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Premium and Mass Affluent Banking - UK - November 2014

“While transactional banking is shifting towards digital channels, the desire for superior personal contact remains strong among the mass affluent segment. The nature of branches is changing and banks targeting the affluent market need to distinguish themselves by offering premium customer service at both branches and call centres in addition to their existing multichannel strategy.”
– Chryso Kolakkides, Senior Financial Services Analyst

This report looks at the following areas:

  • Balancing premium ‘bricks and clicks’ for the mass affluent
  • First Direct demonstrates the power of good service

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Table of contents

  1. 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

                                                                                                                                                                                                                Companies Covered

                                                                                                                                                                                                                • Abbey
                                                                                                                                                                                                                • Adam & Company
                                                                                                                                                                                                                • Alliance & Leicester
                                                                                                                                                                                                                • Automobile Association (AA)
                                                                                                                                                                                                                • AXA UK plc
                                                                                                                                                                                                                • Banco de Sabadell, S.A.
                                                                                                                                                                                                                • Barclays Bank plc
                                                                                                                                                                                                                • Bradford & Bingley plc
                                                                                                                                                                                                                • BT Group plc
                                                                                                                                                                                                                • Cater Allen Ltd
                                                                                                                                                                                                                • Citibank
                                                                                                                                                                                                                • Citigroup Inc.
                                                                                                                                                                                                                • Citigroup Private Bank
                                                                                                                                                                                                                • Coutts & Co
                                                                                                                                                                                                                • Financial Times Group
                                                                                                                                                                                                                • First Direct
                                                                                                                                                                                                                • Google, Inc.
                                                                                                                                                                                                                • Grupo Santander Central Hispano S.A.
                                                                                                                                                                                                                • Halifax Mortgage Services
                                                                                                                                                                                                                • HSBC Holdings plc
                                                                                                                                                                                                                • ING Direct
                                                                                                                                                                                                                • Lloyds Banking Group
                                                                                                                                                                                                                • London Stock Exchange plc
                                                                                                                                                                                                                • Marks & Spencer
                                                                                                                                                                                                                • NatWest
                                                                                                                                                                                                                • Post Office Limited
                                                                                                                                                                                                                • Royal Bank of Scotland Group plc
                                                                                                                                                                                                                • Scottish Widows Bank plc
                                                                                                                                                                                                                • Ulster Bank Ltd

                                                                                                                                                                                                                Premium and Mass Affluent Banking - UK - November 2014

                                                                                                                                                                                                                £1,995.00 (Excl.Tax)