Mass Affluent South Asian Business Proposal

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Independently researched and drafted a busiiness plan for the creation of a new Mass Affluent banking group targeting the underserved, albeit affluent South Asian population in the United States. Originally prepared in 2004.

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Mass Affluent South Asian Business Proposal

  1. 1. Marketing to Mass Affluent South Asians Strategy Recommendation Prepared By Hamed A. Hashmy 773-490-0975 Presentation originally prepared July 2004 Reprinted March 2009 (content updates required)
  2. 2. Outline <ul><li>South Asian Banking Proposition (pg.3) </li></ul><ul><li>U.S. South Asian Demographics (pg.4) </li></ul><ul><li>India Demographics – “India is Rising” (pgs.5-6) </li></ul><ul><li>South Asian Wealth in Chicago (pg. 7) </li></ul><ul><li>Top 5 States for South Asian Wealth (pg. 8) </li></ul><ul><li>South Asian Cultural Sensitivities (pgs. 9-11) </li></ul><ul><li>South Asian Banking Needs (pgs. 12-14) </li></ul><ul><li>South Asian Marketing Strategy (pgs. 15-18) </li></ul><ul><li>Commercial Opportunity (pg. 19) </li></ul><ul><li>Getting Started (pgs. 20-21) </li></ul>
  3. 3. South Asian Banking Proposition <ul><li>JPMorgan Chase creates a business development group that targets Mass Affluent South Asians in Chicago and/or other parts of the country </li></ul><ul><ul><li>Mass Affluent are households with investable assets of $250K and higher </li></ul></ul><ul><ul><li>South Asians include Asian Indians and Pakistanis and to a lesser extent, people from Bangladesh, Sri Lanka and Nepal who were either born or emigrated to the United States </li></ul></ul><ul><li>By going “down market” in terms of Private Banking target market criteria and marketing directly to an ignored, albeit affluent ethnic community, JPMorgan Chase creates an innovative business model from which to expand its customer base, sell more products per relationship and distinguish itself from the competition </li></ul><ul><li>This business model can be executed at a national level and also be used to attract other ethnic groups, subject to the success of the South Asian marketing initiative in Chicago; ultimately, JPMorgan Chase could become a dominant player in Mass Affluent Multicultural Markets across the United States </li></ul>
  4. 4. U.S. South Asian Demographics <ul><li>South Asians are the sixth largest, fastest growing ethnic population with higher wealth and education levels than any multi-cultural market in the country </li></ul><ul><ul><li>Asian Indians are one of the largest Asian groups in the United States and the fastest growing segment within the Asian-American population </li></ul></ul><ul><li>1 in every 9 Asian Indians in the United States is a millionaire, comprising 10% of the 2.1 million U.S. millionaires </li></ul><ul><li>38% of all physicians in the United States are of Asian Indian origin, as are 10% of all medical practitioners </li></ul><ul><li>Global net worth of all Indians is $300 billion of which 30% resides in the United States making the U.S. the largest overseas Asian Indian wealth market in the world </li></ul><ul><li>South Asians own more than 18,000 hotels, representing over 50% of the economy lodging properties and nearly 35% of all hotel properties in the U.S. </li></ul><ul><li>91% of all Indian professionals in the United States have at least a 4-year college degree; almost two-thirds of them have advanced degrees. This exceeds the national average and is the highest of all ethnic groups </li></ul><ul><li>Asian Indians are the wealthiest immigrant group in the United States with a median income of over $60,093 (compared to national average of $38,885) </li></ul>
  5. 5. India Demographics – “India is Rising” <ul><li>According to a June 2004 presentation by Vedika Bhandarkar, Managing Director and Head of JPMorgan’s Investment Banking in India , “ India is Rising! ”, as evidenced by a surging economy and young, educated consumer base </li></ul><ul><li>These growth factors suggest immense wealth potential that could spill over into the U.S. market as more Indians look to work or do business between both countries </li></ul><ul><li>India’s wealth potential cannot be ignored when considering the South Asian Mass Affluent strategy in the United States </li></ul>
