The Australian, Wealth
INTERNATIONAL banks are targeting the Australian market to provide high-end private banking services that don’t necessarily involve mortgages.
Both HSBC and Citibank have launched private banking packages: Premier and Citigold, respectively. They have less stringent requirements than the local so-called private retail banks, but are nevertheless aimed at wealthy people.
British banking group HBOS is also building its share of the local market through its BankWest brand, which is expanding on the east coast and offers private banking.
Meanwhile, Standard Chartered last July launched a private bank package targeting the 100,000 or so Australian expats working in Asia.
In the past, most retail banks offered what they called a “private bank”. But what they offered was simply a premium retail banking service, born from serving people with large mortgages — rather than the exclusive private banking known in Europe or the US. And while global private banks are already established in Australia, they have tended to offer wealth-management services and no retail banking.
According to the Cap Gemini Consulting/Merrill Lynch World Wealth report, there are more than 160,000 people in Australia with investable assets of more than $US1 million in Australia. But there are many more people with $100,000 or more outside their family home to invest.
“We think there are close to two million affluent Australians,” says Suvrat Saigal, director of wealth management for Citibank.
“And for these affluent Australians in the market today, outside of Citigold and Premier, they do not have a product that caters to them — unless they take a mortgage.
“We do not want a me-too service which builds on the mortgage. We want to take a fresh approach based on what these people are looking for.”
Most private retail banks require an income of about $250,000 and/or $1 million in investable assets outside the family home. It usually costs up to $750 a year for the privilege. HSBC Premier is open to anybody with either over $200,000 in investments or a mortgage of $500,000-plus.
It costs $35 a month. Its online banking offers a world view of multi-currency accounts and borrowings on one screen, and is available in some 35 countries.
CitiGold is open to anybody who has more than $100,000 invested. For that there are no fees on everyday transaction banking or using ATMs. Clients get a fee-free platinum card for one year, or totally without fees to those with over $1 million invested.
“There is no overt cost to the service. We don’t charge an annual fee for the service.
“Any cost is either built in to the product or product specific,” says Citibank’s Saigal.
All the international banks offer the standard financial planning and wealth management options and generous discounts on mortgages for their premium clients. Standard Chartered also offers products such as multi-currency mortgages and hedging for overseas property investments. “Even in private banking in Australia, there is a lot of high-end retail going on,” says Peter Flavel, global head of The Standard Chartered Private Bank.
He says the banks are segmenting their customers, depending on their wealth, offering different levels of client management.
While mum-and-dad banking clients are relegated to a call centre, the first tier of premium clients is allocated a relationship manager who may look after 300 to 500 customers. The next tier up is private banking, where the ratio is usually 75 to 150 clients for each manager, and greater wealth gets more attention.
HSBC doesn’t have a private bank in Australia but allocates wealthy clients to Premier. Graham Heunis, head of retail banking for HSBC Australia, says that client managers will look after between 70 and 300 clients, depending on their needs and the wealth invested with the bank.
“I think one of the business challenges of private banks, particularly the domestic private banks (who are probably a premium banking service rather than a private banking service), is that they have tried to sweat the costs and they have increased portfolio sizes,” he says.
“Of course, if you are doing that without adding additional resources you do dilute the service proposition. What we’ve seen globally is a general movement toward greater differentiation between segments.
“There’s a greater differential between the mum and dad and the private banking/premier segment.”
He says that outside Australia, banking has globalised. “There are a lot more people who are internationally inclined, either frequent travellers on business or working offshore. HSBC is feeding off the combination of the ‘premiumatisation’ of banking and the global trends.”
While baby boomers are the current target for many wealth managers, HSBC sees the future in the next generation.
Heunis says that the children of baby boomers tend to be more globally oriented than the older generations: they travel more and are more likely to work overseas.
Standard Chartered has recognised this trend with its offering.
Flavel says: “We looked at the Australians and saw that there are 55,000 across the markets of Singapore, Hong Kong and in Dubai. The thing that’s happening with Australian executives, in particular, is that they are staying longer offshore.”
He says that means financial and wealth planning is no longer something expats leave until they are about to return home to Australia. “Rather they need long-term wealth-management planning while they are offshore,” he says.