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Premium and Affluent Banking - UK - September 2011

“Although the quality of products and services attached to premium and affluent level accounts are likely to improve considerably due to an increased focus on high-end customers, generating new business over the near-term will be challenging because of a reduction in the pool of qualified customers.”

– George Zaborowski, Senior Financial Services Analyst

In the near-term, the providers of premium and affluent banking products and services face a number of significant challenges. At the time of writing the financial services industry has taken another hit to its already considerably damaged reputation in the form of UBS’s $2.3 billion trading scandal. What’s more, in late September the Independent Commission on Banking (ICB) revealed a number of proposals that could add another £4bn to £7bn to banks’ annual costs.

The report also provides a through overview of the products and services offered by the biggest players in premium and affluent banking and also highlights how the current economic environment and regulatory changes will impact the market going forward. In the final sections of the report Mintel reveals the findings of its exclusively commissioned consumer research on premium and affluent banking.

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Table of contents

  1. Introduction

      • Abbreviations
        • Key sources
        • Executive Summary

            • The market
              • 15% of population say they are in the target wealth market
                • Figure 1: Size and segmentation of the target wealth market based on investible assets*, July 2011
              • Three fifths of the key target market use standard accounts
                • Figure 2: Main account used for daily account management, by account type and target wealth market, July 2011
              • Private banking revenue remains level
                • Channels to market
                  • Figure 3: Use of banking channels, April 2011
                • Market factors
                  • Economic malaise hindering growth potential
                    • Clients have become more discerning
                      • Changes on the high street could lead to more focus on high-end customers
                        • Changes in the tax system have moved tax advice up the list of priorities
                          • Companies, brands and innovation
                            • More than half of all high earners bank with Lloyds or RBS
                              • Figure 4: Share of main current account holder customer base, by household income, April 2011
                            • Barclays Wealth and Coutts & Co control 20% of UK assets under management
                              • Brand communication and promotion
                                • The consumer
                                  • Asset ownership
                                    • Account ownership
                                      • What we think
                                      • Issues in the Market

                                          • Who are the premium and affluent target market?
                                            • How can providers get more of the target market to upgrade?
                                              • How will the ICB’s proposals impact the market?
                                                • What are the favoured account management channels for the affluent?
                                                  • How has affluent customer behaviour been altered by the financial crisis?
                                                  • Future Opportunities

                                                    • Stealth exclusivity
                                                      • Keeping clients connected in a virtual world 
                                                      • Internal Market Environment

                                                        • Key points
                                                          • Affluent banking industry having a hard time shaking its image problem
                                                            • Changes on the high street
                                                              • Bank regulation
                                                                • Increased focus on the high-end customer base
                                                                  • Risk aversion will urge banks to seek out good credit risks
                                                                    • The target wealth market are not upgrading their accounts
                                                                      • Figure 5: Main account used for daily account management, by account type and target wealth market, July 2011
                                                                    • Summary of tax changes affecting the wealthy
                                                                    • Broader Market Environment

                                                                      • Key points
                                                                        • Persistent uncertainty holding back the UK economic recovery
                                                                          • The squeeze on incomes expected to lessen in 2012
                                                                            • Figure 6: Monthly change in RPI and average weekly earnings, 2005-August 2011
                                                                          • Consumer confidence remains depressed
                                                                            • Figure 7: GfK NOP Consumer Confidence Index, May 2005-May 2011
                                                                          • The impact on the premium and affluent banking market
                                                                          • Swot

                                                                              • Figure 8: Premium and affluent banking – SWOT analysis, 2011
                                                                          • Who’s Innovating?

                                                                            • Key points
                                                                              • Private banks linking lending rates to amount of client investments
                                                                                • Investec £1 million plus mortgages
                                                                                  • Exclusive iPad app from Barclays Wealth
                                                                                    • Coutts getting in touch with social media
                                                                                      • Private banks innovating in their pursuit of world’s top sports stars
                                                                                      • Market Size

                                                                                        • Key points
                                                                                          • Premier banking services
                                                                                            • Three fifths of the target wealth market use standard accounts
                                                                                              • Figure 9: Main account used for daily account management, by account type and target wealth market, July 2011
                                                                                            • Premier account ownership highest among Mass Market/Aspirational
                                                                                              • Figure 10: Type of account used for daily account management, by level of investible assets, July 2011
                                                                                            • Private banking services
                                                                                              • Private banking revenue stagnating
                                                                                                • Figure 11: Total private banking revenue*, 2006-10
                                                                                              • Changes in regulatory and tax environment help overall revenue growth
                                                                                                • Figure 12: Proportion of private banking revenue, by stream, 2009 and 2010
                                                                                            • Market Share

                                                                                              • Key points
                                                                                                • Over half of all high earners bank with Lloyds or RBS
                                                                                                  • Figure 13: Share of main current account holder customer base, by household income, April 2011
                                                                                                  • Figure 14: Share of main packaged account holder customer base, by banking group, April 2011
                                                                                                • Barclays Wealth and Coutts & Co control a fifth of UK assets under management
                                                                                                  • Figure 15: 25 largest wealth managers, by assets under management – UK, December 2010
                                                                                              • Companies and Products

