Private banking is often dismissed as out of reach for all but the ultra-wealthy. Victoria Hartley explores the market to find out just who exactly is welcome and what you can get for your money.

Private banking services offer clients a world of discretion, service and luxurious little extras the majority of us know little about. Entry requirements vary wildly, but most banks are unlikely to consider applicants with less than £500,000  to invest, and few are willing to give a full discretionary investment service to those with under £2 million to
£3 million to invest.

However, the private banking services offered by the high street banks are targeted at more of a mass affluent market, rather than the discrete few high-flyers that might appear in the Sunday Times Rich List.

Some of their requirements in terms of income and money to invest can be considerably less demanding than the level demanded by more specialised institutions. Even Coutts, which demands that clients should have at least £500,000 to invest, will consider taking on someone as a client if they believe that person has the potential to grow their assets over time.

Who needs a private bank account?
Everyone can get by with ordinary bank accounts, but a private bank account offers a more personal and tailored service. These days, those with private bank accounts are just as likely to be entrepreneurs, footballers, City workers or the recipient of a high-profile divorce settlement as to be a member of the aristocracy or to have inherited wealth.
Along with the private banking facilities, these institutions also offer a whole range of services, such as specialised wealth management, which would be open to their private banking clients.

Andrew Hagger, spokesman for comparison website Moneynet, says, ‘If you are a high-flyer, entrepreneur or someone with a lot of wealth and/or little spare time, it might be worth paying to receive a professional service from a relationship manager that understands your needs.

‘You will often require quick decisions and flexibility to ensure that you don’t miss out on opportunities that may arise – standard high street banks are no longer geared up to handle the specialist needs of wealthy but demanding clients.’

Charlie Hoffman, managing director of HSBC Private Bank, says the bank’s client list is diverse, ranging from extremely sophisticated businessmen with a clear idea of their own risk profiles to those who have never dealt with their own assets before.

‘Both are very exciting to deal with. Sophisticated clients are familiar with finance and have a similar knowledge base,’ he says. ‘Alternatively, we can educate clients and make any financial discussions as simple and informative as possible. Some clients want to be hands-on in managing their money, while others are very comfortable in handing over the reins completely.’

All private banks will have a website encouraging online applications, and C Hoare and Co, the UK’s oldest privately owned and family run bank, established in 1672, is no exception. On its ‘Contact us’ page, the bank says: ‘We normally expect new customers to be introduced by an existing customer and we are most suitable for those with high incomes, significant assets and excellent prospects. We wish to build long-term relationships with customers who will use a wide range of our services – banking, financial planning, investment management, trust and tax.’

Which are the private banks?
When you think of private banks, you might think of oak-panelled walls, leather-bound chairs or Gringotts, Harry Potter’s bank with its vaults filled with gold. But these days most of them are distinctly more modern. Coutts, for example, has a very swish, futuristic building in the Strand.

Well-known high street names like Lloyds, HSBC and Barclays also have private banking arms and compete with traditional names like Coutts (part of the RBS Group) or Arbuthnot Latham. International banks like Citigroup or
J.P. Morgan offer services to UK customers, and there is a variety of wealth management services that offer pure investment and deposit services but no bank account.

Like premium accounts, on the tier below private banking, private clients pay a monthly fee and receive a yearly financial review, along with other luxuries such as business lounge access at airports and international concierge services.

Hagger says that private banking clients get a level of service that is comparable with having a financial PA. Private banking clients are allocated their own relationship managers, and these managers service, say, 100 to 150 clients instead of the thousands covered by a relationship manager with a mass market service. Private bankers may also offer tailored international and entrepreneurial services because many private clients have international business interests and properties and travel frequently.

‘Private banking is not just about people with huge sums of money. It is for those who require non-standard products and the expertise of someone who understands their requirements and can make decisions quickly, without having to refer to head office,’ explains Hagger.

What do you get for your money?
Coutts, HSBC and Barclays private banks pride themselves on their full-service offering of anything from advice and financial planning, including tax and fiduciary services, to full discretionary investment services, although the qualifying level for these is higher still.

With a full discretionary service, a relationship manager (or several in some cases) acts as the linchpin, providing access to specialists on any finance issue. Whatever the need, whether a foreign or UK mortgage, credit reference or start-up company, a private bank should be able to fix it, or arrange an introduction to someone who can, regularly reporting back to clients on progress made.

