Relax; let a private bank take the strain

But the discreet old money moguls face new competition says William Kay. Make way for the thrusting young fund managers
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The Independent Online

When Robert Jones retired early from BP he decided he did not want to be bothered with money. "I wanted to be lazy," he said over a cup of coffee at his cottage overlooking the Dome in London's Docklands, "So I said to Lloyds TSB, 'You look after it'."

Mr Jones has the sort of money and attitude that banks are increasingly anxious to sign up for their so-called private banking operations. After 35 years with BP, he had a substantial pension fund and share options, enough to need proper fund management and tax advice. He decided he would rather spend his retirement pursuing his passion for the theatre, which, bizarrely, has led to him portraying the evil Dr Harold Shipman for the benefit of Japanese television.

Until a few years ago, Mr Jones would have had to take financial problems to separate investment, tax and accountancy specialists, while his banks would have had to watch some lucrative business slip through their fingers.

But now every bank tries to hold on to such attractive customers by offering these additional services under one roof. And, as the once-exclusive City stockbroker, Cazenove & Co, demonstrated this week, investment houses are thinking along the same lines from the opposite direction. They want the upmarket banking custom.

Andrew Ross, chief executive of Cazenove Fund Management, said: "We provide everything a private bank provides, apart from cheque books and lending money." So his senior colleagues at Cazenove are discussing the idea of filling that gap, aware that a Cazenove cheque book would carry a snob value almost as great as paying the bills with one of the highly elusive Bank of England cheques, which are largely confined to Bank staff.

But Cazenove will find it is entering an already crowded field. Most of the high street banks offer a private banking service, either under their own name or through having bought a genuine olde worlde private bank.

The biggest collection is held by Royal Bank of Scotland, which owns Coutts & Co, Child & Co, Drummonds and Adam & Co. Some longstanding City merchant banks, such as Arbuthnot Latham, have quietly moved into private banking, but the only family-owned bank with a long pedigree and still independent is the 330-year-old C Hoare & Co in London's Fleet Street.

They all offer similar deals. Customers have to have spare cash - "investable wealth", in the jargon - of at least £500,000, or keep at least £5,000 or £10,000 in a current account earning no interest, or pay a monthly fee of £20. And that is just for starters. In return, customers are allocated their own account manager as a first point of contact, who will visit them at home if required. Overdraft facilities, credit and debit cards and that ever-so-posh cheque-book come with the rations.

The banks make their real money out of this well-heeled breed from the add-on services that, like Mr Jones, they cannot be bothered to do for themselves. They will fill in a tax return, invest in stocks and shares, unit trusts, investment trusts or hedge funds, set up a trust, advise on transferring money to other members of the customer's family, sort out private business interests, suggest the best ways to give to charity, minimise inheritance tax. All for a percentage varying from 0.3 per cent to 2 per cent of the money involved, for each different service, per year.

Those percentages can soon add up. These private banking services are not to be confused with premier banking, which has lower fees but also lower quality of service. Andrew McDougall at Barclays said: "These customers are getting a more specific, personal, service for their money."

But, if you have the money to swim these luxurious waters, it pays to shop around. Each of the private banks likes to point to a particular speciality that it concentrates on. They like to ooze old wealth, and Coutts executives quietly hug themselves every time someone mentions that they are the Queen's bank.

But nowadays money can come from all sorts of directions, and Coutts has recently opened a Liverpool branch where one of the first customers was believed to be Wayne Rooney, the 18-year-old Everton and England footballer. So Barclays targets entrepreneurs who may need advice on how to develop their business. HSBC prides itself on lending on what it calls "non-standard collateral", such as diamonds, record royalties or unusual properties.

Coutts probably takes this to the furthest extreme, dividing its clients into no fewer than nine categories, each served by a specialist team. These include lottery winners, lawyers, entertainment stars, sports stars, and those with inherited wealth.

Robert Taylor at Coutts says: "They each have different problems. A successful lawyer will need to borrow money in the early years to buy into a partnership, but then will be investing later in their career. Sports stars retire at about 35; they have high earnings while they are still young, so they need pension planning. Old money needs inheritance tax advice."

The big question for a potential private banking customer is whether to go to a bank that has expanded into wealth management and other advice, or to an investment house that has gone into banking, as Cazenove is contemplating.

The US-owned JP Morgan Fleming Private Bank offers a service for individuals with £10m to invest, or families owning £25m. The banking is almost taken as read, while customers tap into the expertise of one of a world-class investment bank. But some of the banks mutter that it is easier for them to go into investment than the other way round.

But if you want discretion, it is hard to beat Hoare & Co. When Alexander Hoare, a director, was asked for a comment, he said: "Actually, we are happy not to appear in an article."

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