It can be frustrating when the item you’ve set your heart on comes to market but your funds are tied up and you risk missing the opportunity. Gary Edwards, Credit Advisory Specialist at HSBC Private Bank explains how bespoke lending based on true relationship banking really can make clients’ dreams come true.
One of the common themes shared by many of the most sought after luxury purchases is rarity. Whether it’s a holiday home in an exclusive location, a one-off yacht or an exquisite piece of jewellery, what adds to its desirability is its availability, or lack of it.
It’s a theme supported by the Knight Frank Luxury Investment Index 2018, showing that the number 1 investment of passion across all surveyed countries (except Africa and the Middle East) was art – a truly unique collector’s item. However, in relation to 12-month changes in asset value, art was fairly static, with rare whisky seeing a huge 40% increase (582% over 10 years). The next biggest gains were coins (12%) and wine (9%), with jewellery seeing a fall at -5%. The Index also showed that coloured diamonds were another must-have item during 2018, with blue proving more popular than yellow, and classic cars saw increased interest – although Porsche as a marque fell by 6.5%.
When timing is everything
The inclusion of these asset types on an Investment Index can be misleading, however, as for many collectors the ability to buy these assets is often driven by the heart as much as by the head.Whether you want to splash out on 24ct gold bathroom fittings, purchase a holiday home in a desirable location or treat yourself to a classic car at auction, timing can be everything. Many of the most sought-after passion purchases owe much of their desirability to the fact that they are unique or extremely rare and that the opportunity to acquire them is fleeting. And even though you may technically be able to afford them, if you can’t put your hands on the cash quickly enough, it can mean missing out.
Don’t miss an opportunity
For many of our Private Banking clients, liquidity can be an issue. Perhaps your wealth is tied up in a business, or in property, and difficult to realise in the short-term window of purchasing opportunity. On the other hand, it maybe that, although the funds are available, using them would disrupt your cash flow or investment plans.
It’s in these situations that borrowing against the value of your assets can be a useful alternative. It can help you secure the object of your desire whilst it’s available – whether that’s buying a second property in your dream location that’s suddenly come onto the market, or a specialist item at auction – without disrupting your existing portfolio.
The art of the possible
At HSBC, we believe in the art of the possible, and our Bespoke Lending teams based around the world mean that we can lend against a whole range of assets. We build close relationships with our clients, so that we are perfectly placed to work with them to explore all the options when an opportunity arises, looking primarily at what we can do to help that individual realise their dream. Our understanding of their unique circumstances and portfolio of assets means we can move quickly to find the right solution. In some cases, for example, it might mean clients pooling their income and the value of their assets together to use as collateral for a purchase, or funding against the value of their business, family-owned assets or even intellectual property rights they own. Our approach is holistic and the options are limitless.
Combining that willingness to create tailored, bespoke lending with the collaboration of expertise available within the HSBC global business can make a real difference for clients who want to move quickly to secure a deal. Take purchasing a yacht or private jet as an example. The process of securing this type of moveable asset can take several months, but if we can take a charge over one of the client’s existing assets to free-up cash so that they can secure the yacht or jet at the right price for a speedy sale, we can work with our specialist international teams to remortgage that lend once the asset is secured.
Bespoke lending allows us to facilitate dreams rather than regrets. The key to achieving that is for Private Banking clients to have open and regular conversations with their relationship managers, so that opportunities are acted upon, not passed up. After all, if you don’t ask, you don’t get.
How bespoke lending could work for you
When one of our Commercial Bank clients and his wife were keen to kick-start their retirement by purchasing a holiday home in their favourite location, there was just one problem.
Although they quickly found a top-of-the-range holiday home in the South of France that met all their requirements, the funds they needed to complete the purchase were still tied up in their business. The business was on the market, but even though it was a standout, highly successful enterprise and there was no doubt that a sale would be achieved, it was unlikely to happen in the timeframe the couple needed to secure the home.
With other buyers interested in the property, and real estate in this particular location rarely appearing on the market, it seemed that the couple’s dreams would be frustrated. However, a chance conversation with his Commercial Bank relationship manager led to a referral to our specialist Bespoke Lending team.
Given the strength of the client’s business and its pending sale, we were happy to advance funds to help the client and his wife secure the holiday home of their dreams, with the repayment to be made from the proceeds of the business sale.
To find out more contact HSBC Private Banking