What makes the Coutts approach unique?

Secondly, private banking requires the private banker and client to formulate and agree upon a wealth strategy together, one that takes into account both the dreams and ambitions of the client and the journey involved. From there, the private banker’s role is to help fulfil that strategy, whilst building into it sufficient flexibility to deal with the unexpected, and checking along the way that the client’s goals have not changed.

Client Understanding

Our aim at Coutts is “ To build Trust, through Understanding our clients’ needs, and using our Collective Expertise to meet those needs ”.

We do not believe there is another private bank that has the same breadth of services, or collective expertise , under one roof. This is important, for it allows our clients to choose how they wish to use Coutts, whether as bankers, investment managers, lenders, trust and estate planning advisers, philanthropy advisers, pensions advisers, or all of these things.

Such collective expertise also enables our private bankers to deliver upon the wealth strategy he or she has agreed with their client. However, it is the understanding of our clients that is at the heart of engendering their trust. This is viewed by Coutts on a series of levels, and we invest significantly in building that understanding.

Your private banker has the time to invest in you…

At its most personal level, we invest in ensuring that a private banker, and his or her assistant, has only as many clients as they can sufficiently devote the time to building relationships with. Investing this time ensures our clients get the most out of what Coutts can offer.

With twenty-eight branches around the UK, our private bankers can hold conversations with their clients in the heart of the world in which they live.

At a second level, Coutts has invested heavily in building a branch network across England and Wales that allows us to be geographically close to our clients. We realised early on that private banking was not a London-centric game, and that we should know the advisers our clients are dealing with locally as well as the commercial and social issues they face in their communities. It is presumptuous for a private bank based hundreds of miles away, to claim an understanding of the local trading environment, or know the tax accountants a client might employ, or what social fractures a local charity which the client may be interested in is trying to address.

In 1961, Coutts opened its first branch outside London, predictably in Eton. Forty-plus years later, the most recent branches we have opened have been in Liverpool, Chelmsford, Sheffield, Exeter and Cheltenham. If nothing else, this underpins the ‘democratisation’ of wealth in this country, powered by a ubiquitous entrepreneurial spirit and fuelled by the internet.

Our unique client constituencies…

And on a third level, since 1999, Coutts has structured itself into divisions that serve specific constituencies of our clients: entrepreneurs, executives, professionals, landowners, international clients living in the UK, athletes and artistes.

Over ten years we have thereby built up an understanding of some of the common issues faced by successful people in these areas. A private banker who only deals with entrepreneurs will understand the need for them to prepare well and in a timely fashion when exiting a business, or the fragility of those exit strategies, and the sense of bereavement that often comes upon sale. A private banker who only deals with executives will understand the structure of compensation benefits, the frequently-found trail of pensions that an executive carries with him or her through a career, or the concentration of their wealth in the form of property and stock options.

Building understanding is at the heart of Coutts strategy. Which brings us, finally, to how Coutts views our clients’ wealth, and how we help them build a wealth strategy.

Wealth Management

Historically, a client’s wealth would be managed as one lump sum, and wealth managers would use a risk-based model to ascertain an appetite for loss, as if such expectations were homogenised across the entire portfolio of a client’s wealth. Often this didn’t serve clients’ best interests, by failing to inject enough risk into parts of the client’s portfolio that were attempting to protect him or her from inflation, but allowing the adviser to stand on reasonably firm ground when the investment experience fell short of the client’s desired goals.

At Coutts we do not believe that most of our clients perceive their wealth as simply one pot of assets. Just as clients have multiple ambitions, so they tend to see different pockets of their wealth as serving different ends, like jam jars on a mantelpiece. Thus, ‘this account is for every-day spending, this pot is for my children’s education, this for acquiring a second home in Portugal, that is a ‘rainy day’ fund, and this for our retirement.’

Clients expect different types of advice for the different pockets of their wealth, and have different expectations and tolerances with regard to their return expectations and risk appetite for each ‘asset pool’.

A Coutts private banker will try and persuade his or her client to articulate which pool of funds is for what purpose and, based upon that understanding, then create a balance sheet of those pools, segmented under four generic headings, or wealth segments. These segments are similar to Maslow’s model, ‘Hierarchy of Needs’, structured in ascending order of necessity, thus:

Wealth Preservation is the asset pool upon which you rely for your day-to-day living: your home, your cash accounts, your very liquid and safe investments, pension assets if you are close to retirement or in retirement. In other words, these assets provide a basic level of economic security for the individual or family. We also think of ‘protection’ issues under this heading, such as your wills and estate planning, your life insurance and ‘key man’ insurance.

Wealth Enhancement assets are surplus to those in the wealth preservation category – they are not needed in the short term and so can be invested in higher return investments which may help reduce exposure to inflation and provide a potential hedge against the risk that deposit rates decline sharply. It is the wealth you have invested to enhance the real value of wealth, with moderate risk of shortfall, or volatility of returns. Your diversified equity portfolio or your fund of hedge funds might well sit here.

Wealth Generation is the wealth you have invested with more concentrated risk characteristics. For the most part, these assets comprise your capacity to create wealth for yourself: business assets or partnership assets, private equity holdings or your stock options, or leveraged investments in real estate. Such investments aim to generate attractive real returns over the long term but are often illiquid, and not easily accessible. This is the speculative end of investing and good advice in this area gives most consideration to your capacity to sustain capital loss.

Finally, Life Enrichment is the pot of your wealth that serves your passions, assets purchased not solely for the purpose of financial gain, such as your home in Portugal, classic car fleet, collection of early twentieth century silver or, indeed, your charitable trust.

Each wealth segment will serve different ends, have different time horizons, and be managed in different ways. It is the role of the private banker to ensure that they are structured to meet your goals. In short, this is what is termed, in today’s portfolio management terminology, as ‘Goal-Based Investing’, and is much more relevant to our clients’ expectations of their private bank.