Premium and Mass Affluent Banking - UK - November 2014

INTRODUCTION
Report scope and definitions
Abbreviations
Key sources
EXECUTIVE SUMMARY
The market
Mass affluent consumers account for 7.5% of the adult population
Figure 1: The UK wealth pyramid, based on ownership of investible assets* (excluding housing equity), 2014
Market factors
Introduction of CASS has turned all eyes on standard current accounts
Impact of the RDR
A degree of optimism is returning to the UK wealth management sector…
…and among investors
Companies, brands and innovation
Major high street bank brands dominate the mass affluent sector
Limited product innovation in the mass affluent banking sector
25% growth in total adspend on banking products and services in 2013/14
Multichannel distribution mix
Figure 2: Channels used to access current accounts, July 2014
The consumer
Profile of the wealth target market
Figure 3: Segmentation of the wealth target market, by value of investible assets (wealth tier), July 2014
Less than a quarter of the mass affluent have a premium bank account
Figure 4: Type of current account owned, July 2014
45% of the wealth target market have never switched their current account
Figure 5: Current account switching behaviour, July 2014
Only 4% plan to switch in the next 12 months
Figure 6: Current account switching intentions, July 2014
Reasons for overlooking premium accounts
Figure 7: Reasons for overlooking premium accounts, July 2014
Appealing features of premium accounts
Figure 8: Appealing features of premium or private bank accounts, July 2014
What we think
ISSUES AND INSIGHTS
Balancing premium ‘bricks and clicks’ for the mass affluent
The facts
The implications
First Direct demonstrates the power of good service
The facts
The implications
TREND APPLICATION
Make It Mine
Return to the Experts
Life Hacking
MARKET DRIVERS
Key points
Higher earners enjoy a greater level of confidence
Figure 9: How respondents would describe their financial situation, by gross annual household income, September 2014
Figure 10: Current financial situation compared to a year ago, by gross annual household income, September 2014
A degree of optimism is returning to the UK wealth management sector
Opportunities to help affluent consumers to expand their investment portfolio
Figure 11: Affluent consumers’ saving and investment plans over the next 12 months, July 2014
Retirement advice will be a priority for affluent consumers
Figure 12: Consumers’ saving and investment priorities over the next 12 months, July 2014
Introduction of CASS has turned all eyes on standard current accounts
Figure 13: Consumer awareness of the Current Account Switch Services, by gross annual household income, May 2014
Impact of the RDR
Wealth managers and private banks behind in their compliance
UK banks leaving the advice market…but will they return?
How are consumers affected?
FCA targets wealth managers and private banks with new division
WHO’S INNOVATING?
Key points
Technology advances in the mass affluent sector
From voice recognition technology…
…to finger vein authentication technology
Banks introducing Wi-Fi in branches
US banks using PFM tools to attract the mass affluent: grounds for inspiration for the UK?
MARKET SIZE
Key points
Total target market covers 13% of the UK adult population
Figure 14: The UK wealth pyramid, based on ownership of investible assets* (excluding housing equity), 2014
Mass affluent consumers account for 7.5% of the adult population
Only 23% of mass affluent consumers have a premium account
Figure 15: Type of current account owned, by wealth tier, July 2014
MARKET SHARE
Key points
Major high street bank brands dominate the mass affluent sector
Figure 16: Main current account provider, by segmentation of the wealth market, July 2014
First Direct shows the value of service to premium customers
Multiple current account ownership among the more affluent
Figure 17: Provider of main current account and other/secondary accounts, July 2014
Coutts and Barclays Wealth lead the way in the UK wealth management sector
Figure 18: Top 15 wealth managers, by assets under management (AUM) and number of client accounts, UK, 2012 and 2013
COMPANIES AND PRODUCTS
Barclays
Company description
Branch network
Mass retail proposition
Premium proposition for the mass affluent
Private banking for HNW
Recent financial performance
Figure 19: Key annual financial data for Barclays Plc, 2012 and 2013
Recent activity
Citibank
Company description
Branch network
Premium proposition for the mass affluent
Private banking for HNW
Recent financial performance
Figure 20: Key annual financial data for Citigroup’s Global Consumer Banking division and EMEA Regional Consumer Banking, 2012 and 2013
Recent activity
HSBC
Company description
Branch network
Mass retail proposition
Premium proposition for the mass affluent
Private banking for HNW
Recent financial performance
Figure 21: Key annual financial data for HSBC Bank Plc, 2012 and 2013
Recent activity
Lloyds Banking Group
Company description
Branch network
Mass retail proposition
Premium proposition for the mass affluent
Private banking for HNW
Recent financial performance
