Top 4 HSBC Wealth Management Interview Questions
Over the past decade HSBC has rapidly grown out its wealth management business. This shouldn't be too surprising given the amount of wealth creation that has occurred in Asia, which is obviously where HSBC has the strongest footprint.
In fact, the success that HSBC has had in scaling out their wealth management operations in Asia has led them to doubling down on wealth management within the UK and Europe as well.
The reality is that HSBC has realized the same thing that all other global investment banks have: the wealth management business provides steady fees that don't dip too deeply during recessionary periods. This is ultimately what makes the business so appealing to banks, as wealth management fees can augment the more cynical parts of an investment bank (i.e., M&A) during more subdued or recessionary periods.
Anyway, while HSBC has a different geographical focus for wealth management than many of the banks we've talked about in the past (i.e., JPM, GS, MS), like all banks they are trying to establish as much market presence as possible everywhere that they have significant retail operations.
So with all that said, let's cover some interview questions...
HSBC Wealth Management Interview Questions
Below are some wealth management interview questions you could be asked at HSBC. As the questions below reflect, you'll often have more qualitative questions around how you'd deal with clients based on the current markets (i.e., if markets are very volatile, you'll be more apt to be asked about how you'd ensure clients don't go fully into cash which is unlikely to be in their long-term best interests).
- What are some economic data points that are heavily influencing equity markets today?
- If your client was concerned about volatile markets and wanted to rotate fully to cash, what would you tell them?
- Why has a mix of stocks and bonds, which normally buffers volatility, performed so poorly this year?
- How might you position a client getting ready for retirement in the next few years?
Given that we're currently experiencing the fastest rate hiking cycle of the past forty years, equity markets today are being heavily driven by rate expectations.
So some of the data points you'd want to pay attention to are those that will inform just how much further the rate hiking cycle will go. For example, if you've been following equity markets you'll see that some of the below data points can cause very sharp reactions:
- Headline / Core CPI / PCE. These are inflation measures that are closely monitored by the Fed as the purpose behind raising rates is to cool inflation. When these measures come in above market expectations, future rate hike expectations usually go up and a sharp sell-off in equities usually occurs.
- Jobless claims. Since part of what the Fed is trying to do by raising rates is to cool the labor market, thereby cooling wage inflation, jobless claims going up means that the future rate expectations go down. This is generally positive for equities right now. But if we start having too many jobless claims, then that will likely start being negative for equities.
- GDP growth. While the Fed would like to see GDP go down - as that would mean the economy is cooling, which will help slow inflation - there is obviously a delicate balance here (as you don't want to raise rates too much and create an unnecessarily large recession). Over the past year GDP growth coming in below expectations has been positive for equities as, once again, it generally means that the market lowers future rate hike expectations.
While there are many more economic data points that influence rate expectations - which in turn influence equity prices - these are the most importnat ones and therefore the ones that you should bring up in an interview.
If your client was concerned about volatile markets and wanted to rotate fully to cash, what would you tell them?
This is a great question because it gets to the heart of what the real role of a wealth manager is. Ultimately, your job is to try to put your clients in the best position possible to meet their goals. But if your clients want to rotate fully to cash, that's their prerogative even if you don't believe it to be in their best interests.
If a client wants to rotate fully to cash, that means they're very concerned and anxious about market conditions. So you should always start by fully understanding why they want to rotate to cash and to commiserate with what they're saying. The worst thing you can ever do - in any client-serving business - is fail to listen and fail to be empathetic.
What you then want to do is review their wealth management goals and explain how rotating with cash could harm their ability to meet those goals. During especially volatile markets, the positive days are often especially large and missing out on them can put you behind the eight-ball when they do re-enter the market.
This is something that happened to many on the precipice of retiring in 2020. They got spooked near the depths of the pandemic - as they saw their retirement funds shrink - and rotated fully to cash even though they were still a bit far away from their retirement goals. Then, by the time they reentered the market, they had missed much of the retracement from the lows.
