Duncan MacIntyre, Head of Coutts Private Office, explains his new philosophical approach to wealth management.
Coutts Private Office clients have achieved huge success and financial rewards in businesses that they know like the back of their hand, wherein sound knowledge has been the key to their achievements. Yet as their businesses grow and mature and they are able to reap the financial benefits, challenges can then arise when they are faced with what to do next.
A business you have nurtured over the years delivers a golden exit strategy. In an ideal world a private bank will be involved ahead of the event, although this is often not the case. Clients are faced with unsolicited approaches from various institutions keen to take on the role of their trusted adviser. Before having to make a commitment to an investment strategy, financial planning structure, or tax scheme, clients have to choose the right private bank with which to cultivate that relationship of trust.
Private banks differ in culture, pedigree, and areas of expertise. Any decent institution will have good products or access to good products in the marketplace. The main factors to consider are the service, the understanding of a client’s position (both UK and international factors), and the delivery of the solutions.
In our experience, clients suffer the most stress during the lead up to selling or leaving a business. Life beyond that can be even more stressful, with many of our entrepreneurial and family-business clients experiencing an emotion akin to bereavement. It takes time for clients to readjust to their new circumstances, and the process can affect both head and heart. New business interests, family requirements, philanthropic urges, and a sudden avalanche of free time can bring new challenges and a host of new questions.
Our advice is often to do nothing – something people don’t expect a private bank to say. It is important that clients have time to think about how they want to segment their wealth, especially if investing in a new venture. Our only caveat is that the cash is held in the right jurisdiction, in a secure, straightforward account, with a good credit rating, where it can earn an optimal rate of interest.
As long as clients have wills in place, there is no urgency to rush into any further decisions. Obviously, a large part of the enjoyment derives from buying the toys, going on amazing holidays and just having the time to have fun with family and friends.
Education is at the core of our relationship with our clients. Knowledge is power and we like to impart some of that knowledge to ensure that our clients feel empowered to start thinking about some of the issues they now face. The journey should be as important as the destination. Education is a powerful navigational tool in this journey, not only for the client, but also for the private banker.
With that in mind, Coutts Private Office arranges tailored sessions for clients depending on their tax status, personal objectives and aspirations. They have the opportunity to meet some of the experts who create the hedge funds of funds, make strategic asset-allocation decisions and drive the investment policy of the bank, provide inheritance tax planning, and advise on philanthropy. Private banking is an industry littered with jargon.
From convertible arbitrage to inverted yield curves to annuity income to domicile status, the technical references are endless. The private banker is there to ask the questions that clients may not feel comfortable in asking, translate any jargon to ensure that clients benefit, and in the process understand clients and their objectives.
The role of the private-office banker is similar to that of an orchestral conductor: knowing when to bring in the soloist while ensuring the extended team around the client remains in harmony and tempo. The key objective is to give the client comfort and confidence in the decisions that they will make together. The scope of these education sessions is not just confined to the experts within the bank – our bankers also draw on experts outside the bank. The team deals with a variety of scenarios from UK residents domicile to UK residents non-domicile to truly international clients.
Our investment of time in these early stages of the relationship is a risk, as there is no guarantee that the client will engage us as their ultimate trusted adviser. This is an investment worth making. It is an approach that has integrity and gives both parties time to make a true assessment of the possibilities in any lasting relationship.
The quality of people and product is a given in any respected institution – the distinguishing factor is the approach and understanding. The motivations of the private bank must be aligned to those of the client. There is often a commercial pressure to move from holding cash to a more complex solution, but we believe the phrase ‘to act in haste and repent at leisure’ is pertinent.
Knowledge is power and at the heart of our philosophy is the commitment to keeping our clients informed while we deliver the expertise behind the solutions. It is an investment of time that is definitely worth making. As a result, two years after Coutts Private Office was established it is now managing £2.5 billion on behalf of some of the world’s wealthiest people.