  6. 6. India Demographics – “India is Rising” <ul><li>Why India is Rising </li></ul><ul><ul><li>Population : 1.06 billion people </li></ul></ul><ul><ul><ul><li>Largest population in the world by 2025 </li></ul></ul></ul><ul><ul><ul><li>Population under 35: 710 million people </li></ul></ul></ul><ul><ul><ul><li>English speaking population: 250 million people </li></ul></ul></ul><ul><ul><ul><li>Consuming class: 245 million people </li></ul></ul></ul><ul><ul><ul><li>College graduates per year: 2.4 million </li></ul></ul></ul><ul><ul><li>Economy : Rapid economic growth </li></ul></ul><ul><ul><ul><li>6-7% projected growth per year </li></ul></ul></ul><ul><ul><ul><li>Growing consumer class: 405mm by 2007 </li></ul></ul></ul><ul><ul><ul><li>World beating industries: technology, pharmaceuticals, auto components </li></ul></ul></ul><ul><ul><ul><li>#3 destination for Foreign Direct Investments in Asia by the year 2008 </li></ul></ul></ul><ul><li>JPMorgan has a strong presence in India </li></ul><ul><ul><li>Office has doubled in size over the last six months </li></ul></ul><ul><ul><li>Leading Investment Bank in India since 1930 </li></ul></ul><ul><ul><li>Best Foreign Investment Bank from 2000-2002 </li></ul></ul><ul><ul><li>Large team with focused sector coverage </li></ul></ul>
  7. 7. South Asian Wealth in Chicago <ul><li>There are approximately 174,535 households in Chicago with $250K+ in investable assets, of which Bank One’s share is only 20,071 or 11.5% ( NOTE : the figures below ignore the JPMorgan Chase share of wallet) </li></ul><ul><li>There is conservatively $710 million in investable assets within the Chicago South Asian market , based on a very conservative estimate of the South Asian population relative to the total Chicago population ( NOTE : assuming only 1.84% of the Mass Affluent households in Chicago are South Asian ) </li></ul><ul><li>It is very likely that the $710 million in assets is a low estimate of the actual market potential. Below are less conservative estimates : </li></ul>
  8. 8. Top 5 States for South Asian Wealth <ul><li>New York, New Jersey, California, Illinois and Texas are the top 5 states (in this order) in terms of South Asian population </li></ul><ul><ul><li>These states represent the biggest concentrations of South Asian wealth in the United States </li></ul></ul><ul><li>Since Bank One/JPMorgan Chase does business in each of these states, it is possible to source incremental banking opportunities, namely in the Mass Affluent South Asian segment. JPMorgan Chase can leverage : </li></ul><ul><ul><li>Brand equity and Mass Affluent prospects from a strong Retail franchise in New York (Chase), New Jersey (Chase), Illinois (Bank One) and Texas (Bank One) </li></ul></ul><ul><ul><li>Brand equity and Mass Affluent prospects from a highly respected, top-tier Corporate/Investment Banking business that spans the globe, including countries such as India </li></ul></ul><ul><li>The wealth scenarios above likely underestimate the Mass Affluent banking opportunity if the South Asian population figures and/or Mass Affluent Household figures are inaccurate; for example, other than Asian Indians, other South Asians like the Pakistani, Bangladeshi, Nepalese & Sri Lankan do not appear to be included in the U.S. Census South Asian population totals </li></ul>
  9. 9. South Asian Cultural Sensitivities <ul><li>The underlying premise in this proposal is that Asian Indians and South Asians in </li></ul><ul><li>general have not been approached in the right manner or been approached at all. </li></ul><ul><li>There are cultural sensitivities that ought to be considered when marketing to this </li></ul><ul><li>ethnic community, as with any ethnic group. Here are some very important </li></ul><ul><li>marketing considerations : </li></ul><ul><li>Trust is key to establishing relationships; South Asians may feel more comfortable dealing with other South Asians because of common culture & language </li></ul><ul><ul><li>NOTE : Speaking native language may not be expected; English language spoken as often as native languages </li></ul></ul>
  10. 10. South Asian Cultural Sensitivities <ul><li>Brand recognition is very important ; Asian Indians regard a company’s financial stability and reputation as extremely important </li></ul>
  11. 11. South Asian Cultural Sensitivities <ul><li>Highly conservative ; South Asians tend to save their money </li></ul><ul><ul><li>Saving for education is a high priority for current and future generations </li></ul></ul><ul><li>Price sensitive; Pricing must be competitive and reflect services with a value-add </li></ul><ul><li>Referral-driven; Referrals are taken seriously so providing high quality products and services is paramount </li></ul><ul><li>Penchant for self-investing and acting on “hot tips” from fellow investors/equity analysts </li></ul><ul><li>Retirement saving and planning is also important , particularly among non-resident Indian physicians and health care providers </li></ul><ul><li>Inheritance planning for family run businesses is a complex but much needed service </li></ul><ul><li>Estate planning to accommodate wealth distribution for the next generation also very important </li></ul><ul><li>South Asian clients seek more comprehensive and integrated financial services ; South Asians increasingly want a single point of contact for all their financial needs, be it mortgages, business loans, credit cards, investment, insurance, banking or financial planning </li></ul>
