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Positioning your business to capture the private bank market

Financial planning firms have an outstanding opportunity to move into the lower private bank space but it takes dedication, investment and the absolute positioning of your proposition, practitioners tell Rob Kingsbury


There is increased potential for high end financial planning companies to target private bank clients in the current market, believes Paradigm Norton chief executive Barry Horner. He sees bank clients becoming disillusioned with banks generally and more specifically “because they
are given the perception that the private banks offer an elitist service, but what they end up getting is a rather commoditised service,” he says. “Fundamentally the banks haven’t used the RDR as an opportunity to revisit their business model and they are still trying to offer the old commission-based product service in a different guise. People are savvy enough 
to recognise that and are beginning to look elsewhere.”

Horner says a major complaint about private banks that he has heard often of
late is the lack of continuity of relationship manager. “This is
 a key part of the service as it gives the client security in their provider, yet our experience, certainly locally, is that bankers are changing role or company as regularly as once a year. With this kind of turnover
you can’t build the long-term relationships that clients want.”

What the private banks do have going for them, Horner says, is the reputation for good corporate entertaining, the elitist persona, great offices, slick systems and excellent marketing material. “But fundamentally a lot of the products that clients are put in they don’t understand and, in my perception from dealing with portfolios of clients that have moved to our firm, often seem recommended more in favour of the adviser than the client.

“I think people are waking up to this and to the changes in the market that now expects transparency. I think a lot 
of these organisations lack transparency. This is beginning to make people suspicious and when that happens it leads to a lack of trust.”

These elements – the lack of personalised service, poor financial planning and opaque charges – Horner believes
are making people seek out alternatives, notably high-end financial planning firms.

The right proposition

For firms willing to invest in positioning their proposition correctly to capture private bank clients, there is opportunity but it requires a number of key elements, Horner says.

“This is a market that is demanding. Clients are very exacting in what they want – you can’t afford to mess up. They come with high standards and you have to make sure you constantly deliver. We have been able to do that by putting in place a service that is not only based on sound financial planning skills but looks and is professional and that is focused on client service.

“We have recruited top
 people who are chartered and certified, we have high quality professional looking offices,
we are clear and transparent
on our fees, and clients get
good service in everything we deliver to them. Importantly, they will have continuity in their relationship with us. Most of our staff have been with us for many years and we incentivise our senior people with stock in the company. Our business structure is based on service – no one gets remunerated based on business production.

There are certain services that private banks offer that financial planners must have, the hygiene factors, Horner says. “Many of the private banks have very good systems and we’ve had to invest in our systems, as well as good corporate governance to make sure clients receive what they have been used to receiving, including the frequency and quality of reporting.

“Online access to portfolios is another essential service. When you track how many people actually use it the number is quite low because clients come to us in order to delegate the running of their financial plan – but it’s one of those hygiene factors you have to have. “Without these hygiene factors we wouldn’t win the work that we do. They aren’t necessarily what the clients’ value – which is more the quality of the relationship and the service. As many clients have pointed out to me, it’s doing what you say you’re going to do. If you tell a client you’ll deliver meeting notes within two days with follow up actions, then you make sure that you do that. It’s that quality and level of service that these types of clients value over and above whether their investments are one to two points above or below benchmark.

“Above all, you have to keep investing. We are going through another major rebrand and building another completely new website at the moment. Clients want to see that you are a firm that is not complacent and is progressing, as do professional connections, especially if they are going to recommend you to their clients, friends and colleagues.”

If there is a major obstacle in the way of financial planning firms moving into the private client sphere it is perception, Horner believes. “We are a firm of 45 people, which makes us a fair size firm in the financial planning community, but compared to a UBS or a Coutts we’re a minnow, so sometimes we are starting behind the line when it comes to winning a client over.”

Not having a big brand name behind the firm can create obstacles, one being concerns around security of assets. The best way to deal with that is head on, Horner says. “In first client meetings you put the issues that are important
to clients high up the agenda because if you don’t raise them they will. So we’ll talk about arrangements for the custody and security of assets, frequency of staff turnover, how the money is looked after, anything we feel they will want to know – we’re up front about it. And generally once people are onboard they love it and refer others to us, which is what we want.”

Current accounts and loans
One area where financial planners can’t compete
with private banks is the banking services themselves. A crucial step is finding a private banking partner that, if wanted, will provide what clients would normally get by going direct. For mainstream banking Paradigm Norton has established a relationship with Clydesdale Bank.

Another service private
bank clients are used to is liquidity creation, Horner adds. Paradigm Norton uses 7IM’s recently introduced service offering margin lending against an investment portfolio to cover this base. “We’ve got a loan going through at the moment,” says Horner, “where the client has a short-term cash flow
in the purchase of a house in France. He’s a client worth £20m but the banks wouldn’t lend him the money. He spoke to us, we did margin lending against his portfolio and he had £800,000 with him in France 
in five days. He was delighted. And the rate is about 4%; it’s
 a no brainer. To be able to offer that service is great.”

World-class client service
Noel Farrelly, managing director of Index Wealth Management based in Sutton Coldfield in the West Midlands deals only with clients with assets of £1m or over and has been picking up more private bank clients of late, he says.

“We fish in the same waters as the private banks and
we are getting many more opportunities to speak to people who are dissatisfied with the service they are getting from the banks. I think private banks are in disarray at the moment. They are losing staff, they are getting rid of staff, they are getting rid of clients below a certain level; they don’t really know what their proposition is.”

