I have many expat readers, and from time to time, I am asked to review certain providers. HSBC expat is no exception.
I get asked the following questions on countless occasions;
- Should I invest with a bank?
- Isn’t it more convenient to invest and bank with the same firm?
- Are banks expensive for investing compared to platforms and currency apps?
- Do banks tend to only sell their own products and funds?
- Aren’t bigger names safer?
I will answer these questions in this article.
Where does HSBC operate?
Globally. Most of their expat clients are in Hong Kong, Singapore, Shanghai, Dubai, Qatar and other places with large expat numbers.
What is HSBC Expat and what services do they offer?
HSBC Expat used to be called HSBC International. They offer multi-currency bank accounts, fixed deposits various investment opportunities.
What are the account minimums?
60,000GBP, which is about $80,000. If the accounts fall below 60k, additional fees are charged.
This is a very substantial account minimum, considering that money could be better invested elsewhere.
HSBC do offer fixed deposit interest rates, but due to the global situation with interest rates, the rates are paltry.
What are the benefits of HSBC Expat?
Theoretically, they allow customers to move from country to country and stay in the same banking family.
They also cooperate with the accountants EY, and their global tax guides, which can be useful for some with complex tax issues.
The mortgage service also isn’t bad, but it always pays to shop around for better rates and deals.
Their general service levels are still better than some local banks, even if they compare unfavourably to more boutique expat-focused banks.
What are the costs?
The cost of the banking service (current account) isn’t cheap, but not extortionate. FX fees are 2.5%-3%. This is more expensive than Transferwise, but normal compared to other offshore banks operating from Isle of Man, Guernsey, Cayman Islands and Jersey.
International bank transfers cost 30-35GBP each time, even when done online, which is higher than normal.
Investment costs on the platform are high, due to a combination of fund costs, direct costs and a range of hidden fees.
Do HSBC Expat offer mortgages?
Yes. HSBC offers UK mortgages to expat investors. They no longer offer international mortgages, however.
Why bank offshore?
For me, and most expats, the desire for expat banking isn’t about secrecy. Sometimes I feel like the media are in a time machine.
Offshore banking these days isn’t like the 1970s, 1980s or even 1990s. It isn’t linked to tax evasion for most people.
It certainly isn’t about stuffing money in your trousers, before going on a flight, like in this scene from the Wolf of Wall Street!
For most investors in the 21st century, offshore banking and indeed investing is about diversification, convenience and lowering political and social risk.
For me, I want a number of things;
- To avoid emerging market banking, especially in unstable countries.
- To avoid black swan events, I want diversification in terms of banking options. Even though I come from the UK, which is a fairly stable country, I want to have non-British banking options……just in case the UK goes into political turmoil and elects a radical government. Or for that matter, Brexit causes 1001 problems!
- I also want speed and convenience, and not to have to open and close bank accounts every 3-4 years.
I am not alone. Many expats, especially in unstable countries, feel the same way. Take oil and gas as an example.
Expats in this industry are often sent to unstable parts of the world. Angola, Egypt and countless other countries.
Why would an expat, moving from emerging market to emerging market, want to entertain a local banking solution?
So what are the negatives with HSBC Expat?
Based on the above reasons for offshore banking, how does HSBC rank? Firstly, for me, a bank which is so international means more risk in certain situations.
HSBC, we have to remember, has some links to our governments back home, if we are from the UK, US and countless other countries.
The very fact that HSBC is so international means that they can come under political pressure at any moment.
A few years ago, HSBC reviewed accounts held by UK residents in Guernsey. These people aren’t expats.
Nevertheless, it shows that it can be easier to pressure a bank that is registered in the UK but has an offshore arm, compared to a truly offshore platform or bank.
That doesn’t mean that platforms or banks operating in just one country are perfect or without risk.
They still have to operate under various accounting reporting standards, moreover, such as FATCA for Americans and CRS.
Despite this negative, surely HSBC is more convenient than some options, due to their international flavour?
Well not really. Even though HSBC UK is a different entity to HSBC Japan or HSBC USA, the local regulators can put up barriers, and these barriers can also work against you.
It often isn’t possible to deposit an HSBC cheque in country Y, if it has been produced in country X.
Very normal, you may be thinking, but this hardly makes HSBC the world’s local bank, which makes everything convenient!
Countless other banks, moreover, have international services, even if they don’t have physical banks in numerous countries.
How about HSBC Investment Options?
Like most private banks, HSBC offers some very expensive fund ranges. So even if you use HSBC for banking, most of their expat investing accounts are best avoided.
There is a strong correlation between lower investment fund fees and better long-term performance.
Countless of the funds offered on the HSBC platform cost 1.5%, 2% or even 2.5% a year in fees.
HSBC does have some excellent index fund options available for UK investors, such as the FTSE250 tracker fund, which has 0.1% yearly costs.
These options, however, are seldom used on the platform offered to expats. They tend to be used on third-party platforms, alongside BlackRock, iShares and other providers.
This situation isn’t surprising. The largest institutions, with the biggest brand names, often get away with charging more money.
How about customer service?
Large organizations can lead to slowness and impersonal service. With HSBC, you are one customer out of 37 million!
So many expats claim that service levels are poor, even though HSBC preach about the benefits of getting a specific relationship manager assigned to your account.
What are some of the biggest mistakes investors make with big banks?
Given all these negatives about the big banks, why do many people still use them? Even though more and more people are becoming sceptical about big business and big government, some people still pick big brands.
This is despite the extra cost, slowness, poor impersonal service and so on. This can be blamed partially on familiarity bias.
Various studies have shown people are more likely to:
- Invest in Google stocks, if they use Google search more often.
- Invest in a company they drive by on the way to work.
- Invest in the company they work for, and therefore doubling their risk if the company goes bankrupt.
- Assuming that big name company stocks are safer than the broader market.
- Invest in stocks only in their home market
- Invest in stocks in the sector they work in
- Invest in certain assets due to cultural familiarity. For example, gold for Indian investors or property for Singaporeans, regardless of whether this is rational or not.
Applied to HSBC, many people assume that service levels and investment returns must be excellent, due to the familiar sounding name.
This is usually not the case.
So in conclusion, should you bank and invest with HSBC Expat?
On the banking side, HSBC is OK. Better options exist, however. The costs, service and convenience could all be improved.
On the investment side, the vast majority of HSBC products on the platform are expensive and focused on HSBC in-house products and funds.
Most of these funds are not the low-cost variety, that tends to outperform, long-term. For these reasons, banking and investments should be kept separate as a generalization.
Do you offer banking services?
I offer banking services for existing clients, but not as a standalone product. It is too time-consuming to offer as a standalone product or service.
My main focus is on investment-related services, although I do not charge for banking services for existing clients.
What are your contact details?
email@example.com. I also am available on a range of apps.
For expats with existing policies offshore the following article is useful;