Market timing is a deeply difficult thing to do and it may be best for a client to shift their portfolio makeup as opposed to outright getting out of the market. Especially during an inflationary environment where just holding cash is going to per se mean earning a negative real return (a negative return when adjusted for inflation).
So in your interview answer you want to make it clear that you should start by listening to your client and being empathetic, reviewing their goals and aims, and then softly providing alternatives that keep them invested so that they don't miss on upside opportunity moving forward.
But ultimately your role is to serve your client's wishes, and so you need to balance providing a bit of pushback with understanding that your client ultimately has the final say (whether you agree with their decision or not).
Why has a mix of stocks and bonds, which normally buffers volatility, performed so poorly this year?
This is a great question because it requires you to take a step back and figure out how market dynamics this year have negatively impacted a traditional portfolio in an atypical way.
So let's back up a bit. As you likely know, a very basic portfolio construction for a client wanting to reduce year-to-year volatility - while still getting exposure to the market - would be through a 60% / 40% split between equities and bonds (usually government bonds, although some will use a mix of corporate and government bonds).
Traditionally, this has always reduced volatility as when rates go lower - usually during more recessionary periods - that reduces the price of equities given the weaker economic backdrop, but provides price gains on bonds (as yields going lower increases the price of bonds).
However, the past year has been anything but traditional. Because the Fed is rapidly raising rates because of wildly overshooting inflation, this has caused both equities and bonds to tumble.
Over the past year stocks are down 16.5% with 19.5% volatility while bonds are down even more with 6.3% volatility. Therefore, a 60/40 mix has been hit hard losing 17.5% with 13.5% volatility.
Note: You can always check how the 60/40 portfolio is doing by looking at this Bloomberg index.
What's been particularly abnormal is just how volatile bonds have been. This all stems from just how rapid the rate hiking cycle has been, and the fact that rates were being raised from the zero lower pound.
Over the prior decade - as inflation was lethargic and growth relatively sluggish - volatility in bonds was much lower. Further, the negative relationship between bonds and equities that the 60 / 40 portfolio relies on held mostly true.
None of this is to say that the 60 / 40 portfolio construction is improper or bad (although for many clients a better mix can be created!). Some like Morgan Stanley think it'll make a strong comeback. Rather, I've put this answer here primarily to demonstrate what an economically abnormal environment we're currently residing in that has upturned many traditional relationships.
The first thing you should do is clarify whether the client would be in the position (financially) to retire today. If so, then the aim should be to ensure that you're preserving their capital while allowing it to modestly grow until retirement.
This could be done - especially in the current environment - by looking to invest heavily in TIPS (that are inflation protected), money market funds, government debt, and a smaller allocation to equities to give some growth upside.
This type of composition not only protects funds from an overly large decline in the advent of a recession, but also provides significant revenue through the heavier fixed income allocation (you could also get some more revenue generation, via dividends, by looking to utility and commodity equities).
As one of the largest retail banks in the world, HSBC has an advantage over many others - like Goldman and Morgan Stanley - when it comes to drawing existing customers into their wealth management practice.
And this is exactly what HSBC has been striving to do. They've invested heavily to grow out a wealth management platform that can serve clients across the world and have grown their market share relatively well.
As the questions above illustrate, you should be prepared to answer more general market-based questions and be prepared for more "situational" questions that draw on current themes within the market.
Since many reading this post may be based in Asia, when you're going through interviews you'll likely be asked questions about markets in the country you'll be working in and about the United States as we've discussed above (the reason being that many wealth management clients you'll be dealing with will have significant dollar-denominated assets).
If you're looking for a longer list, here are some more wealth management interview questions (including some that are a bit more technical or objective as opposed to the broader questions we've gone over above). If you're looking for an even longer compilation of questions, there is also the wealth management interview guide you can check out.