Private Banking may be bad for your Financial Health

NOTE: This post is more than 12 months old, and the information contained within may no longer be accurate.

In its Retail Conduct Risk Outlook, released in March, the FSA identified that:

Poor firm conduct in private banking and wealth management might lead to widespread detriment.

The FSA have launched a damning attack on Private Banks, in particular, highlighting poor risk profiling and an over-emphasis on sales targets;

Banks may sell complex or illiquid products that encourage existing private banking clients to take inappropriate risks with their savings. There is a risk that relationship managers with aggressive sales incentives may be more inclined to highlight benefits and downplay risks of the products they sell.

I’m unsurprised by the FSA’s view, having advised ex-Private Bank customers, particularly those who have invested proceeds of the sale of business. My experience is the bank give little thought to the individual’s long-term Financial Planning needs, and do not undertake rudimentary tax-planning, nor do they adequately explain the illiquidity and risks of their oft favoured products: Structured Products.

It is our view, that any investment decision should start with a detailed overview of a client’s overall circumstances, and consideration of all long-term financial objectives. As a firm we charge a fee for the preparation of a financial plan, which is always agreed in advance. Unlike the Private Banks we are not motivated to sell products, and our interests are aligned with a long-term relationship with all our clients – conversely, the banks are almost always only paid by the sale and manufacture of product.

If you feel you are being poorly served by a Private Bank, we would bear the cost of an initial meeting to explain how are services are very different. Despite what the banks tell you, we can facilitate any of the ancillary services they offer, and indeed more, as we consider the Financial, Tax and Estate Planning considerations of any and all advice we give.

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20 Jun 2022

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