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

‘At the level of someone with assets of £500,000 to £1 million, the high street private banks are not much more than sales operations,’ warns Bain. ‘I don’t think I would think of using a private bank unless I had £10 million or more. You are paying high fees and you don’t get the benefit of real wealth management under £10 million.’

David Cobb, head of investment and banking at independent wealth managers Smith & Williamson, agrees. ‘The high-street private banks see clients as an asset to be sweated. They are product driven, whereas we are service orientated. They expect to earn 2 to 5 per cent up front, but our fees are less than 1 per cent.’

Smith & Williamson is one of few upmarket wealth management firms that not only offers genuinely independent investment advice but is also a bank and the eighth largest firm of chartered accountants in the UK. It has a specialist pensions division and can advise on everything from making a will, trust funds and inheritance tax planning to floating a family business. It offers a personalised, service to clients with upwards of £250,000, with a typical client having around £1 million of free assets, excluding their homes.

‘We have seen an increase in business and it’s not just because of the credit crunch. People want to know that the investments recommended are ‘best of breed,’ says Cobb. The firm chooses funds from the entire range on offer and rebates their front-end commission. ‘Nobody needs to pay front-end fees,’ he says.

‘Clients understand the importance and the linkage with tax and IHT advice. We offer a service and a long-term relationship, rather than products.’ And he makes the point that it is important to have ongoing advice. ‘It is worth having someone to keep an eye on your investments.’ Fees are less than 1 per cent and clients can pay an hourly rate for advice if they prefer.