Going private is an ideal option for our wealthy

DESPITE the credit crunch, Scotland appears to have more than its fair share of wealthy people.

It's therefore not surprising that private banks see Scots in need of advice as a target for their services. For example, earlier this year HSBC opened its first private banking office north of the Border. It is taking on familiar Scottish names, such as Adam & Company, Royal Bank of Scotland and Bank of Scotland.

One of the reasons for HSBC Private Bank coming to Edinburgh is the fact it was looking after, from London, Scots who could benefit from being able to visit a local branch for face-to-face advice.

Joss Mitchell, director of HSBC Private Bank in Scotland, believes one of the distinguishing features is its global network.

He said: "In many ways what we bring to the table, which few other private banks have, is the international context. HSBC as a bank has 10,000 offices around the world and the private bank operates out of 96 locations, with about 7,000 employees.

"We're in an era of global technology, but it's still hard to open bank accounts in other countries, so you need to have someone nearby."

One of the big attractions of a private bank is that customers get to deal with a named individual, rather than having to go through a call centre.

"We focus very heavily on relationships – something that, perhaps, needS to be brought back to private banking," said Mitchell. "Each of our relationship managers, including myself, will have no more than 40 clients, whereas our competitors can have as many as 200."

HSBC Private Bank tends to look for clients with wealth in excess of £1 million to £2m.

"A lot of people think there is no-one up here with that kind of money, but there is," said Mitchell. "If you look at the top 100 Scots by wealth, they have a total of around £18bn. There are something like 20,000 people in Scotland with wealth in excess of £2m."

Mitchell describes HSBC Private Bank as "open architecture", which means it can recommend products and investments from other companies. It also offers clients with £1.5m or more a specialised hedge fund.

Mitchell realises that, despite being a major global brand, HSBC is relatively thin on the ground in Scotland, so he has his work cut out in raising its profile. "It is proving really exciting. Aberdeen, for example, just screams for help when it comes to international private banking work. There are entrepreneurs involved in oil and gas who have international needs."

Rival banks say they welcome the competition and argue they can differentiate themselves.

Adam & Company – part of Royal Bank of Scotland – is one of the most established private banking brands north of the Border.

David Crathie, managing director of Adam & Co, explained: "In a world of increasingly large and, by implication, impersonal financial institutions, the scale and perceived friendliness of a private banking operation such as ours appeals to a certain kind of person.

"We're intentionally low profile, as are our clients. We take a family view and talk to our clients about how wealth can flow down through the generations."

Crathie says clients choose Adam & Co partly because is it seen as traditional.

"Some might say we take an old-fashioned approach to banking," he explained. "If, by old-fashioned, you mean we like to speak to our clients then, absolutely.

"We're one of few private banks which don't publish criteria and we do that intentionally. But people know that we're not for everyone and we're not the cheapest in town. We tend to appeal to successful professionals who don't have a lot of time for their personal business or someone who has gone through a change in their life, such as inheriting money. We're not really for someone who wants to do all their banking on the internet and find the cheapest rates."

As well as Adam & Co, RBS also has its own Royalties Private Bank. One of the main differences between the two brands is that Royalties' clients are more "income wealthy", while Adam & Co's tend to be "asset rich".

Nigel Jackson, head of RBS private banking, said: "We tend to see people who earn more than £100,000 a year, although we don't limit our service to them."

The make-up of clients has changed over the years, according to Jackson. "There is a lot more wealth being created now in Scotland and clients tend to be making money rather than inheriting it."

A slightly different service is offered by Bank of Scotland through its corporate private bank. It gets itS clients through Bank of Scotland Corporate and, therefore, attracts entrepreneurs who have completed business deals and need a lending service.

Ian McKinney, senior director of private banking – corporate, said: "It's an unusual service in that it's offered to clients free of charge. It's designed to help entrepreneurs create wealth.

"For example, if the corporate team puts up the cash for a management buyout we can lend money to the individuals involved. We sit right beside the corporate team, so we know their clients."

In times of market turmoil, a private bank is something worth considering – for those lucky enough to have enough cash to make it worthwhile.


REAPING THE BENEFITS

CHRIS Buchan is an entrepreneur who is sold on the benefits of private banking.

Buchan runs Heritors Consultants, an Edinburgh property fund management business, which has funds under management of about £300 million. He has complex business needs which he says are met by Bank of Scotland's corporate private bank.

Buchan explained: "I have a number of relationships with the Bank of Scotland. I primarily use corporate banking for debt funding for a series of property investment funds I manage.

"I used to live in Hong Kong and went to Bank of Scotland out there when I started the property fund management business ten years ago. Ian McKinney (now senior director of private banking –corporate] was my contact at the bank in Hong Kong and when I relocated to Scotland six years ago he put me in touch with the person in charge of private banking in Edinburgh at the time.

"The service is critical for me as an entrepreneur. When I'm doing private banking, it's important that the people I'm dealing with understand my business, and that's the case with Bank of Scotland where the private banking team sit beside the corporate team.

"If that wasn't the set-up, I probably wouldn't use the service."