Those who are new to the sector often don’t appreciate the full range of services a private bank can offer. Colin MacKenzie, Director, Investment Management at Arbuthnot Latham & Co., Limited, explains what these institutions do for their High Net Worth Clients across investing, financial planning, credit solutions and more.
Is there ever a good time for investors and savers to pause and take time to evaluate their finances? One could argue that it is, or should be, a constant action however, with the end of the tax year fast approaching, this can often prompt investors to assess their current and future wealth planning needs, making sure they are still on course to achieve their goals.
A private bank, through its range of banking, wealth structuring, and investment management services, can help its clients achieve their financial and life goals, be they personal and/or professional.
Having an all-encompassing banking and investment services company look after my financials has enabled me to house all my needs under one roof. I have utilised the bank’s lending facility as part of the services offered to me and it’s been a great mobiliser for my start-up business ventures
Looking after clients’ financial needs are at the heart of the service private banks offer. Choosing the right bank is an important first step to building a successful relationship and ultimately achieving suitable financial outcomes.
Crucially, a private bank’s offering can encompass the totality of your financial affairs as a true “one-stop-shop” – even including business finance for busy entrepreneurs. A client of ours recently reflected on their personal experience: “Having an all-encompassing banking and investment services company look after my financials has enabled me to house all my needs under one roof. I have utilised the bank’s lending facility as part of the services offered to me and it’s been a great mobiliser for my start-up business ventures.”
What are the headline benefits of being a private banking client?
For High Net Worth Individuals, the advantages of partnering with a private bank are many, stemming from both the ethos of these institutions and the expertise and bandwidth they boast.
First is the highly personalised service: Private banks typically have a smaller client base than high street banks enabling a more personalised service to serve the unique needs of each client. These services are also all-encompassing, enabling clients to often access. range of banking, wealth, and investment management services all under one roof.
Private banks often offer a wide range of wealth management services, including estate planning and trust services to help clients manage their assets and preserve their wealth over time. But it is often under-appreciated how useful private banks can be on the credit front too: Compared to many larger commercial banks, private banks tend to have more flexibility in their credit offerings, such as loans, lines of credit, and other borrowing options.
Compared to many larger commercial banks, private banks tend to have more flexibility in their credit offerings, such as loans, lines of credit, and other borrowing options
Private banks can help diversify your investments, seek tax efficiencies, and make sure your investments align with your evolving needs, capacity for loss, risk tolerance, and time horizon. Private banks often have teams of experienced investment professionals who work in close partnership with bankers and internal or external wealth advisers. These investment professionals provide expert advice and guidance on a wide range of investment services and opportunities.
Their connections can also mean that private banks are also able to provide access to exclusive investment opportunities, such as private equity and hedge funds, which may not be widely available.
The result is truly tailored financial solutions centred on helping you to achieve your financial goals by creating a personalised investment plan and providing ongoing advice and guidance as your needs evolve over time.
Top Tip
Wealth management is a broad church, and the UK is a very mature market offering every kind of organisation (which is why it can be slightly bewildering!). While those new to the sector readily understand the investment services on offer, we often find that the concept of a private bank can be less familiar. The credit facilities one can access via a private bank therefore frequently come as a very nice surprise.
Private client mortgages, bridging finance and Lombard loans against investment portfolios are all options you can explore with a private bank – and you may find that terms can be very favourable indeed. You will also have a dedicated professional who will undoubtedly work harder to understand your situation than with a mainstream bank. If the private banking concept has piqued your interest, please do get in touch to learn more about how we can introduce you to the best providers.
Lee Goggin
Co-Founder
Why you need to invest
We can all appreciate investing’s role in growing our wealth over time, so that we can achieve financial goals like saving for retirement, buying a house, or supporting children through university, their early career or helping them get on the property ladder.
As recent times have underscored, investing is also crucial if we are to have a hope of beating inflation and preserving the purchasing power of our money. But we can be more ambitious still by harnessing the magic of compounding returns and reinvesting income and capital earned over the long term. This can lead to significant growth over time. For example: if the return from an investment is withdrawn each year, a return of 5% per annum over 10 years will return 50% on the initial investment. However, if this amount is reinvested, the return increases to almost 63% over the same period.
If the return from an investment is withdrawn each year, a return of 5% per annum over 10 years will return 50% on the initial investment. However, if this amount is reinvested, the return increases to almost 63% over the same period
Investing via a private bank with deep research capabilities can also help boost results through a global, more diversified approach to portfolio building. This is about returns, but also managing risks. Investing in the global stock markets allows you to participate in the growth of companies around the world and the global economy; done properly, diversification can help reduce risk by spreading your invested wealth across different types of assets across many geographic locations and currencies.
Taking care of tax mitigation
Reducing tax exposures is arguably just as important as maximising investment returns – particularly in light of the growing tax burden facing both individuals and families.
Inheritance Tax is something all affluent people should be tackling as early as possible as intergenerational wealth transfer looks an increasing target for the Government: the latest data from HM Revenue & Customs shows that IHT receipts for April 2022 to October 2022 were £4.1bn, which is £0.5bn higher than in the same period 12 months earlier.
Tax mitigation is multi-faceted however and taking advantage of your annual tax allowances and reliefs can help to hugely improve your investment outcomes and financial wellbeing.
Inheritance Tax is something all affluent people should be tackling as early as possible as intergenerational wealth transfer looks an increasing target for the Government: the latest data from HM Revenue & Customs shows that IHT receipts for April 2022 to October 2022 were £4.1bn, which is £0.5bn higher than in the same period 12 months earlier
A good private bank will ensure that that all personal savings and dividend allowances plus the annual Capital Gains Tax (CGT) allowance are fully leveraged to help reduce your annual tax bill. They will also take care of the easily forgotten “house-keeping” of making sure the whole family uses up their ISA allowances every single tax year.
Beyond these basics, a private bank can explore the tax efficiencies to be found through sophisticated pension planning (pension contributions are tax-deductible) and investment vehicles you are unlikely to be offered on the High Street. For instance, offshore bonds can be a tax-efficient option as they allow you to defer paying tax on your investment return until you withdraw the funds – useful if you are in a high tax bracket or if you expect to be in a lower tax bracket in the future.
It is important open your mind to new ways of reducing your tax exposures, but as a final note of caution I would warn that it is vital to only implement these solutions properly with expert help. Tax laws can be complex and subject to change, and you should consult with the tax professionals any good private bank will have on hand extensively.