  12. 12. South Asian Banking Needs <ul><li>The cultural sensitivities highlight the unique financial needs of South Asians that can translate into big business for a financial powerhouse like JPMorgan Chase. Here is a list of South Asian Banking needs and corresponding opportunities : </li></ul><ul><ul><li>NEED : Saving for Education & Long-term Care </li></ul></ul><ul><ul><li>OPPORTUNITY : Educate consumers on investment options that will help them save for their children’s education as well as for the long-term care of their parents, either living with them or in their native country; currently 1/4 th of Asian Indian parents own a 529 plan suggesting that with proper advice and information, the bank can successfully reach out to this group </li></ul></ul><ul><ul><li>NEED : Need for Financial Advisor/Planning Services </li></ul></ul><ul><ul><li>OPPORTUNITY : While active in the purchase of stocks, bonds and mutual funds, Asian Indians hardly use a professional financial advisor; only 1/5 th of Asian Indians have a professional to contact for financial advice and information and of those who don’t have an advisor, 1/3 rd would turn to a financial planner, but 1/4 th do not know who to contact </li></ul></ul>
  13. 13. South Asian Banking Needs <ul><ul><li>NEED : Understand Subtleties of Individual Life Insurance </li></ul></ul><ul><ul><li>OPPORTUNITY : Educate consumers on how to choose a life insurance company, determine the kind of life insurance to buy and determine how much of it to purchase; only 1 in 10 Asian Indians interviewed felt that individual life insurance was too expensive suggesting that cost is not a concern </li></ul></ul><ul><ul><li>NEED : Retirement Planning </li></ul></ul><ul><ul><li>OPPORTUNITY: While younger than the U.S. population (average age of 30 vs. 35 for general U.S. population), Asian Indians will age, resulting in increasing numbers of older Asian Indians who will be concerned with providing for their retirement years </li></ul></ul>
  14. 14. South Asian Banking Needs <ul><ul><li>NEED : Estate Planning (primarily for family-owned businesses) </li></ul></ul><ul><ul><li>OPPORTUNITY : Given that as much as 90% of Indian business is family owned, there will certainly be complex inheritance planning issues; the bank can get prospects thinking about the value of wealth distribution from one generation to another as a way to expand the banking relationship </li></ul></ul><ul><ul><li>NEED : Investment & Asset Allocation advice </li></ul></ul><ul><ul><li>OPPORTUNITY : Asian Indians may be concerned about their investments in the current environment of low interest rates and stock market volatility; while many Asian Indians are quite knowledgeable of accumulation products, they may still appreciate the benefits of consulting an investment advisor, especially in an uncertain U.S. economy and volatile stock market </li></ul></ul>
  15. 15. South Asian Marketing Strategy <ul><li>Promote the strategy internally first : </li></ul><ul><ul><li>Make South Asian employees aware of the concept in order to generate some free publicity, to solicit their feedback and to gather referrals </li></ul></ul><ul><ul><li>Partner with groups that have any connection to the South Asian market (i.e., Investment Bank in India, Diversity Committee, Capital Markets groups) </li></ul></ul><ul><li>Develop culturally-aligned advertising to help bolster brand awareness and to establish an emotional connection with the marketplace </li></ul><ul><ul><li>Bank literature can be written in English, given language fluency relative to other Asian groups like the Chinese, Vietnamese and Koreans </li></ul></ul>
