16 Nov 2010

Survey points to bright future for independent private banks

Almost 100 influential figures from London's banking, trustee and advisory communities came together this week for a topical debate on the future of private banks and how the super rich manage their wealth, held by Lawrence Graham LLP.

A survey at the event found that almost two thirds of attendees (61 per cent) still believe that exceptional service and a personalised approach to managing wealth is the most important consideration when selecting a private bank - ahead of the ability to spot wealth management opportunities (16 per cent) or a fortress balance sheet (9 per cent). The remaining 14 per cent favoured a global brand that would protect customers against financial risk.

However, whilst service remains king, the vast majority (81 per cent) of respondents believed private banks should provide a range of services - including day to day banking, investment opportunities and wealth structuring, rather than focusing purely on personal banking (11 per cent).

There was also a strong preference for independence from state control with over two thirds (70 per cent) favouring a bank that has never been owned or partly owned by a government.

In terms of competitors within the industry, 50 per cent felt that other private banks offering better service or incentives were the main threat to a private bank, ahead of multi-family offices (20 per cent), IFAs (10 per cent) or boutique investment managers (20 per cent).

One area of keen debate was the preferred culture of a private bank. Perhaps as a result of recent uncertainties, 40 per cent of those surveyed said security of assets was their prime focus. In contrast, 31 per cent felt personal service was most important and a quarter (25 per cent) were principally concerned with investment performance. Interestingly, only four per cent felt that providing value for money was the most important characteristic of a private bank.

Remuneration was also a key issue - a small majority (54 per cent) of those surveyed believed fixed annual fees were the best form of remuneration while 23 per cent preferred an ad valorem approach based on the value of their customers' investments. In the discussion that followed, attendees and the panel suggested that a move towards a mixed remuneration structure was increasingly favoured by clients.

The debate, chaired by Sebastian Dovey, Managing Partner at Scorpio Partnership Limited, attracted a high profile audience, including representatives from Deutsch Bank, Morgan Stanley Private Wealth Management, Barclays Wealth, Schroder's Private Bank, Merill Lynch and Citco London.

They heard from a panel of experts, including Charlie Hoffman (HSBC Private Bank), David Poole (Citi), and Bella Hopewell (C Hoare & Co.).

The debate was the fourth in a series held by Lawrence Graham LLP. Family Bhive, a social network for the ultra high net worth community and the industries that serve them, will promote the debate via its website. Attendees can also leave comments and research those they met at the event to see if they can do business with them by visiting the Family Bhive website.

Anthony Thompson, partner with Lawrence Graham, said: "What's interesting from our survey of key industry experts is that, whilst exceptional service associated with a private bank is still extremely important, clients are increasingly looking for a wider range of products from these providers as well as greater transparency, particularly on the issue of risk.

"This series of debates were designed to stimulate discussion around the major issues facing the private client industry - from trust structures to issues of pricing, reporting and transparency - and last night was a great example of this.

"Each time we've been delighted with the turnout and the level of lively discussion and we will be continuing the series of events next year."