The FT is reporting that Independent Financial Advisers are picking up the clients sacked by private banks, as new pricing structures introduced by these wealth management firms result in the disengagement of their less profitable clients.
Those clients with assets under £500,000 appear to be the biggest victims of new pricing structures at private banks.
In one example, it talks about a new £250,000 investable assets threshold being introduced by Deutsche Bank, with some clients being asked to close their investment accounts as a result.
Coutts is set to focus on investors with investable assets over £1m.
Of course every business needs to identify those clients where it can deliver value in a profitable manner.
What is interesting to see is that private banks are struggling to provide services to clients with these substantial portfolios, particularly when a typical private bank solution is based around in-house funds or vanilla discretionary fund management.
Last week I was discussing with another IFA the contents of a Lloyds TSB private banking investment portfolio, correctly guessing that it consisted of funds solely from Scottish Widows Investment Partnership (SWIP), also part of the Lloyds Banking Group.
In our experience taking over investment portfolios from various private banks, the charges are much higher than those we are able to secure for our clients and the funds are typically restricted to a small range from a single provider.
Apart from the perceived prestige of being a client of a private bank, it is difficult to see why the majority of retail investors would want to go down this route; particularly when the alternative of an award-winning firm of Chartered Financial Planners with a powerful wealth management service tailored to their objectives is right on their doorstep!
Photo credit: Flickr/loop_oh
