Private banks place premium on personal touch with customers

Think private banking, think oak-panelled institutions used by generations to dodge inheritance tax and set up trusts for the younger ranks of privileged customers.

Think private banking, think oak-panelled institutions used by generations to dodge inheritance tax and set up trusts for the younger ranks of privileged customers.

To "ordinary" banking customers, those oak doors may seem firmly shut, but not so, claim today's private banks. Some are chasing new customers, emphasising that gaining entry to the sector is less likely to be about being proposed by two existing members and more based on the hard facts about your investable assets.

Coutts & Co, which loves to be described as the Queen's bank, is owned by Royal Bank of Scotland, which also has Child & Co, Drummonds and Adam & Co. Coutts targets customers with at least £500,000 to invest.

In 2001, Coutts reorganised its private bankers around different groups, such as landowners, entrepreneurs and sports professionals, with the aim of reflecting the changing character of private banking customers and to create products tailored to their needs.

The services offered are typical of a private bank. Every client has an individual financial plan and a dedicated private banker who can meet them at their home or workplace. A 24-hour phone and internet service is also available.

There is no fee for balances of at least £3,000 or non-sterling equivalent. But below £3,000, there is a quarterly management fee of £45. The investment management service charges an annual fee equal to 1 per cent of the capital value of the portfolio.

Private banks can be separated into independent family run banks, typified by the ultra-exclusive London bank C Hoare & Co; private banks owned by big clearing banks, including Royal Bank, Lloyds TSB and HSBC; and those owned by small banks, such as Arbuthnot Latham.

The emphasis on the personal touch is in all cases their justification for charging more than the plain vanilla banks. But whether it is worth paying the extra depends on your circumstances. After all, if you only want a straightforward service you can get better interest rates on the high street.

Allan James, banking director at Arbuthnot Latham, says: "Private banking does not mean a stuffy, exclusive service. Here it means being approachable. Our customers don't mind putting up with lower interest rates on some products in exchange for the high level of personal service."

An Arbuthnot customer, Peter Burditt, says: "They phone me when my balance gets low. If I don't have time to sort it out, they even come to my house with paperwork and tell me where to sign. It's not about having the most competitive products, it's about getting things done and getting excellent service."

The 50-year-old Londoner says it was a catalogue of errors by his previous bank that led him to private banking three years ago.

Arbuthnot Latham's current account pays just 0.2 per cent AER on balances up to £24,999, but you can start an account with a relatively modest £10,000. On the three-month notice deposit account things look healthier: balances of £50,000-plus attract 3.66 per cent AER, nearly base rate.

Many private banks highlight service over basic competitive banking products to tempt disenfranchised high street customers, who are used to wrangling with call centre staff to keep their affairs in order, while private banking aims to offer consistency.

Mr James says that most of Arbuthnot's managers, who are customers' single point of contact, are more likely to leave in their coffins than they are to leave to work elsewhere.

Hoare & Co's website does not say much about tempting account terms, but makes much of its staunchly old-fashioned approach. It remains 100 per cent owned by the Hoare family and is managed by the direct descendants of the bank's founder.

Established in 1672, the bank says it is most suitable for those with high incomes, significant assets or those who have what it deems to be excellent prospects. It stresses references, as opposed to fixed income or assets, as the key to becoming a client.

But is going to a once independent bank or the private banking division of a larger organisation an inferior banking experience?

Lloyds TSB Private Banking caters for those with more than £250,000 in cash and/or marketable assets, and acts as an independent financial adviser. It says it is one of the largest and fastest-growing providers of private banking services in the UK, with over £8bn of funds under management for about 40,000 clients.

As well as an asset management service, customers can withdraw up to £500 a day from cash points, instead of the normal £300, and they get a fee-free Lloyds TSB Gold credit card with a £5,000 limit. Asset management clients are charged 1 per cent for assets of £500,000 and below. There is also a quarterly charge of £35.

For that Lloyds TSB will complete tax returns, write wills and plan retirement and estates. Its instant access investment account pays 3.15 per cent AER on balances of £10,000 and above.

HSBC's private banking arm offers similar services, for which customers need about £150,000 of investable assets. The managing director, Phil Dillnutt, says: "Our private banking is about meeting all of our customers' financial needs. They appreciate the depth of expertise and length of relationship offered."

Although many private banks no longer insist on references from existing customers, you would be well advised to use your friends and rely on word of mouth to find the right service for you.

Once you have decided on a shortlist, it is important to go to see the bank: some offer informally to match your personality an appropriate personal banker to make sure you have the right rapport.