Until fairly recently, he says reputation and size would
win the banks a lot of clients, especially if they were part of a larger banking group. That is changing because high-end financial planning firms can deliver true financial planning for clients. “In addition, clients want the legendary customer service as well as continuity of attention they get from a smaller firm like ours,” he says.

Farrelly believes image and presentation are essential to attract private bank clients but more important is “world-class customer service”. This has been a core focus at Index, he says, and includes “great offices, car parking on site, with a reserved car park space by name for every client who visits, and putting the client’s name on the meeting room door and also on the screen when they enter the room. We remember what they drink, how they like their coffee.

“Also, we take responsibility for arranging meetings and we remind clients as we approach the date. We’ve picked up clients on that point alone. We’ve been told by clients that they came to us because we reminded them of the meeting and the private bank didn’t.”

Good communication and keeping in touch on a regular basis also are fundamental elements of the service, he says. “Research by CEB has shown that clients want to hear from their adviser 28 times a year.

It doesn’t have to be face-to- face, or even by phone, but they do want that regular contact.
So 12 times a year our clients receive our newsletter, we send courtesy letters if we’re going on holiday to let them know, and we actually contact them more than 28 times a year.

“These may seem like small things but it’s a level of service that gets remarked on; clients like it.”

The need for scale
Brett Davidson, managing director of FPAdvance, coaches businesses looking to move into the private bank space. When asked what he sees as key to breaking into the private bank market, he says: “This is going to sound blasphemous but I think this is all about marketing and perception. Private banks have predicated their business model on delivering the right image to the clients they want to attract – if you walk into a private bank it looks fantastic, and you get the bottled water, the Michelin star catering, it has all the right ambience. That’s what this level of client expects.

But what bank clients are finding, Davidson says, is that while they have the image, the banks are no longer delivering the substance when it comes to looking after their wealth. “A lot of product push has happened in banks and that is taking its toll.”

And this is exactly where high-end financial planners can take over, he adds. “What a lot of advisers looking to play in this space have is the substance – they are exceptional financial planners; what they might lack is the style. To cater for this market you’ve got to have the right look and feel, as well as the right quality of advice. Also, you have to be of the highest calibre in terms of people and process. You’re not going to be able to give this market the service it expects if you don’t have the right people talking to the clients and your processes behind the scenes aren’t efficient. You might also need access to specialists in areas like offshore tax or US residency tax.

Where firms may come across obstacles is in terms of their scale, Davidson says. “If the financial advisory market
is going to be taken seriously
 as a profession then the best firms have got to find a way to build a larger scalable corporate culture that doesn’t kill all the values they have believed in 
on the way through. I think we’re on the cusp of that at the moment and I see that as being one of the major challenges for financial planning firms over the next decade.”

Absolutely know the client
Abbie Tanner, managing director of marketing consultancy A Business Innovation, has been working with firms like Midlands-based Cooper Parry to help them accurately target this private client market.

Tanner believes any firm that wants to make the leap to this level must already be serving some of this kind of client, people on which they can test and pilot their new service.
“It’s about really understanding what those clients need and want. Firms can’t just go out and replicate what other people are doing, they need to think about what these clients really want and why it is logical for the client to come to their firm and not a bank or competitor.”

A useful way to access that information is through a client advisory panel, Tanner suggests. “Get your private bank type clients in a room and figure out exactly where you add the most value for them and why it would make sense for others to use you too.”

Private bank clients will have high expectations of the way
a firm looks and operates, Tanner says, and invariably that will mean investing in the firm’s image across the board. This will include ensuring the office clients will visit is well situated, professional in its image and presentation, and delivering the best in materials, using high quality paper stock and printing finishes for all client-facing brochures with reports professionally bound if necessary. Researching just what the banks deliver image- wise can help inspire firms
in their presentation, Tanner suggests. “But you must package it in your own way,” she says. “You need to own it.”

As a potential first point
 of contact the firm’s website can be key, Tanner explains. “With Cooper Parry we wanted to make sure the website, newsletter and stationery all looked high end and luxurious and really talked to the private clients about what they wanted to know and hear. In this the language was very important. We used a lot of key words
like Family and In-tune and Different, reinforcing the value proposition. This was supported by high-end photography,
the perception value and the strength of the proposition coming through in the imagery.

“You have to be seen to be serious about serving this type of client who may well go into Coutts before seeing your financial planning firm. You have to look as professional,” says Tanner.

But image is nothing without having the right people to service the client and firms have to ensure they assemble an expert team – whether internal or with external support – that can deal with all the client’s affairs, Tanner adds. These need to be tightly integrated relationships so everything
is dealt with cohesively and
the adviser sits in the middle with the private client. Within the business there must be a person who acts for the client as the relationship manager and the conduit to the expert team.”

Marketing and referrals
Get the proposition right and to some extent the marketing will take care of itself Tanner suggests. “Recommendation is crucial and a highly effective way to get access to the right clients is to partner with firms that also deal with that type of client.” She suggests high-end insurance brokers that work with clients insuring art and jewelry etc., lawyers and accountants, and working with consultants that help business owners sell their businesses.

“And once you start working with this type of client, as long as you have a differentiated proposition that gives the clients exactly what they want then you will start to grow your business organically by client referral. Also, strategic partners will start to refer you because they know you are doing a really good job and it reflects well on them with their client.”

Finally, Tanner says, once you start building the right type of client base, make it work for your business. “Rather than doing seminars and networking, what works well in this market are client appreciation events, such as invitations to cricket and tennis matches. Invite clients along and encourage them to bring other people from their network with them, friends and colleagues. A lot of the marketing to this type of client occurs in these informal networking events, it is quite discrete and relationship focused.”








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