advice for smaller savers

The service is designed to provide advice for customers looking to invest single lump sums of between £15,000 and £100,000.

Customers qualify by having £50,000 or more of savings or investments - the point at which they normally move to Premier and Wealth banking.

The bank added that if the service is a success, it plans to make it more widely available later this year.

Pricing feature

HSBC Premier Financial Advice

Stand-alone Investment Advice

Report-only fee (Incl VAT)

£420

£294

Report & Implementation fee

Minimum charge

£960

£672

% charge

2.75%

1.93%

 

HSBC’s nod to the lower value end of the advice market follows the Treasury and Financial Conduct Authority report on the Financial Advice Market Review, which aimed to tackle to so-called ‘advice gap’ - referring to hose people who could benefit from advice but can’t afford it.

The report recommended various measures to encourage mass market savers and regulated advisers to reconnect, following their post-RDR split.

But Greg Heath, managing director at Derbyshire Booth Financial Management, pointed out that the annual management charge for the HSBC premier service is 2.75 per cent.

“Why pay that price when a fully qualified IFA with 25 years experience, who has access to the whole of the investment market and delivers a personal service, can do a better job for 0.75 to 1 per cent lower in charges?

“This illustrates the difference between IFA’s and banks who need to pay for complex and bureaucratic management systems and hence pay over the top for an average service.”

Douglas McCulloch, a premier client manager for HSBC, responded that the 2.75 or 1.93 per cent charge is potentially a one-off, not an annual fee. He added that there is no retainer or annual fee applied, other than the investment’s annual management charge, which would typically be 1.06 to 1.15 per cent.

The launch was backed by research from YouGov, conducted this month among 2,079 adults, which found that of investments made to-date in 2016, two thirds were arranged without any financial consultation.

Over half of respondents planning to make an investment during the remainder of the year are also unlikely to seek any advice, with almost a quarter of those asked feeling it was too expensive.

One in five adults in the UK has £15,000 or more to invest, but despite this HSBC argued there is currently a gap in the advice market where customers who have smaller amounts of money cannot access the appropriate advice.

Caroline Connellan, head of UK wealth and premier banking at HBSC, said full financial advice is a core offering and right for many customers, but others want quicker, lower cost advice for relatively simple needs.

“With many people keeping their long-term savings in cash, it seems there is a real need for advice - and it’s why we’re excited to introduce Stand-alone Investment Advice.”

When asked why financial advice is not used, after the quarter that said it was too expensive, one in ten found it too difficult to know where to source advice and a further one in ten admitted to just having not thought about it before.

When advice is sought, people are still securing information from traditional sources, with advisers (36 per cent), banks (24 per cent) and building societies (15 per cent) recognised as three key destinations.

However, people are increasingly turning to family and friends for advice, with one in five discussing options with parents and one in ten getting guidance from their friends. In addition, people are taking direction from online sources such as financial websites (34 per cent), three times more popular than personal finance pages in newspapers (11 per cent).

The data also showed trends between young and older financial investors. Three quarters of all 18-34 year olds plan to seek advice before making an investment, compared to just two fifths of those over 45 years old. One in four 18-24 year olds seek advice from friends, compared to just 5 per cent of those over 55.

peter.walker@ft.com