Private goes a little public: Lisa Vaughan reports on a new mood at Britain's most exclusive banks

WHAT a difference a decade makes. In the 1980s, the frock-coated providers of exclusive financial services for Britain's wealthy were absorbed with the problems of affluence. Visiting sheikhs would request cash on silver platters for shopping sprees while wealthy City gents made rich beyond their dreams by Big Bang demanded immediate facilities to take care of spontaneous purchases like a new Porsche or a country manor.

In those days, private banks could afford to be choosy about their customers and the snob factor was part of their exclusiveness. The job is harder now. Private bankers may have discreetly to advise customers on how to thread their way out of a financial tangle, to cope with the shrunken values of their property and business assets or to fund a cash call from Lloyd's.

Some private banks, including Coutts, Britain's biggest, and Adam and Co, the small Edinburgh-based bank, have made pre-tax losses in Britain. Nearly all have had to extend emergency loans to some customers to help them through the recession.

None the less competition is growing. Even Barclays, swimming in red ink from huge property losses, opened a new private bank in Mayfair in January.

The attractions of banking for the rich are straightforward. After the lending disasters of the 1980s, financial institutions want safer sources of income. Private banking's bread and butter comes from fee-based services, such as investment advice and moving money between countries, rather than risky lending propositions.

'Banks haven't generated returns from other businesses in the recession and they are looking to generate better ones,' said Ian Woodhouse, a consultant specialising in private banking with the accountants Price Waterhouse.

The market also looks lucrative because the number of high-income individuals in Britain is growing, said David Macguire of Lloyds Private Banking, launched in 1985. This decade many babyboomers are inheriting estates or businesses, creating a new class of high-net-worth individuals who need and want advice on managing their money. Business owners selling up and recipients of retirement packages and handsome golden handshakes add to the pool - as do those fed up with declining quality of service from high street banks. 'More people are prepared to pay a bit extra to bank with someone like us because the clearers have downgraded their service,' said Henry Hoare, chairman of the family- run C Hoare & Co Bankers in Fleet Street, London.

Neither recession nor competition has changed the strict financial criteria private banks require of their customers. But amid increasing rivalry for well-heeled customers, domestic private banking is going for a wider audience. For some banks, this means moving downmarket. Today more private banks cater not only to the super-rich, but also to the moderately rich and even the merely well-off. Coutts does it, Lloyds does it. Even Royal Bank of Scotland's London private bank, Child & Co, is considering a broader approach.

Clearing banks have also discovered that they can make more money offering customers above a certain income, often pounds 50,000, a classier kind of service than they can through the ordinary high street branch.

James Laurenson, managing director of Adam & Co, warned that private banks' renowned quality of service can suffer if they attempt too much. 'Maintaining quality is more difficult when you get bigger,' he said. 'But if you don't grow, you die.'

Some are even sullying their hands with advertising. Child & Co, whose historic building near Fleet Street's Law Courts is decorated with handsome antiques, is planning its first ads in selected magazines. But it admits to being wary of the response. Bernard Gould, the local director, has calculated that domestic private banking caters to the richest 1 per cent of the British population. 'But 30 per cent of the population would like that type of service. The question is, can you do it at the service level and a price that would be meaningful for us?'

According to Inland Revenue figures published last year, about 53,000 people in Britain have more than pounds 500,000 in liquid assets, excluding homes, pensions and insurance. About 160,000 people have more than pounds 250,000. But moving down to the pounds 75,000 level, the market mushrooms to 820,000 people. And 1 million individuals, half of them retired, have liquid assets of pounds 50,000. Focusing on the lower end of the upper crust with 31 branches nationwide enabled Lloyds Private Banking to become the second-biggest domestic private bank, after Coutts, in eight years.

Mr Macguire of Lloyds said: 'In UK private banking, there was double-digit growth in 1991 and 1992. Other clearers are seeing that customers want the focus on better service.'

But don't be fooled by this downward push. You still need some fairly serious money to consider opening an account at a posh private bank. The criteria vary, but most require a minimum annual income of pounds 50,000. At Child & Co, a customer must keep an interest-free average balance of pounds 1,500; at Lloyds it is pounds 3,500. But these minimum current account balances are deceptively low. High fees for ordinary services such as stopped cheques inflate the cost of holding a private bank account.

'We have no set figure for balances, income or capital . . . but our charges are higher so unless people really want the extra service, they are better off going to a clearing bank,' said Mr Hoare of that ilk. Barclays Private Banking Division, which focuses on asset management and has no cheque accounts, has a pounds 500,000 minimum, guaranteed to keep away the riff-raff.

Generally UK private banks aim to preserve customers' wealth and spending power. Basics include all financial services available at a clearing bank, plus tax advice, investment planning, school fee provisions, share dealing, valuations and drawing up wills.

But the extras are what count, and clients differ in what they want. Tea and freshly ground coffee in china cups or the silver service, deep carpets, and expensive surroundings come with the territory. Customer lunches in the banks' elegant dining rooms help to maintain the personal relationships on which private banking prides itself. The most famous customers often want the least possible fuss made over them, and like to bank over the phone.

Coutts, whose doormen and qualified bankers still wear their trademark frock coats at the bank's modern, glass-enclosed London headquarters, is known to be banker to the Queen. In business for 300 years, it has had some unusual requests. Its senior bankers have hand-delivered a Christmas pudding to a client in France, and accompanied clients to art auctions. Last year Coutts sent a crew to sail a customer's boat back across the Atlantic from New York. Last-minute dashes to Heathrow with a customer's forgotten spectacles are not so rare.

The smaller private banks are smug about their records during the recession. Hoare's and Child's, with minimal customer borrowings, boasted stable income. But the flip side is that during a boom the takings from private banking can look pretty stodgy compared with lucrative lending deals.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
Arts and Entertainment
Kanye West, performing in New York last week, has been the subject of controversy as rock's traditional headline slot at Glastonbury is lost once again
music
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Life and Style
Drinking - often heavily - is a running theme throughout HBO's Game of Thrones adaptation
food + drink
News
people
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living