Affluent investors abandon traditional wealth managers

As the big banks write off billions, the dissatisfied ‘new rich’ are switching to the rising stars among the smaller independent banks, says Lorna Bourke

The latest report from consultants MDRC, which specialises in analysing the high net worth market – those with £500,000 or more to invest – reveals that client satisfaction has been declining for some time. ‘The UK client satisfaction benchmark fell 5.8 per cent to 59.8 per cent, the lowest level since 2003,’ says Richard Williams, chief executive of MDRC. ‘Very sharp falls in client satisfaction were recorded at those firms adversely affected by the credit crisis.’

According to Williams, clients are disappointed with the infrequency and poor quality of client communications, relatively low level of staff experience, high fees, particularly for ancillary products and services, and with the fast turnover in relationship managers.

But as Williams points out, if you do have the requisite £10 million or more, there are still some good private banks around who take wealth protection and conservation seriously. ‘The highest satisfaction score in 2007 for UK-domiciled clients was again achieved by C. Hoare & Co with a rating of 82 – an increase of over 2.2 per cent over the 2006 score.’ In seven of the last ten studies on client satisfaction by MDRC, Hoare’s has been top. Kleinwort Benson Private Bank also did well with a rating of 75.2.

Hoare’s, the UK’s oldest independent bank, founded in 1672 and still a private partnership, has seen a big inflow of new money in recent months, as investors look for security and a firm they can trust. ‘With wealth preservation top of most people’s agendas, the unlimited liability structure of some private banks – in which the partners share the risk of the business failing – has been seen as attractive,’ explains David Bain, editor of Wealth Bulletin.