Champagne bankers scramble to uncork wealth

Banking: John Eisenhammer reports on a rapidly growing global market that is still untapped
Click to follow
The Independent Online
Forget all the talk of financial insecurity gripping the population. The wealthy have never had it so good. Their numbers are booming and banks are tripping over themselves to get their custom. The news from the high street may be of branch closures and job cutbacks, but in the select world of private banking, the mood is of heady expansion. Pampering the rich has suddenly become serious business as private banking is targeted as one of the most attractive growth sectors.

"This is an enormously exciting market, growing in the UK by around 6 per cent a year, compared with a general banking market that is pretty mature and stable," says Peter Dacombe, head of private banking at Lloyds, which is reportedly the market leader in Britain with 25,000 customers.

All the main players are investing heavily in reworking the image of their private banking operations and expanding them. Midland Private Banking, launched at the beginning of the year, has already opened 30 offices. "We have to specialise around the demands of this new wealth. You need trained people who are good at listening. This is a not a high street proposition," says Peter Wren, managing director of Midland Private Banking.

Lloyds had renamed its service somewhat earlier, investing in new offices and personnel, while Coutts & Co, part of the NatWest Group and one of the grand old names of private banking, has been purpose- fully revamping a business that had rather gone to seed.

Hambros is in the midst of a full review of its private banking operations."The market has changed completely from the old days of banking for the few landed wealthy. Just think of all the young entrepreneurs, sport stars, people running professional practices. These are 30- and 40-year-olds, not 70-year- olds, and they want a modern approach," Mr Wren says.

The pool of wealth in the UK has been pumped to overflowing by cascading inheritances, the sale of family businesses and the well-publicised exercising of share options. "There is an increasing awareness of the need to have one's wealth managed properly. Last week we satisfied a private client's inquiries about investing in antiques and fine wines," says Mr Dacombe.

The banks are moving all the faster for not having moved earlier with the fast-developing market. "People have been getting wealthier here for a decade, but the banking service was largely unchanged. There is a lot of catching up to do; it is still a relatively untapped market," says Mr Wren.

But the attractiveness of private banking for the big banks with global networks is heightened by its international opportunities. In areas like Asia and Latin America wealth creation is bounding ahead.

"Wealth creation is growing globally by 10 to 15 per cent a year. In terms of opportunities, private banking is one of the few markets where you can see growth well above the rate of inflation," says David Went, chief executive of Coutts & Co.

"Clients in our line of business will typically want to have relationships with us in more than one place. A Middle East client, for example, will want to deal with us in the Middle East, but also have a service in Switzerland and in the UK."

Different cultures demand different types of service. In Hong Kong private clients want their bank on the phone several times a day saying how investments are being moved around.

In Britain clients prefer to let the bank get on with it.

The threshold for private banking services varies considerably. Lloyds expects clients to have liquid assets of over pounds 75,000; the Midland of over pounds 100,000. Coutts, though it says it has no fixed criteria, prefers investors with rather more.

From there on, the sky is the limit, with millionaires many times over expecting a personally tailored service. In the Middle East that can include the bank picking up clients at the airport and doing all their travel arrangements.

But generally it means handling a customer's financial affairs right across the board, providing banking, investment and tax advice and estate management.

"The new clients have changed the nature of private banking from wealth preservation, which is what the older customers wanted, to wealth enhancement," says Mr Went.