  16. 16. South Asian Marketing Strategy <ul><li>Offer products and services that meet the unique financial needs of South Asians. </li></ul><ul><li>Product and services might include : </li></ul><ul><ul><li>Introductory Meetings/Materials (sponsor lunch seminars/brochures) </li></ul></ul><ul><ul><li>Promotional Events (sponsor cultural shows and market services) </li></ul></ul><ul><ul><li>Affinity Card Programs (leverage cultural/business/religious affiliations) </li></ul></ul><ul><ul><li>Non-Commercial Money Transfer Services (tap into $12 billion business) </li></ul></ul><ul><ul><li>Investment Products (offer traditional and alternative products) </li></ul></ul><ul><ul><li>Investor Network Events (introduce clients for networking synergies) </li></ul></ul><ul><ul><li>International Equity Offerings (sell India funds and stocks) </li></ul></ul><ul><ul><li>Asset Protection (address major concern among physicians and self-employed) </li></ul></ul><ul><ul><li>Consumer Credit Products (market pre-approved and no doc loans) </li></ul></ul><ul><ul><li>Financial Planning Services (provide research & tax strategies) </li></ul></ul><ul><ul><li>Retirement & Estate Planning Services (offer educational seminars) </li></ul></ul><ul><ul><li>Business Banking Products & Services (leverage Retail franchise) </li></ul></ul>
  17. 17. South Asian Marketing Strategy <ul><li>Use “grass-roots” marketing to generate prospects and credible referral sources. Points of contact include, but are not limited to : </li></ul><ul><ul><li>Bank Employees and Customers </li></ul></ul><ul><ul><li>Internal Lines of Business (I.e., Retail, MC/MM & IB) </li></ul></ul><ul><ul><li>Consul General of India / Chicago Office </li></ul></ul><ul><ul><li>Business owners within the Hospitality Industry </li></ul></ul><ul><ul><li>Business owners within the Food/Grocery/Retail Industries </li></ul></ul><ul><ul><li>Business owners within the Travel Industry </li></ul></ul><ul><ul><li>Business owners within the Technology Industry </li></ul></ul><ul><ul><li>Professionals within the Health Care industry </li></ul></ul><ul><ul><li>Professionals within the Finance Industry </li></ul></ul><ul><ul><li>Professionals within the Consulting Industry </li></ul></ul><ul><ul><li>Professionals within the Engineering Fields (i.e., Mechanical, Electrical, Chemical) </li></ul></ul>
  18. 18. South Asian Marketing Strategy <ul><li>Use electronic and print media to create brand awareness for the group (minimum 2 year commitment) </li></ul><ul><li>Recruit financial service providers who can identify with South Asian culture and who can create sales opportunities with the help of dedicated financial advisors and product experts within the bank </li></ul>
  19. 19. Commercial Opportunity <ul><li>Fees generated from investing these assets as well as from residual bank services and products could amount to conservatively $500,000 to several million dollars in new revenue for JPMorgan Chase </li></ul><ul><li>The new business can generate hurdle ROE and accretive SVA within the 1 st year using conservative sales, revenue and cost estimates (detailed projections available upon request) </li></ul>
  20. 20. Getting Started <ul><li>Here is how JPMorgan Chase can enter this market and generate accretive SVA : </li></ul><ul><li>Review Business Opportunity with internal departments , namely corporate strategy group, marketing, systems, law, risk management and enterprise management to discuss the strengths and weaknesses as well as opportunities and threats associated with this Mass Affluent South Asian business proposition </li></ul><ul><li>Identify the appropriate Line of Business to house the proposed business unit </li></ul><ul><ul><li>Chase Personal Financial Services group, headed up by Barbara Goodstein may be a good fit, given their Mass Affluent strategy </li></ul></ul><ul><ul><li>Or, this may be a stand-alone business unit with a mandate to work across as many lines of business to source Mass Affluent South Asian prospects and referral sources </li></ul></ul><ul><li>Implement a 6-9 month Pilot Program to gauge interest and business potential before making a larger investment in areas such as staffing, marketing and product development; (specific initiatives available upon request) </li></ul>
  21. 21. Getting Started <ul><li>Sponsor community events and holidays to build brand recognition not only in Chicago but in India as well </li></ul><ul><li>Develop and promote products and services that reflect the unique needs of the South Asian consumer </li></ul><ul><li>Advertise with targeted mailings, print ads and the Internet to build brand recognition in Chicago and around the country </li></ul><ul><li>Host financial planning & insurance seminars to educate South Asians on the types of insurance, retirement, credit and depository products available to them, who to contact in each of these areas as well as to describe the process of attaining such products </li></ul><ul><li>Host investor networking seminars to introduce fellow investors to each other as a value-added service that will reinforce and perhaps deepen banking relationships </li></ul>

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