Spear’s and Butterfield Private Bank identify the ten hottest issues in private banking today
1. Philanthropy We’re always told that giving is better than receiving, and private banks have finally cottoned on. Coutts, JP Morgan, HSBC Private Bank and Barclays Wealth all have established philanthropy advisory services which help clients determine how they can give most effectively, sustainably and pleasurably.
2. Boutiques ‘There are very few truly independent small banks in the UK. Many of the household names in private and premier banking — the likes of Coutts, Adam & Co and Cater Allen — are in fact owned by some of the largest banks in the country, if not the world. The small independent banks are ideally placed to capitalise on the current feelings of negativity towards the larger banks.
‘While small private banks offer similar products and services to their larger peers, it is on personal service, relationship and tailoring where they come to the fore — arguably the true unique selling points of the small private bank.’ Raymond Sykes, managing director, Butterfield
3. RDR By January 2013, the entire model of private banking will have changed — no more old buffers who’ve been investing your money since the year dot, no more secret fees and kickbacks to the adviser. The Retail Distribution Review ensures wealth managers and private bankers will have proper qualifications and you’ll pay for their advice, not their product choice.
4. Technology If you can open a car without even touching the door and sync 8,000 contacts across all kinds of devices, why shouldn’t you be able to see what your money is doing at a moment’s notice? Some private banks are waking up and creating iPad apps which allow granular access to your investments. Safety concerns have not entirely been allayed yet, however.
5. Lending ‘Every new client has to start their relationship with a private bank in some way. One of the increasingly popular ways of doing this is via a lending proposition. We have been able to help wealthy individuals secure large mortgages between £1 million and £8 million since the start of the year. For many, it is also their first taste of private banking and they have appreciated the highest level of service, flexibility and personal relationship.
‘Although borrowing from a private bank is seldom cheaper than a high-street bank, the level of service is worth paying for. For example, one of our clients requested a substantial and complex loan on 23 December and we were able to provide an offer letter so that he could exchange by 4 January.
‘We have seen that lending offers a great start to a long-term relationship with the wealthy and their families.’ Raymond Sykes
6. Vickers Talk of ring-fences after the Vickers Report have left private-banking clients in limbo: do they fall into the protected, guaranteed retail space, or are they cast adrift in the casino pit? According to the report, HNWs are sophisticated enough to understand the risk of having your money outside the ring-fence, but that is little comfort when a protected retail bank fails and is saved and a larger casino bank fails and is not.
7. Women ‘Research has shown that wealthy women are dissatisfied with the service provided by their banks, with the majority feeling like “second-class clients”. A study from the Boston Consulting Group found that their dissatisfaction “stems from the unshakable perception that men get more attention, better advice and sometimes even better terms and deals”.
‘At Butterfield we recognise the potential of the female market and are keen to remain visible as a bank that understands and caters for this segment.’ Danny Dixon, head of private banking, Butterfield
8. Allocation Some private bankers and wealth managers have come to believe that it’s not the individual securities you pick which determine how successful your portfolio will be, but the balance of assets within it. If all boats are carried by a rising tide, one asset class will tend to benefit across the board (and vice versa), thus it’s the big picture you need to consider.
9. Passivity Similar to the move towards focusing on asset allocation is the increased interest in passive investments, such as ETFs, which track entire indices. According to Standard & Poor’s Indices Versus Active funds scorecard, since 2008 the S&P 500 outperformed 64 per cent of actively managed large-cap funds, and there are similar figures for mid- and small-cap indices and funds.
10. Extras ‘One of our clients was telling us about a holiday he had planned and how much he’d like to be able to drive his vintage Aston Martin while he was there. His private banker arranged to have his car shipped out to him and arranged for it to be collected at the end of the holiday — the client then told us that that was true private banking.’