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The UK Premium and Mass Affluent Banking Market - September 2012

Some questions answered in this report include:
  • What is mass affluent banking?
  • What is the sector worth?
  • How successful are banking providers at reaching the mass affluent audience?
  • How can banks improve their mass affluent propositions?
  • What impact could the RDR have on this market?

The ‘mass affluent’ represent an important target market for the retail banks, with several offering ‘premium’ products and services designed specifically for this moderately wealthy demographic. Offering a premium or lower-entry private bank account not only helps to reach these more profitable individuals, but also acts as a useful gateway product, through which other products and services can be channelled. Sounds simple in principle, and yet Mintel’s research reveals that a large proportion of mass affluent adults in the UK do not have a premium or private bank account. In addition, some banks seem to be more proactive than others at identifying and targeting mass affluent customers. This is partly because the mass affluent have a tendency to spread their assets across different institutions, making it more difficult to identify them, and partly because they are not a homogenous group.

In the UK, mass affluent individuals tend to be more mature (typically aged 45+), although they are not exclusively so. This wealthier segment of the population comprises a diverse range of people: from young entrepreneurs and high income earners, seeking to build their wealth, to income-poor but asset-rich retirees, who are seeking to maintain a good standard of living in retirement and/or tax-efficient ways of passing on wealth. Definitions and qualification criteria vary, but mass affluent individuals are typically categorised as having at least £100,000 in investable assets and, as such, have more complex financial needs and higher expectations of service than mass-market customers. Of course, offering a premium service means providing greater privacy and exclusivity, elements which require extra investment and resources. However, the benefits – higher profit margins and greater scope for product cross-selling and relationship management – far outweigh the additional cost. Indeed, research suggests that the mass affluent banking sector in the UK generates a return in the region of 25-35%.

By drawing on targeted consumer research, this report aims to learn more about mass affluent consumers, by answering a number of key questions: What is the size of the mass affluent population? Where do these wealthier individuals hold their main bank account, and how satisfied are they with their provider? What aspects do they most like about their main account provider? Why do such a large proportion of them not possess a premium or private bank account? How has their wealth level changed over the past year? And what are their financial goals and wealth expectations over the coming months? The report also includes an overview of the market’s current size and composition, and assesses its prospects for future growth.

What's Included in the UK Mass Affluent Banking Market Report?

The focus of this report is on premium banking services aimed at the mass affluent segment (eg HSBC Premier, Barclays Premier), although reference is made to other segments (eg mass retail and private banking) in order to provide context.

Although premium bank accounts typically come with additional services and benefits and may charge a fee (sometimes waived on meeting certain criteria), they should not be confused with standard fee-based packaged accounts for mass retail consumers (eg Lloyds TSB’s Silver, Gold and Platinum current accounts and RBS’ Royalties Gold account). The key difference between them is the qualification criteria. Packaged accounts are normally available to all customers for a fee, while premium bank accounts are usually only available to customers with a certain amount of investable assets and/or household income.

 

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Table of contents

  1. Introduction

      • Report scope
        • Wealth market segmentation
          • Figure 1: The UK wealth pyramid, based on ownership of investable assets (excluding housing equity), 2012
        • Abbreviations
          • Key sources
          • Executive Summary

              • The market
                • Size of the UK mass affluent population
                  • Market value
                    • Figure 2: Size of the UK wealth market, by sector assets under management, 2012
                  • Market turnover and profitability
                    • Figure 3: Size of the UK wealth market, by sector revenues and pre-tax profit, 2012
                  • Market factors
                    • Economic and investment environment
                      • Regulation
                        • Companies, brands and innovation
                          • Product innovation
                            • Leading players in the market
                              • Advertising activity
                                • Multichannel distribution mix
                                  • Figure 4: Frequency of using channel to access current account or other services, July 2012
                                • The consumer
                                  • Age profile and asset holdings of the mass affluent
                                    • Premium account penetration
                                      • Figure 5: Type of current account owned, by wealth tier, July 2012
                                    • Reasons for not having premium account
                                      • Owning a current account with rival banks is common
                                        • Satisfaction with main bank provider
                                          • Figure 6: Level of satisfaction with main current account provider, by wealth tier, July 2012
                                        • Top three provider attributes
                                          • Current financial situation, prospects and goals
                                            • What we think
                                            • Issues in the Market

