HSBC has announced plans to offer robo-advice to small investors. Clients with less than £15,000 will have access to the new service, which will offer advisement to online investors at a fraction of the cost of a traditional financial advisor.
HSBC’s Online Investment Advice service is designed to give personalized, tailored financial recommendations to smaller investors, filling a gap in services that has not traditionally been addressed by professional financial advisors.
Customers will be required to complete a questionnaire detailing their own financial needs and circumstances. Individualized data will be fed through an algorithm, which will automatically return personalized investment recommendations based on the information provided.
The Online Investment Advice product is not yet available, as it is still in development. As a relatively new area for regulators, HSBC has confirmed that it is working with the Financial Conduct Authority for guidance on the project.
Taylan Turan, head of HSBC UK’s wealth management business, told the Financial Times that the new site was aimed at providing access to investment advice that is both fast and low in cost. Investments, personally tailored to the individual, would be recommended from a pool including internal HSBC funds, third-party funds, and tax-free ISAs. He also noted that the entry point will be significantly lower than £15,000, so that individuals with very small amounts to invest will still have access to proper investment advice. He also said that the service would be personalized to the point where two people with similar amounts to invest and risk profiles would receive different advice through the service, based on other factors.
Rahman Bhatia, head of digital at HSBC UK, noted in a statement that online investment advice is a natural next step as customers become more comfortable with online and mobile banking. “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.”
Robo-advisors have become a popular option for investors, as a low-cost solution for those seeking investment advice. Betterment, LLC became the first independent robo-advisor firm to pass $5 billion in assets under management last year, and currently has over $7 billion invested on behalf of clients.
As customers become better used to online and automated financial services, it is only natural for banks to explore the benefits of robo-advisors, to help customers make smart investing choices and to keep those investments in the bank, rather than with an outside firm like Betterment.