Rich pickings

    6 October 2018

    The Old Masters, the tasteful antiques, the Montblancs — everything in a private bank looks reassuringly expensive but should you be drawn in? At their best, they offer long-term planning based on inside-out knowledge of your finances, make personalised flexible loans and offer independent investment advice which stretches beyond their own products. Of course, just qualifying for their service is gratifying and, if many clients were honest, they would admit the ego massage is a potent attraction. Ditching the lunchtime queue at NatWest for corporate hospitality with private bankers at Wimbledon will make you feel richer in an instant.

    These days, however, private banks are under pressure from their high-street rivals which now offer ‘premium banking’. Some even call it ‘private banking’. These services go a little beyond their usual ‘one size fits all’ of high-street banks. They offer more tailored advice and their lending isn’t entirely decided by computer. Compared with genuine private banks, these services accept clients of slightly more modest wealth.

    There is, then, an unprecedented plethora of options for high-net-worth individuals. It is worth thinking precisely which services you need before a prospective ‘relationship manager’ starts trying to seduce you with the red-carpet treatment and the ‘soft’ benefits of networking events and art consultancy. Often, private banking means investment management. Whether or not you need that should be one of your earliest considerations. Any bank will be keen to retain as much of your money in-house as possible, and you should explore how content you would be with their range of services.

    The archetypal private bank is family-run and centuries-old, such as C. Hoare & Co (founded 1671), Weatherbys (1770), or Raphaels Bank (1787). These all remain independent. Some of the most famous, however, including Coutts, Drummonds, Adam & Company and Child & Co, have been bought up by RBS. As they have become more corporate, they have lost a little of the charm and personal touch that endeared them to their customers. It makes sense for banks to set their sights on double-digit millionaires, but some have been more obvious than others. Adam & Company, for example, has introduced higher charges at the lower end of balances, which predictably did not sit well with existing customers.

    Do you need to be a double-digit millionaire to join these days? As discretion is one of their characteristics, most private banks are cagey about their qualification criteria. A few require relatively little: Cater Allen asks only that you hold £100,000 there, with an opening deposit of £5,000 per account. It is common to ask for far more. At Brown Shipley, clients need investable assets of at least £500,000; at Arbuthnot Latham, it is £1 million. At Britain’s oldest privately owned bank, C. Hoare & Co, money alone will not be sufficient — aspiring customers need £1 million handy, but also have to be recommended by two existing customers.

    Where personal wealth might let you down, family connections can help. As many banks are keen to lock in young clients with bright prospects or wealthy parents (preferably both) they often lower the bar in the hope they will become lucrative customers. For a few years I piggybacked on my father’s account at a bank called Butterfield. When I was 18 they gave me a gold credit card — with little money behind it. It sat, seldom used, in my wallet next to my student railcard and my ‘First Saver’ NatWest visa debit.

    Historically Coutts used to think strongly along family lines, too. Until 2016 it had a branch on Eton High Street, primed to serve the next generation. The emphasis at Coutts has shifted to flashier, newer clientele and it now offers services such as Coutts Concierge, which operates in 20 languages and helps clients book sought-after events and restaurants. The most popular is Sexy Fish, the Asian restaurant in Mayfair well known for attracting wealthy Russians, followed by Chiltern Firehouse.

    At the ‘private-banking’ arms of high-street banks, the entry threshold is generally lower, but more rigid. Family wealth is unlikely to get you far with, say, Barclays in the way that it might at C. Hoare & Co. Lloyds requires £250,000 in savings, investments or pensions, or an income of £250,000. This entitles you to a personal advice service, but no dedicated manager, nor any private accounts. For that you need £250,000 in savings and investments or at least a £750,000 mortgage with them.

    Should you qualify, your private bank should be well equipped to handle your typical high-net-worth dilemmas, such as inheritance tax planning, efficient philanthropy and succession in a family business, with the benefit of being a one-stop shop for that advice. They also usually offer enticing rates on mortgages and investments products, and nuanced lending options. Many have long-standing experience in the ‘old money’ problem of being ‘asset rich, income poor’. With this in mind, they offer loans against assets such as fine art, and against intellectual property for customers in creative fields. C. Hoare & Co has specific teams respectively geared towards landed estates, landlords, entrepreneurs, and people who work in the arts who, as the bank delicately puts it, have incomes ‘outside a fixed pattern’.

    But corporate hospitality and personal service doesn’t come for free. Many banks only specify fees upon application, but for Coutts’s most basic ‘sole banking relationship’ you can expect an annual tariff of £900.  C. Hoare & Co. charges £60 a month per current account, unless you hold more than a certain amount there.

    Private banking frills are attractive, but of dubious value. Instead, if you are tempted, you should focus on your borrowing needs, such as whether you want investment management. If all you need is a place for depositing money or taking out standard loans, a private bank does not merit the expense. After all, if you have the time to shop around for high-interest accounts and investment advice yourself, you can buy your own tickets to the opera with all of the money that you saved.