                                                • What is mass affluent banking?
                                                  • What is the sector worth?
                                                    • How successful are banking providers at reaching the mass affluent audience?
                                                      • How can banks improve their mass affluent propositions?
                                                        • What impact could the RDR have on this market?
                                                        • Trend Application

                                                            • Highlight higher satisfaction levels to encourage more customers to upgrade to a premium account
                                                              • Develop tools to help customers monitor and meet their financial goals
                                                                • New mobile and smartphone capability is transforming the way we bank
                                                                • Market Drivers

                                                                  • Key points
                                                                    • Summary of the main macroeconomic indicators impacting on the banking sector
                                                                      • Economic uncertainty is encouraging the wealthy to be more cautious…
                                                                        • Figure 7: Impact of economic downturn and eurozone crisis on investment attitude/approach, by wealth tier, July 2012
                                                                      • …although a minority are looking for investment opportunities
                                                                        • HNW clients are more likely to reconsider advice options…
                                                                          • …and spread assets across a range of financial institutions
                                                                            • A round-up of key legislative and regulatory developments
                                                                              • FSA to be replaced
                                                                                • ICB recommends retail ring-fence
                                                                                  • Basel III and new capital requirements
                                                                                    • RDR impact
                                                                                      • Banking industry in the spotlight
                                                                                        • Summary of recent tax changes affecting the wealthy
                                                                                          • Cut in corporation tax
                                                                                          • Market SWOT Analysis

                                                                                              • Figure 8: Premium and mass affluent banking – SWOT analysis, 2012
                                                                                          • Who’s Innovating?

                                                                                            • Key points
                                                                                              • LBG and RBS restructure their wealth operations and plan to develop new propositions
                                                                                                • Barclays overhauls its packaged and premium offering
                                                                                                  • Citibank explores social media banking potential
                                                                                                    • Figure 9: Usage of social networking sites, by wealth tier, July 2012
                                                                                                • Market Size

                                                                                                  • Key points
                                                                                                    • The mass affluent account for nearly 6% of the UK adult population
                                                                                                      • Figure 10: The UK wealth pyramid, based on ownership of investable assets (excluding housing equity), 2012
                                                                                                    • Penetration of premium accounts among the mass affluent segment
                                                                                                      • Figure 11: Type of current account owned, by wealth tier, July 2012
                                                                                                    • Mass affluent banks manage £501 billion in private client assets
                                                                                                      • Figure 12: Size of the UK wealth market, by assets under management, total revenue and pre-tax profit, 2012
                                                                                                    • Revenues for the mass affluent banks total over £6 billion
                                                                                                      • Sector profitability
                                                                                                        • Methodology behind market sizing
                                                                                                        • Market Share

                                                                                                          • Key points
                                                                                                            • Major bank brands dominate the mass affluent sector
                                                                                                              • Figure 13: Main current account provider, by wealth tier, July 2012
                                                                                                            • LBG has the largest overall share of the wealth market
                                                                                                              • Figure 14: Main current account provider – shown on a group basis, by wealth tier, July 2012
                                                                                                            • HSBC customers are most likely to have a ‘premium’ account
                                                                                                              • Figure 15: Type of (main or other) current account held, by provider, July 2012
                                                                                                            • In the UK wealth management sector, Barclays Wealth and Coutts & Co remain ahead of rivals
                                                                                                              • Figure 16: Largest 15 wealth managers, by assets under management – UK, 2010 and 2011
                                                                                                          • Companies and Products