Hagger adds, ‘Many private banking relationships will be long term as the bank will focus on getting a thorough understanding of a client’s financial situation over time so that they can meet their individual needs and aspirations.
‘These clients seek much more than just a bank account; usually, they will have complex taxation issues. Some will also need to be able to deal in multiple currencies rather than just sterling. Others will have lending requirements that will fall outside the criteria of a high street bank, and most will demand access to an account relationship manager 24/7, 365 days a year.’

Wealth management services like Cater Allen, Kleinwort Benson, Rensburg Sheppards and London Capital offer pure investment or tax and inheritance services and leave the banking service to other businesses. Some wealth managers don’t hold the money themselves, but manage and deposit it with another bank. Others offer execution-only investment services, allowing clients to either manage their own investments or parcel out that responsibility to a financial adviser.

Are there non-financial benefits?
The social cache of being able to flash a private bank account card is just one intangible benefit. Coutts spokesman, Nick Gill, says 18,000 of its clients are entrepreneurs. ‘There has been a huge increase in entrepreneurialism in the past decade, and it has been a growing part of the UK’s economic engine.’

Many get a referral to Coutts after they have sold a business and so satisfy the assets requirement. ‘But if an entrepreneur with a strong proposition came to us, we’d talk to them of course, because it would be silly not to,’ adds Gill.

Several private banks offer networking forums that allow specialist speakers to meet and mingle with prospective
clients and offer services tailored to their particular needs. ‘If you’re a start-up, you need to be planning an exit strategy five years ahead,’ says Mark Hussein, head of private wealth management at Kleinwort Benson. ‘Therefore, you have to structure the business in the best possible way to establish a good cash flow position and get early advice before you tie up your money. We offer financial planning and tax teams and establish relationships early to be able to offer help along the way, so at some point we can invest and grow their money further.’
 
Fees and charges
The old-fashioned suggestion is that if you need to ask what the fees and charges are, you may not be a candidate for private banking. However, average fees and charges will obviously be higher than those for standard accounts.
C Hoare & Co, for example, charges a monthly £40 for a personal bank account and 65p for each transaction, but those fees are waived if the balance stays above £15,000. Trust and executor accounts cost £25 a month if balances fall below £7,500.

Butterfield Private Bank charges £5 to produce a copy of a statement and 50p each time a client pays in a currency cheque in sterling drawn from a UK bank, with a £5 minimum charge. Sometimes, charges will be waived or discounted the more widely a client invests, and rates can be negotiable if a client is investing millions.

Cater Allen says its fee tariff is published and non-negotiable, although as with mainstream savings accounts, higher deposits attract better interest rates. ‘What you see is what you get with us,’ asserts Sally Watts, head of banking products. ‘Our rates and fees are clear. There are no tricks – it’s just simple banking with really good service.’

Wealth management services
Many private wealth management clients keep their premium current accounts and simply bolt on private services, like trust or will writing.

Jon Seal, director at wealth manager Rensburg Sheppards, explains, ‘On issues like will writing, for example, we can have direct discussions with a solicitor. Last week, I had a client whose discretionary seven-year trust had elapsed, so I phoned the client’s solicitor to ask him to find out the client’s wishes.’

And Ian Tait, director of private clients at wealth management firm London & Capital, adds, ‘It varies, but if you go to see a bank adviser, he or she will talk about risk strategy and financial planning and invest your money, but then there is an overt disconnect between a service at that level and what happens to your money after that.’

An adviser will discuss a client’s aims and establish a risk profile in a similar way, but an investment manager joins in, allowing the client to meet and question the person who will actually invest the money.

Independent wealth managers also contend that investing through the institution that also holds your bank account can bring risks. Seal says, ‘Investors should always be aware that if a bank adviser recommends an in-house product, they should wonder if they are getting best advice. Few internal bank funds submit their performance to external scrutiny. Often investors draw comfort from the brand instead of transparent fund performance.’

But the downturn is likely to be a great leveller, says Hussein. According to The Times Rich List, the recession wiped £155 billion from the fortunes of Britain’s richest 1,000 people, equivalent to more than a third of their wealth. ‘Lots of clients have been in a frozen state after the past 18 months, but now many will be questioning who their bank is and why they are with them, and then ask, “What did you do to mitigate my position?”’