HSBC Bank USA is turning toward digital advice to expand its wealth management footprint beyond its branch offices.
The bank will begin a pilot program of HSBC Wealth Track, a direct-to-consumer robo-adviser, in November before a public rollout in 2019.
HSBC will focus on bringing Wealth Track to existing customers who either prefer self-directed investments or have accounts too small for the bank's existing adviser minimums before using it as a tool to expand its presence in the U.S.
HSBC currently offers wealth management services for clients with at least $100,000 in assets and a premium service called "Jade" for investors with more than $1 million. Wealth Track will offer managed accounts to clients with as little as $5,000 in an individual retirement account or $10,000 for discretionary accounts.
Like other digital advice platforms, investors will answer a risk profile questionnaire and get assigned to one of five model portfolios based on risk tolerance. The portfolios will consist of diversified ETFs selected by HSBC's asset management group and will be rebalanced quarterly. Wealth Track will charge investors a 50-basis-point management fee.
HSBC developed the technology in a partnership with Marstone, a digital advice service that already has partnerships with Fiserv and Interactive Brokers. Marstone also is already fully integrated with Pershing, HSBC's custodian.
Wealth Track is part of a $130 million project to modernize the bank's digital experience to align with modern consumer expectations, said HSBC Bank USA head of innovation Jeremy Balkin.
Though several large and regional banks have already launched robo-advisers, Mr. Balkin doesn't believe the bank is too late to the digital advice game and will be able to differentiate Wealth Track from other products already on the market.
To start, HSBC will focus on bringing the robo-adviser to its existing retail banking customers instead of marketing it to a general audience. Many of these clients have international wealth and rely on HSBC for their unique needs, Mr. Balkin said.
The bank also sees Wealth Track as a chance to reach investors who aren't located near one of HSBC's branch offices along the East or West Coast. Mr. Balkin hopes it will create pipeline of future business by managing accounts for existing clients' children.
"It's the missing piece of our growth strategy in the U.S.," he said.
While other banks have trended toward the hybrid-robo strategy, which pairs automated investing and rebalancing with human advisers, the intial rollout of Wealth Track will be purely digital. Marstone founder and CEO Margaret Hartigan believes there is actually a large market of people who want automated investing without speaking to an adviser but acknowledged that this is only the beginning of a long-term partnership with HSBC. It's possible the firm could introduce an additional service tier with a hybrid robo-adviser in the future.
"Marstone's flexible solution allows HSBC to fully customize the platform, from implementing their own branding down to defining the investment offering, to make it truly their own," Ms. Hartigan said in a statement. "Our technology is not only a tool for digital transformation, in the case of this partnership, but also ensures HSBC's ability to continue delivering high quality solutions and services as their client base grows."