Private banking is no longer the preserve of the super-rich as large banks and smaller wealth managers are increasingly bringing bespoke services to the masses.
Traditionally, private bank managers have only been offered to those with at least a few hundred thousand pounds, if not millions, available for investment. But clients can now gain a free personalised banking service for a fraction of this.
Several high street banks have launched private services to bridge the gap between extremely wealthy and affluent clients. Royal Bank of Scotland, for example, claims its private service is “for housewives, academics, armed forces and managers…not just for millionaires…”.
Cater Allen, a division of the Santander Group, offers a basic private banking service to customers with a minimum of £5,000 in their account. Private divisions of banks including HBOS, RBS and Lloyds TSB are opening the doors to customers with good salaries but not necessarily huge sums of investable assets. Other banks such as HSBC, which already have elite private banking services, are offering “premier” services to cover the middle ground.
The main attraction of a private bank is better service. Bankers say demand is growing fast from affluent clients who want a dedicated, UK-based bank manager they can trust to handle their day-to-day finances. Around 2.7m individuals in the UK have at least £100,000 of investable assets, according to Datamonitor. These people increasingly want a better, quicker and more personal banking service.
“People look to private banking for bespoke financial advice and service which is a cut above the rest,” says Mark Cheshire, UK private banking director at Lloyds TSB. “Many of those who choose to bank with a private bank do so because they either simply don’t have the time to manage their own financial affairs or want some additional support to ensure that they are getting the most from their cash.” Many clients speak to their private banking manager on a daily basis.
How personal the service is will largely depend on how much capital the client has. Mass market services with the lowest entry requirements still tend to use call centres to process clients’ requests, although these are typically UK-based and better staffed than the ones that service regular account holders. Customers who want their own personal manager need to meet a higher minimum investment level.
Bank of Scotland and Royal Bank of Scotland will allocate a dedicated manager to clients who earn at least £100,000 a year or have investable assets of the same amount. Lloyds TSB Private Banking provides services to individuals with investable assets of £100,000 or more or a minimum income of £250,000, while HSBC’s Premier service targets those ready to invest at least £50,000.
These services do away with call centres altogether and provide one-to-one banking contacts. Managers are responsible for typically between 50 and a few hundred clients each, and so can build up a good relationship with them and an understanding of their finances.
“Our Premier account is for the mass affluent,” says James Thorpe at HSBC. “It is a link between the packaged accounts that provide enhanced service and private banking.”
HSBC’s full private banking service demands minimum investable assets of £2m and offers a sophisticated portfolio management service. Thorpe says the Premier service combines some wealth management with day-to-day banking services.
Private banking clients also have access to a wider range of accounts, often with preferential interest rates. They can also access bespoke financial advice.
“We aim to offer current accounts outside the norm,” says a spokesperson for Bank of Scotland. “Ours can be a lot more flexible regarding borrowing requirements.”
He says private banking clients can negotiate overdrafts for several hundred thousand pounds, for example.
BOS’s accounts typically pay interest at 2 per cent below base rate and charge around 7.5 per cent on overdrafts.
Some private banks offer customers additional benefits such as free travel insurance, phone insurance and credit card fraud alerts. Cater Allen offers a deferred debit card, which allows customers to accrue interest on money they spend until the end of the month.
Customers can also negotiate exclusive mortgage and loan offers and have access to euro or dollar-denominated accounts. HSBC allows customers to set up accounts and credit facilities overseas.
Once the minimum investment levels are met, private banking services are generally free from annual charges, although certain transactions – such as some transfers, duplicate statements and stopping cheques – will attract charges. Private bank account holders also still face high fees if they go over their overdraft limits or bounce cheques.