                                                                                                • Premier banking
                                                                                                  • Barclays Premier
                                                                                                      • Figure 16: Barclays’ premium current account range
                                                                                                      • Figure 17: Key financial data for Barclays Plc (UK Retail Banking Division), 2009 and 2010
                                                                                                    • HSBC Premier
                                                                                                      • Figure 18: HSBC’s premium packaged current account
                                                                                                      • Figure 19: Key financial data for HSBC (UK Retail Banking division), 2009 and 2010
                                                                                                    • RBS/NatWest Private Banking
                                                                                                        • Figure 20: RBS/NatWest’s premium packaged current account
                                                                                                        • Figure 21: Key financial data for RBS Group (UK Retail Banking Division), 2009 and 2010
                                                                                                      • Lloyds Banking Group
                                                                                                          • Figure 22: Lloyds Banking Group premier current account
                                                                                                          • Figure 23: Key financial data for Lloyds Banking Group (Retail Division), 2009 and 2010
                                                                                                        • Santander
                                                                                                            • Figure 24: Santander’s premier current account
                                                                                                            • Figure 25: Key financial data for Santander UK (Retail Banking Division), 2009 and 2010
                                                                                                          • Private banking
                                                                                                            • Barclays Wealth Private Banking
                                                                                                              • Coutts & Co
                                                                                                                • UBS Wealth Management
                                                                                                                  • HSBC Private Bank
                                                                                                                    • Goldman Sachs Private Banking
                                                                                                                      • St James’s Place Wealth Management
                                                                                                                        • Lloyds TSB Private Banking
                                                                                                                          • JPMorgan Private Bank
                                                                                                                          • Brand Communication and Promotion

                                                                                                                            • Key points
                                                                                                                              • HSBC top advertiser of premium accounts
                                                                                                                                • Figure 26: Top five advertisers of packaged/premium accounts, 2009-11
                                                                                                                              • Premium accounts mainly promoted via press and TV adverts
                                                                                                                                • Figure 27: Share of advertising expenditure on packaged/premium accounts, by media type, 2011
                                                                                                                              • Private banking and asset management adspend falls by a fifth
                                                                                                                                • Figure 28: Top 20 advertisers of asset management and private banking, 2009-11
                                                                                                                              • More than two thirds of private banking adspend is via press ads
                                                                                                                                • Figure 29: Proportional distribution of adspend on private banking and asset management, by media type, 2011
                                                                                                                              • Sponsorships frequently used to promote private banking
                                                                                                                                • Note about NMR data
                                                                                                                                • Channels to Market

                                                                                                                                  • Key points
                                                                                                                                    • Bank branch and online banking the key account management channels
                                                                                                                                      • Figure 30: Use of banking channels, April 2011
                                                                                                                                    • A third of high earners managing finances via mobile online banking
                                                                                                                                    • Size and Profile of the Target Wealth Market

                                                                                                                                      • Key points
                                                                                                                                        • In 2011 15% of population say they are in the target wealth market
                                                                                                                                          • Figure 31: Size and segmentation of the target wealth market based on investible assets*, July 2011
                                                                                                                                        • 4.2 million adults own investible assets worth £100K or more
                                                                                                                                          • Figure 32: Distribution of investible assets among the UK population, 2011
                                                                                                                                        • Affluent over-55s highly represented in the target wealth market
                                                                                                                                          • Figure 33: Target wealth groups, by demographics, July 2011
                                                                                                                                        • Investible assets more important than income for private banks
                                                                                                                                          • Figure 34: Target wealth groups, by demographics, July 2011
                                                                                                                                        • High concentration of wealth in the southern part of the country
                                                                                                                                        • Account Ownership

                                                                                                                                          • Key points
                                                                                                                                            • Account ownership and target wealth markets
                                                                                                                                              • Figure 35: Type of account used for daily account management, by level of investible assets, July 2011
                                                                                                                                            • Financial product ownership by main account type
                                                                                                                                              • Figure 36: Financial product ownership, by main account used for managing day to day finances, July 2011
                                                                                                                                            • Profile of an affluent standard account owner
                                                                                                                                              • Profile of an affluent packaged account owner
                                                                                                                                                • Profile of an affluent premier banking customer
                                                                                                                                                • Asset Ownership

                                                                                                                                                  • Key points
                                                                                                                                                    • Positive link between level of wealth and diversity of assets owned
                                                                                                                                                      • Figure 37: Asset ownership, by level of investible assets, July 2011
                                                                                                                                                    • Asset ownership levels increase with age
                                                                                                                                                      • Figure 38: Asset ownership, by gender and age, July 2011
                                                                                                                                                    • Influence of socio-economic status and income on asset ownership
                                                                                                                                                      • Figure 39: Asset ownership, by socio-economic group and gross annual household income, July 2011
                                                                                                                                                  • Targeting Opportunities

