Join the blue bloods

If you've got a princely sum, the banks are vying for your custom

Coutts, the élite bank favoured by the Royal Family, Premier League footballers, pop stars and lottery winners, is considered the ultimate in private banking. In fact, there is far more choice available to the rich, with a wide range of private or premium banking services coming on to the market.

Coutts, the élite bank favoured by the Royal Family, Premier League footballers, pop stars and lottery winners, is considered the ultimate in private banking. In fact, there is far more choice available to the rich, with a wide range of private or premium banking services coming on to the market.

Increasing wealth is generating demand for these services, leading to a need for more sophisticated financial products and advice.

To bank with Coutts, you need liquid assets of at least £500,000. However, other banks offer private services for people with more restricted funds. For example, the Royal Bank of Canada and Investec, the South African bank, both have a private banking facility for people with a minimum of £10,000 to invest. HSBC has a private client service for those with £30,000 or more, and NatWest's private banking service is available to those with at least £75,000 in liquid assets.

Private banking is little understood: most people think it is just like normal banking but for the well-off. In fact, it is a complete service. "If your needs are purely banking transactions, then you probably don't need a private account," says Paul Feeney, managing director of NatWest Private Banking. "Private banking offers a wealth management service that gives advice on how to make the most of your money."

Andrew Fisher, group chief executive at Coutts, describes private banking as a "holistic service", which offers advice on how best to protect and manage your wealth. This explains why it is associated with the ultra rich, as their finances are far more complicated to organise. They require in-depth advice on matters such as how to protect their money from capital gains tax and inheritance tax, and where to invest.

If you are putting large amounts of money into funds such as unit or investment trusts, you will end up paying high management fees if you invest yourself. If, however, you go through a private bank, then the buying power it commands by combining the funds of several customers enables it to negotiate lower charges.

"We have a different set of products and services depending on the wealth that has accumulated," says Phil Cutts, vice-president of Royal Bank of Canada Global Private Banking. Those with £500,000 to invest will have extra options but also more chance of facing complications than those with £30,000, so a different service is required.

According to HSBC, the private banking market is growing by 20 per cent a year. Investment bank Merrill Lynch says that some 13 per cent of the adult population in the UK have liquid assets of between £100,000 and £200,000, while about 6.5 per cent have over £200,000.

So while private banking used to be targeted at very high net worth individuals, the fact that so many people now have considerable assets makes them attractive customers to banks. In addition, says Martyn Begbour, senior business development manager at HSBC Private Client, banks now realise that customers are demanding more as they become richer and raise their expectations of financial products and services.

Mr Fisher notes that compound interest is a big factor in the rapid growth of the private banking market. This, coupled with the fact that Britain has not been debilitated by war or crisis for many years, means we have been able to accrue more money. The knock-on effect is that an increasing number of people are inheriting this wealth from their parents, passing it down through the generations.

The main area of growth in new money, however, is entrepreneurial wealth. Lots of people are making cash through owning their own business or exercising share options, and such people need the advice of a private banker. Increased regulation means the fairly basic services offered by a retail bank may not be sophisticated enough.

"Private banking provides a structured service," says Leon Blitz at Investec. "It is for clients who require independent advice, not off-the-shelf [products]."

The fact that overseas banks such as Investec and Royal Bank of Canada are offering private banking to UK customers illustrates the global perception that there is a huge target market here. NatWest only launched its private banking arm last week, while investment house Schroders has recently been granted a licence by the Financial Services Authority to launch its own private bank, Schroders & Co.

"Wealth management is the fastest-growing area of UK financial services," says Mr Feeney at NatWest. "In the past, the market was split between the super-high net worth banks and the high street. There is now a growing number of banks targeting this in-between market."

* Contacts: Coutts, 020 7753 1719; HSBC, 02380 531467; Investec, 020 7597 4000; NatWest, 0113 241 6021; Royal Bank of Canada, 020 7653 4746.

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