Figure 22: Key annual financial data for Lloyds Banking Group, 2012 and 2013
Recent activity
RBS Group
Company description
Branch network
Mass retail proposition
Premium proposition for the mass affluent
Private banking for HNW
Recent financial performance
Figure 23: Key annual financial data for RBS Group, 2012 and 2013
Recent activity
Santander
Company description
Branch network
Mass retail proposition
Private banking for HNW
Recent financial performance
Figure 24: Key annual financial data for Santander UK, 2012 and 2013
Recent activity
BRAND COMMUNICATION AND PROMOTION
Key points
25% growth in total adspend on banking products and services in 2013/14
Figure 25: Total advertising expenditure on banking and asset management products and services, by product category, 2009/10-2013/14
Lloyds Bank takes the lead in advertising expenditure
Figure 26: Top five advertisers of packaged/premium accounts and mass-market wealth management services, 2009/10-2013/14
TV and press advertising dominate the packaged, premium and mass affluent banking market
Figure 27: Share of advertising expenditure on packaged/premium accounts and mass-market wealth management, by media type, 2011/12-2013/14 (12 months to 31 July)
A note on adspend
CHANNELS TO MARKET
Key points
Mass affluent customers desire multiple access points…
Figure 28: Channels used to access current accounts, July 2014
…and hence a multichannel solution
Having an extensive branch network remains an advantage
Figure 29: Approximate number of branches operated, by top five retail banking groups, 2012 and 2013
PROFILE ANALYSIS OF THE WEALTH TARGET MARKET
Key points
Survey background
Segmenting respondents according to wealth
Figure 30: Segmentation of the wealth target market, by value of investible assets (wealth tier), July 2014
Demographic profile of the wealth target market
Figure 31: Demographic profile of wealth target market, by wealth tier, July 2014
The wealth target market is not homogeneous
Saving and investment product ownership across wealth tiers
Figure 32: Ownership of savings and investment products, by wealth tier, July 2014
CURRENT ACCOUNT OWNERSHIP
Key points
Less than a quarter of the mass affluent have a premium bank account
Figure 33: Type of current account owned, July 2014
Figure 34: Type of current account owned, by wealth tier, July 2014
The need to reach people who do not feel ‘rich’
Multiple account ownership among the more affluent
Figure 35: Type of current account owned, by top three most popular types of account, July 2014
25-44-year-olds most likely to own a premium account
Figure 36: Type of current account owned, by age, July 2014
Premium account holders are most likely to be customers of Barclays or HSBC
Figure 37: Main current account provider, by type of current account owned, July 2014
CURRENT ACCOUNT SWITCHING BEHAVIOUR
Key points
45% of the wealth target market have never switched their current account
Figure 38: Current account switching behaviour, July 2014
Similar switching behaviour observed across the wealth tiers
Figure 39: Current account switching behaviour, by wealth tier, July 2014
Half of over-65s have never switched accounts
Figure 40: Current account switching behaviour, by age, July 2014
Packaged account holders are more likely to have switched
Figure 41: Current account switching behaviour, by type of account held, July 2014
CONSUMER INTENTIONS REGARDING SWITCHING
Key points
Only 4% plan to switch in the next 12 months
Figure 42: Current account switching intentions, July 2014
Figure 43: Current account switching intentions, by wealth tier, July 2014
Previous switchers are more likely to consider switching again
Figure 44: Current account switching intentions, by past switching behaviour, July 2014
Premium or private account holders least likely to switch in the future
Figure 45: Current account switching intentions, by type of current account, July 2014
REASONS FOR OVERLOOKING PREMIUM ACCOUNTS
Key points
More than two in five affluent consumers are happy with their existing current account
Figure 46: Reasons for overlooking premium accounts, July 2014
Figure 47: Reasons for overlooking premium accounts, by wealth tier, July 2014
8% have never looked into premium or private accounts
More than a third of affluent adults are not willing to pay for current accounts
Some affluent consumers cannot see the value of fee-charging accounts
APPEALING FEATURES OF PREMIUM ACCOUNTS
Key points
Affluent consumers consider travel benefits most appealing
Figure 48: Appealing features of premium or private bank accounts, July 2014
Preferential access to bank staff valued particularly by frequent users of in-branch counter services
Figure 49: Appealing features of premium or private bank accounts, by frequency of in-branch counter services usage, July 2014
Premium features considered appealing even among non-fee-charging current account holders
Figure 50: Appealing features of premium or private bank accounts, by type of current account held, July 2014
A risk of accusations of mis-selling
Little disparity across the wealth tiers
Figure 51: Appealing features of premium or private bank accounts, by wealth tier, July 2014