                                                                                                              • Barclays
                                                                                                                  • Figure 17: Barclays premium current account – key features, August 2012
                                                                                                                  • Figure 18: Barclays UK Retail and Business Banking Division – key financial data, 2010 and 2011
                                                                                                                  • Figure 19: Barclays Wealth – key financial data, 2010 and 2011
                                                                                                                • Citibank
                                                                                                                    • Figure 20: Citibank’s Citigold current account – key features, August 2012
                                                                                                                    • Figure 21: Citicorp’s Global Consumer Banking division, EMEA region – key financial data, 2010 and 2011
                                                                                                                  • Clydesdale Bank
                                                                                                                      • Figure 22: Clydesdale Bank’s premium account – key features, August 2012
                                                                                                                      • Figure 23: Clydesdale bank Plc – key financial data, 2010 and 2011
                                                                                                                    • HSBC
                                                                                                                        • Figure 24: HSBC Premium account – key features, August 2012
                                                                                                                        • Figure 25: HSBC Bank Plc’s UK Retail Banking and Wealth management division – key financial data, 2010 and 2011
                                                                                                                      • Lloyds TSB
                                                                                                                          • Figure 26: Lloyds TSB’s premium/private bank account – key features, August 2012
                                                                                                                          • Figure 27: LBG’s Wealth and International division – key financial data, 2010 and 2011
                                                                                                                        • NatWest/RBS
                                                                                                                            • Figure 28: RBS/NatWest premium/private bank account – key features, August 2012
                                                                                                                            • Figure 29: RBS Group’s Wealth division – key financial data, 2010 and 2011
                                                                                                                        • Brand Communication and Promotion

                                                                                                                          • Key points
                                                                                                                            • Total adspend on banking products and services increases by 12% in the year to May 2012
                                                                                                                              • Figure 30: Total advertising expenditure on banking and asset management products and services, by product category, 2008-12
                                                                                                                            • Barclays increases investment in promoting its Premier account
                                                                                                                              • Figure 31: Top five advertisers of packaged/premium accounts and mass-market wealth management services, 2010-12
                                                                                                                            • Online advertising accounted for almost a fifth of total sector adspend in latest year
                                                                                                                              • Figure 32: Share of advertising expenditure on packaged/premium accounts, by media type, 2008-12*
                                                                                                                          • Channels to Market

                                                                                                                            • Key points
                                                                                                                              • Having a large branch network is an advantage…
                                                                                                                                • Figure 33: Number of branches belonging to the largest current account providers (shown on group basis), year-end 2011
                                                                                                                              • …but a multichannel approach is vital to appeal to an increasingly mobile and technically adroit customer base
                                                                                                                                • Figure 34: Frequency of using channel to access current account or other services, July 2012
                                                                                                                            • Profile Analysis of the Wealth Target Market

                                                                                                                              • Key points
                                                                                                                                • Survey background
                                                                                                                                  • Segmenting respondents according to wealth
                                                                                                                                    • Figure 35: Segmentation of total sample, by value of investable assets (wealth tier), July 2012
                                                                                                                                    • Figure 36: Demographic profile of wealth target market, by wealth tier, July 2012
                                                                                                                                  • Asset ownership is high across wealth tiers
                                                                                                                                    • Figure 37: Pensions, investments and other assets owned by the wealth target market, by wealth tier, July 2012
                                                                                                                                • Type of Current Account Held

                                                                                                                                  • Key points
                                                                                                                                    • Less than a quarter of the mass affluent have a premium bank account
                                                                                                                                        • Figure 38: Type of current account owned, by wealth tier, July 2012
                                                                                                                                      • Many wealthy people have more than one type of account
                                                                                                                                        • Figure 39: Type of current account owned, by top three most popular types of account, July 2012
                                                                                                                                      • Mass-affluent customers need to be convinced of need for premium accounts
                                                                                                                                          • Figure 40: Reason for not having a premier or private bank account, by wealth tier, July 2012
                                                                                                                                      • Current Account Provider

