Anthony Hilton: Private banks have lots to shout about, but they’re far too private for that
Saturday 23 November 2013
For years on my way to work I used to go past the front door of the private bank Duncan Lawrie without knowing it was there – which shows how private they were. But it also underlines a dilemma for firms such as theirs. When the essence of what they offer is a discreet personal service, how do you let people know you exist?
Private banking has a bit of a bad name. People used to think it was something secretive and probably Swiss – and only for the seriously wealthy. Then after the turn of the century growing numbers of mainstream financial institutions thought they could attract wealthy clients by promising them a private bank within the overall umbrella – a bit like some fairly humdrum hotels have special floors with a special key for people willing to pay a premium price. It worked to the extent that they attracted a fair number of the middling well off, who were, if truth be told, a bit flattered that they qualified for private banking status.
It is always debatable in hotels whether the extra service is enough to justify the extra charges but it was even more obvious with private banking that it was not. People thought they were getting a personal adviser but instead they got a product salesman – often a previously redundant independent financial adviser. The latter may have sounded public school with posh accents to match, but they were still salesmen – as many clients found to their cost when the financial crisis broke in 2008 and their portfolios turned out to have been stuffed full with worthless structured products often ultimately linked to subprime mortgages.
Since then the big banks have retreated, there has been much consolidation and the genuine private banks – like Duncan Lawrie – are beginning to find their voice again. And theirs is an interesting offer. They don’t promise the inside track on investments, they don’t promise particularly exclusive banking, but what they do is make you feel wanted. Clients really do have a personal account manager who knows who they are and whom they can contact, providing good, commonsense financial planning. It’s what high-street banks and stockbrokers offered 50 years ago as a matter of course – banking and broking as we used to know it. It ought to be a very good business to be in because the demand is certainly there – if only people knew it was available.
Resolve the skills shortfall or housebuilding will hit the wall
On Thursday the annual conference of the principal contractors’ group of the National Federation of Builders took place, and, for the first time in several years, there was a degree of optimism. Things are beginning to get better but don’t get overexcited. Even keynote speaker Vince Cable, the Business Secretary, warned against taking anything in this recovery for granted.
The most startling unknown to my ears came in a presentation from Judy Lowe, the deputy chairman of the Construction Industry Training Board. Though it is hard to believe given the still depressed state of the sector, it is already finding it hard to get skilled workers. This means there is a real danger that the industry will run into severe labour shortages well before it gets back to operating at what should be its full capacity.
Her numbers were startling. The industry has lost 390,000 people since 2008, largely because companies had to scale back drastically to survive in the face of collapsing order books. Many of these were Eastern Europeans – the legendary Polish plumbers – who have gone back home.
But an even bigger and even less appreciated potential problem is that construction is likely to lose a further 500,000 people in the next five years, not as a result of the economy but through retirement. Construction employment has a dangerously skewed age profile so that currently 27 per cent of those in work are over 50, and only 12 per cent are under 25. The old are leaving and the young are not joining in anything like the numbers needed.
The consequence is that the industry needs to find 165,000 new skilled workers every year just to stay in the same place, and it is very hard to see where these are going to be found in this country. Indeed, there was also a report at the conference that more than 30 per cent of housebuilders are already struggling to find bricklayers and plasterers.
Unless those Polish plumbers return – and are made to feel welcome by a Government whose actions more often imply the opposite – the growth of the entire economy could be held back by the inability of construction to find the skilled people it needs.
If they want to be trusted, finance firms have to earn it
If there is a growth sector in financial services, it must be seminars on the topic of restoring trust. There were two more to my knowledge this week – though I attended just one, and that was probably one too many.
The problem is that to talk of restoring trust is to start from the wrong premise; an individual or company can try to make itself trustworthy but it is up to other people to decide whether or not they will trust it. A second false assumption is that trust disappeared with the banking crisis; actually, people stopped trusting financial services years before that, but the industry failed to notice. So the problem is inherent to the way the industry has behaved for years.
A third issue is that you never really get trust until you empower customers. People trust Marks & Spencer because they know they can take those socks back and exchange them with no questions asked. Giving that sort of power away is something financial services has never done.
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