Charles Schwab targets Chinese investors

Charles Schwab seeks to lure Chinese investors.
Charles Schwab, the world's biggest online brokerage, is rolling out its strategy for winning Asian customers. It is particularly interested in targeting the Chinese, who the company estimates have more than $1 trillion stashed away under mattresses or in bank deposit accounts.

The US-based company opened its first branch office in Hong Kong on Wednesday and plans to launch its online trading service by the end of the year. The company is betting its dual-pronged approach, which combines online services with bricks and mortar branches will be more successful than pure online investment companies, or pure bricks and mortar houses, of which there are becoming ever fewer.

The Hong Kong office is one of a series of branches the company has set up recently in areas of the world where there are strong Chinese populations, including Toronto, Vancouver and Australia. By the end of this year it also plans to open a call center in Hong Kong, connected to the Asia Pacific Services call center in the US, and offering 24-hour services in Mandarin, Cantonese and English.

"There are large overseas Chinese populations around the world," says Larry Yu, head of Schwab's Global Asia Pacific Services. "Our aim is to customize our services for that global Chinese market."

Schwab has 7.4 million accounts and $961 billion in assets under management. Of those, 42 million accounts, accounting for $420 billion in assets, are traded online. Schwab maintains its "clicks and mortar" strategy will be particularly attractive to Chinese-speaking investors who want to be able to trade online but like the reassurance of a local branch where they can receive personal service.

Schwab is the latest in a rash of investment vehicles springing up to try to part Hong Kongers from their savings. Earlier this month CMG First State Investments and SSB Citi Asset Management launched "guaranteed" health and technology funds which promise to return investors at least their principal if they hold the fund until it matures. Only 8% of Hong Kong's savings are invested in mutual funds or unit trusts, compared to 50% in the US. According to Schwab, Hong Kong investors hold their investments for an average of 12 years. The brokerage is betting more mutual funds will enter the market as Hong Kong rolls out its mandatory pension scheme at the end of this year.