LONDON — HSBC on Thursday announced plans to launch an online investment advice service by the end of the year, offering a cheaper wealth management service to those with only a modest amount of money.
Relatively little detail is given on how the new service will work but HSBC says Online Investment Advice “will use data and algorithms to deliver tailored advice and will make personal recommendations based on an individual’s unique circumstances.”
Customers will input their financial circumstances and their needs, then the computer will crunch the numbers and recommend an investment portfolio that fits them.
The product is still in development and HSBC says it is in conversation with the UK’s financial industry regulator, the Financial Conduct Authority about what it can and can’t do in this relatively new area.
Online Investment Advice is a so-called “robo-advisor,” a product that offers automated investment and savings advice to customers.
“Robo-advisors” have become a hugely popular new area of fintech in recent years, with startups such as Scalable Capital and MoneyFarm pioneering the idea in the UK. Big banks have recently begun launching their own products, such as UBS’ SmartWealth and NatWest Invest. HSBC’s head of digital in the UK Raman Bhatia hinted that the bank was working on its own product in an interview with Business Insider last month.
“Robo-advisors” are seen as attractive by both banks and regulators as they have the potential to reduce the so-called “advice gap.” Financial advice is usually carried out face-to-face and, as a result, is relatively expensive. Only the relatively wealthy tend to seek advice and a large number of people with a modest amount of cash are left with no advice. This leaves them open to make inappropriate investments that won’t fit their needs.
HSBC says its new product will “open up wealth management opportunities to those who thought it wasn’t for them, thanks to a lower investment entry point.”
HSBC’s Bhatia says in a statement on Thursday: “We are very excited by HSBC Online Advice service and have been working with our customers and the FCA to shape our offering to ensure that we are providing the most up-to-date and smart wealth management advice possible.
“More customers than ever are using mobile and internet banking with more than 90% of our interactions with customers now done through our digital channels, so it’s the natural next step that investment advice is available online.”
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