                                                                                                                                        • Key points
                                                                                                                                          • The majority of wealthy individuals hold at least two current accounts with different providers
                                                                                                                                            • Figure 41: Provider of main account and other/secondary accounts, July 2012
                                                                                                                                          • Premium and private account holders are most likely to be customers of Barclays, HSBC and NatWest
                                                                                                                                            • Figure 42: Current account provider (main or other), by type of account held, July 2012
                                                                                                                                        • Customer Satisfaction and Key Provider Attributes

                                                                                                                                          • Key points
                                                                                                                                            • Most wealthy individuals are satisfied with their main account provider…
                                                                                                                                              • Figure 43: Level of satisfaction with main current account provider, by wealth tier, July 2012
                                                                                                                                            • …but there is still some room for improvement
                                                                                                                                              • Figure 44: Level of satisfaction with main current account provider, by type of account held, July 2012
                                                                                                                                            • HSBC and First Direct customers are the happiest
                                                                                                                                              • Figure 45: Level of satisfaction with main current account provider, by selected banking group, July 2012
                                                                                                                                            • Customers appreciate their bank providing convenient access points
                                                                                                                                                • Figure 46: Perceived attributes of main current account provider, by wealth tier, July 2012
                                                                                                                                              • Provider attributes vary between different banking groups
                                                                                                                                                • Figure 47: Perceived attributes of main current account provider, by selected provider, July 2012
                                                                                                                                            • Financial Situation, Prospects and Goals

                                                                                                                                              • Key points
                                                                                                                                                • Almost a third of wealthy individuals say that they are worse off than a year ago…
                                                                                                                                                  • Figure 48: Current financial situation compared to 12 months ago, by wealth tier, July 2012
                                                                                                                                                • …but there is greater optimism looking forward
                                                                                                                                                  • Figure 49: Financial wealth expectations over the next 12 months, by wealth tier, July 2012
                                                                                                                                                • Wealth accumulation is the most common goal among the target wealth market
                                                                                                                                                  • Figure 50: Financial goals over the next 12-18 months, by wealth tier, July 2012
                                                                                                                                              • Appendix – Type of Current Account Held by Demographics

                                                                                                                                                  • Figure 51: Type of current account held, by demographics, July 2012
                                                                                                                                              • Appendix – Current Account Provider by Demographics

                                                                                                                                                  • Figure 52: Provider of main or other current account held, by demographics, July 2012
                                                                                                                                              • Appendix – Customer Satisfaction and Key Provider Attributes by Demographics

                                                                                                                                                  • Figure 53: Level of satisfaction with main current account provider, by demographics, July 2012
                                                                                                                                                  • Figure 54: Perceived attributes of main current account provider, by demographics, July 2012
                                                                                                                                              • Appendix – Financial Situation, Prospects and Goals by Demographics

                                                                                                                                                  • Figure 55: Current financial situation compared to 12 months ago, by demographics, July 2012
                                                                                                                                                  • Figure 56: Financial wealth expectations over the next 12 months, by demographics, July 2012
                                                                                                                                                  • Figure 57: Top five financial goals over the next 12-18 months, by demographics, July 2012
                                                                                                                                                  • Figure 58: Next six financial goals over the next 12-18 months, by demographics, July 2012

                                                                                                                                              Companies Covered

                                                                                                                                              • American Express UK
                                                                                                                                              • Apple Computer UK Ltd
                                                                                                                                              • Barclays Bank plc
                                                                                                                                              • Citibank
                                                                                                                                              • Clydesdale Bank
                                                                                                                                              • Facebook, Inc.
                                                                                                                                              • Financial Services Authority (The)
                                                                                                                                              • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                              • HSBC USA Inc.
                                                                                                                                              • Lloyds TSB Insurance
                                                                                                                                              • NatWest
                                                                                                                                              • Nokia Corporation (UK)
                                                                                                                                              • Royal Bank of Scotland Group plc
                                                                                                                                              • Yorkshire Bank PLC

                                                                                                                                              The UK Premium and Mass Affluent Banking Market - September 2012

                                                                                                                                              £1,995.00 (Excl.Tax)