                                                                                                                                                    • Key points
                                                                                                                                                      • Well informed knowledgeable staff top the list of must-haves
                                                                                                                                                        • Figure 40: Important attributes when choosing a financial services provider, July 2011
                                                                                                                                                      • Key target groups
                                                                                                                                                        • Figure 41: Premium and affluent banking target groups, July 2011
                                                                                                                                                      • Specialised Expertise
                                                                                                                                                        • Uncomplicated
                                                                                                                                                          • Value for Money
                                                                                                                                                            • Complete Package
                                                                                                                                                                • Figure 42: Important attributes when choosing a financial services provider, by target groups, July 2011
                                                                                                                                                              • A quarter of the Uncomplicated have £250K or more in investible assets
                                                                                                                                                                • Figure 43: Size and segmentation of the target wealth market based on investible assets, by target groups, July 2011
                                                                                                                                                              • Those with straightforward demands using standard accounts
                                                                                                                                                                • Figure 44: Account used for managing day-to-day finances, by target groups, July 2011
                                                                                                                                                              • Still room for growth
                                                                                                                                                                • Target groups and asset ownership
                                                                                                                                                                  • Figure 45: Asset ownership, by target groups, July 2011
                                                                                                                                                              • Appendix – Brand Communication and Promotion

                                                                                                                                                                  • Figure 46: Advertising expenditure on packaged/premium accounts, by company and media type, 2011
                                                                                                                                                                  • Figure 47: Advertising expenditure on private banking and asset management, by company and media type, 2011
                                                                                                                                                              • Appendix – Size and Profile of the Target Wealth Market

                                                                                                                                                                  • Figure 48: Size and segmentation of the target wealth market based on investible assets, by demographics, July 2011
                                                                                                                                                                  • Figure 49: Size and segmentation of the target wealth market based on investible assets, by demographics, July 2011
                                                                                                                                                              • Appendix – Account Ownership

                                                                                                                                                                  • Figure 50: Account used for managing day-to-day finances, by demographics, July 2011
                                                                                                                                                              • Appendix – Asset Ownership

                                                                                                                                                                  • Figure 51: Most popular financial product ownership, by demographics, July 2011
                                                                                                                                                                  • Figure 52: Next most popular financial product ownership, by demographics, July 2011
                                                                                                                                                              • Appendix – Targeting Opportunities

                                                                                                                                                                  • Figure 53: Important attributes when choosing a financial services provider, by target groups, July 2011
                                                                                                                                                                  • Figure 54: Target groups, by demographics, July 2011
                                                                                                                                                                  • Figure 55: Most popular attributes when choosing a financial services provider, by demographics, July 2011
                                                                                                                                                                  • Figure 56: Next most popular attributes when choosing a financial services provider, by demographics, July 2011

                                                                                                                                                              Companies Covered

                                                                                                                                                              • Aberdeen Asset Management PLC
                                                                                                                                                              • Alliance & Leicester
                                                                                                                                                              • Bank of New York Mellon Corporation, The
                                                                                                                                                              • Barbican Centre
                                                                                                                                                              • Barclays Bank plc
                                                                                                                                                              • BNP Paribas
                                                                                                                                                              • Bradford & Bingley plc
                                                                                                                                                              • Brewin Dolphin Holdings PLC
                                                                                                                                                              • Cater Allen Ltd
                                                                                                                                                              • Charles Stanley Group plc
                                                                                                                                                              • Clydesdale Bank
                                                                                                                                                              • Collins Stewart Tullett plc
                                                                                                                                                              • ComPeer Limited
                                                                                                                                                              • Coutts & Co
                                                                                                                                                              • Credit Suisse First Boston LLC
                                                                                                                                                              • Deutsche Bank AG
                                                                                                                                                              • EFG Bank
                                                                                                                                                              • Financial Services Authority (The)
                                                                                                                                                              • Goldman Sachs Group, Inc., The
                                                                                                                                                              • Grupo Santander Central Hispano S.A.
                                                                                                                                                              • Hargreaves Lansdown Plc
                                                                                                                                                              • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                              • HSBC Private Bank (UK) Limited
                                                                                                                                                              • Investec
                                                                                                                                                              • JM Finn & Co
                                                                                                                                                              • Jupiter Unit Trust Managers Ltd
                                                                                                                                                              • Lloyds Banking Group
                                                                                                                                                              • Merrill Lynch (UK)
                                                                                                                                                              • National Australia Bank
                                                                                                                                                              • National Savings & Investments
                                                                                                                                                              • NatWest
                                                                                                                                                              • Rathbones Brothers Plc
                                                                                                                                                              • Royal Bank of Scotland Group plc
                                                                                                                                                              • SEB S.A.
                                                                                                                                                              • Société Générale Group
                                                                                                                                                              • St James' Place Plc
                                                                                                                                                              • UBS Wealth Management UK Ltd
                                                                                                                                                              • Ulster Bank Ltd
                                                                                                                                                              • Virgin Money
                                                                                                                                                              • Yorkshire Bank PLC

                                                                                                                                                              Premium and Affluent Banking - UK - September 2011

                                                                                                                                                              £1,750.00 (Excl.Tax)