HSBC Targets Doubling UK Wealth Business Amid Mass Affluent Market Push

HSBC (HSBA.L) is setting its sights on doubling the assets under management (AUM) in its UK wealth division to £100 billion ($131 billion) over the next five years. This strategic move aligns with a broader industry trend of banks tapping into the ‘mass affluent’ segment for increased fee income. José Carvalho, Head of Wealth and Personal Banking UK, emphasized HSBC’s goal of becoming a top-five player in the British market, leveraging its global reach to attract clients who bank across multiple markets or hail from overseas.

“International connectivity is our competitive edge and a key growth driver,” Carvalho told Reuters. HSBC, which manages $712 billion in assets globally, plans to expand its advisory team to support this growth initiative, though specific hiring numbers were not disclosed. The UK’s wealth management market is currently dominated by St James’s Place, which reported AUM of £168 billion at the end of last year. According to research firm Coalition Greenwich, the largest UK banks collectively generated $12 billion from wealth management in 2023, marking an 11% year-on-year increase. St James’s Place forecasts a 7% growth in the overall wealth market.

Rivals Barclays (BARC.L) and Lloyds (LLOY.L) have also recently announced plans to target the ‘mass affluent’ segment, defined by Lloyds as customers with deposit balances ranging from £75,000 to £250,000. This demographic holds approximately £4 trillion, accounting for half of the UK’s wealth market, according to data from Lloyds and the Investment Association. This strategic pivot reflects banks’ desire to diversify into sectors less impacted by falling interest rates, where technological advancements are enabling competition with independent providers. However, experts caution that the market is becoming increasingly crowded.

“The appetite for wealth management services is growing, but competition is fierce, with nearly every major bank now aiming for a larger share,” said Nigel Moden, EMEIA Banking & Capital Markets Leader at EY, in an interview with Reuters.

Historically, big banks have focused on ultra-high-net-worth individuals, leaving the mass affluent to independent financial advisors like St James’s Place. However, Carvalho noted a shift in strategy, highlighting an opportunity in the mass affluent segment, which remains largely dominated by independent financial advisors (IFAs), controlling around 55% of the market. HSBC’s approach includes cross-selling more products to its wealth clients via enhanced mobile and digital platforms, while also encouraging wealthier clients with substantial savings to consider long-term investments.

“For the mass affluent market, banks are adopting a hybrid model that combines digital technology with human advisors, offering enhanced services that particularly appeal to younger clients,” said Grace Miu, Head of Wealth at Coalition Greenwich.

Lloyds is pursuing a similar strategy with its new Lloyds 360 digital tool, while Barclays is focusing on its recently merged Private Bank and Wealth Management unit. However, Christian Edelmann, Managing Partner for Europe at Oliver Wyman, warned that the collective ambitions across all banks may exceed what the market can realistically deliver, suggesting potential disappointments ahead.

Nestle Shares Under Pressure After CEO’s Sudden Departure

Nestle shares are expected to drop on Friday following the unexpected resignation of CEO Mark Schneider and the appointment of long-time company executive Laurent Freixe. Schneider’s abrupt departure, announced late Thursday after a board meeting, ends his nearly eight-year tenure as the first outsider to lead the Swiss food giant in almost a century.

Investor confidence in Schneider had already been waning over the past 15 months, and his sudden exit has rattled the market, with shares in Nestle maker of KitKat and Nescafe indicated to fall nearly 3% in premarket trading in Zurich.

Freixe, a 62-year-old Frenchman with deep industry knowledge and extensive networks, is expected to steer Nestle back to its core strengths in sales and marketing. His appointment comes as the company has lagged behind competitors like Danone and Unilever in recent quarters. Critics have pointed out that Nestle’s heavy reliance on price hikes has hurt sales volumes, driving cash-strapped consumers towards cheaper alternatives. Freixe, who has already begun his new role, faces the challenge of restoring market share and boosting sales in a challenging environment.

“There will always be challenges, but we have unparalleled strengths,” he remarked. “We can strategically position Nestle to lead and win in every market we operate in.”

Freixe’s experience includes leading Nestle’s European business during the global financial crisis and most recently heading the company’s Latin America zone, which has experienced robust growth. Analysts believe Freixe’s focus on fundamentals and passion for products will be crucial for Nestle’s recovery.

“With Laurent Freixe in charge, Nestle will return to its roots,” said Jean-Philippe Bertschy, an analyst at Bank Vontobel. “Successful food companies like Lindt and Danone have marketing and sales experts as CEOs, and Nestle is likely to benefit from this approach as well.”

Restoring sales growth will be key to regaining investor trust, particularly after Nestle shares hit an all-time high in January 2022 but have been declining since May 2023 due to earnings misses and guidance downgrades. While Schneider was praised for some strategic moves, including selling Nestle’s U.S. confectionery business and North American water brands, his efforts to revitalize the company did not materialize quickly enough for investors. Missteps, such as the costly acquisition and subsequent sale of a peanut allergy treatment company, further eroded confidence. As Freixe takes the helm, his ability to reignite growth and stabilize the company will be closely watched by the market.

Apple to Allow iPhone Users in Europe to Delete the App Store

Apple will soon permit iPhone and iPad users in the European Union to delete the App Store and Safari browser from their devices, a significant shift in its long-standing policy. This move comes as Apple adjusts to the EU’s new digital regulations aimed at increasing competition and reducing Big Tech’s dominance. Previously, Apple had tightly controlled the App Store as the exclusive gateway for apps and digital content on its devices. However, under the EU’s Digital Markets Act (DMA), the tech giant is required to offer more flexibility to users. According to an update on Apple’s support page, users in the EU will soon be able to delete the App Store, Messages, Camera, Photos, and Safari apps, with only Settings and Phone remaining undeletable.

Apple is also introducing a new section in iOS where users can manage default settings for key functions like browsers, messaging, and phone calls. The company emphasized that developers will need to meet strict privacy and security criteria before offering alternative browser engines on iPhones, given the high risk of exposure to malicious content. Historically, app developers were required to use Apple’s payment system within the App Store, allowing Apple to take a share of transactions. The EU has criticized this practice, arguing that it restricts developers from directing users to alternative payment methods. Apple was recently accused of violating the DMA, marking the first time a tech firm faced such charges under the new law.

In response, Apple announced that, starting this autumn, developers in the EU will be allowed to promote and sell their products outside of the App Store. This includes introducing a new fee structure for transactions made through alternative platforms. The European Commission, which oversees compliance with the DMA, has stated it will review Apple’s upcoming changes to ensure they meet regulatory requirements and consider feedback from developers and the market.

The DMA is part of the EU’s broader effort to regulate Big Tech, with other companies like Google, Amazon, Meta, Microsoft, and TikTok’s owner ByteDance also required to comply. The law empowers the EU to impose substantial fines on companies that fail to adhere to the rules.

As the digital landscape continues to evolve under these new regulations, Apple’s decision marks a significant shift in how it operates within the EU, potentially setting a precedent for other regions.