Entry Level Offshore Private Banking

They call themselves private banks, but are they really? Investment International investigates

If you earn a bit more than the average – perhaps you’ve finagled yourself a superior expatriate contract, in which case well done – perhaps you might be thinking that you should have a bit better banking service? It seems reasonable. Banks do, after all, make a lot of money out of your money. Let’s not get into technical details about how they do, but they do. So if you’re starting to give them a bit more of the lolly, the least you can demand is something more than the odd ATM and a bored 21-year-old who can work a computer screen.

We’ve looked at the banks that offer above-standard packages specifically to expatriates. Rather grandly, we’re calling what they offer ‘Entry Level Private Banking’. Banks themselves don’t use that term. Up until recently, they talked in excited – if slightly patronising – terms about ‘Mass Affluent’ banking, which meant the market segment with a few tens of thousands of pounds to play with.

It’s worth saying first that this is a tricky market segment for banks, particularly international banks which tend to have higher overheads per customer. It is expensive for them to run relationship managers, for instance, which are the sine qua non of any sort of private banking relationship. In fact, a couple of years ago, a number of them stopped marketing their ‘mass affluent’ services entirely. Much of that was to do with the stock market crash which made making money on all but the biggest private banking relationships very difficult. Even so, all the banks in our table still offer some extra bells and whistles for the client with a bit more money to play with. That, we hope, is you.

Asset levels

First in the table comes asset levels. Some banks will require a certain salary level, but most will ask for a minimum asset level. NatWest asks for either £25,000 in assets, or a minimum salary of £75,000. Obviously, under a certain level and the economics don’t work out for them. A word of warning though. Even though some banks say they want clients with the odd £50,000, they’d rather not and are looking for client higher up the income scale. Ansbacher Channel Islands, for instance, set the barrier at £50,000, but is really a product geared to individuals with more than that. If you’re in that bracket, fine. If not, try elsewhere. Others offer a perfectly good service at that lower level. By the same ruling, some banks will be flexible about the entry limit if you’re, say, a long-standing customer, or if you look to them like a good prospect. What banks want –the raison d’etre behind these packages – are youngish people who look likely to go on to earn substantially more in future. Get ‘em now, is their outlook. Get more out of them, ought to be yours.

Other banks – perfectly good and competent ones with pukka reputations – have no lower limit, and you can open accounts with them for a couple of thousand, but only really roll out the private banking carpet when you reach a more usual private banking asset level. Singer & Friedlander in the Isle of Man, for instance, falls into that category. We’ve left them out of this table because although their minimum deposit is just £2,000, real wealth management doesn’t kick in until the £250,000 mark. Singer’s is a great bank with private banking competencies, but not quite an ‘entry level’ one.

Charges

If a bank wants to charge you for their service, you should probably go elsewhere. They take your money, re-lend it out or invest it and earn a lot of money from it. And they want to charge you for the privilege?

Relationship manager

This is the key competency. One important thing to bear in mind is what banks mean when they say ‘Relationship manager’. Sometimes they mean something along the lines of “someone will pick up the phone and pull up your details on a computer screen”, which isn’t quite what most of us would think counts. What an RM is meant to be is a person whose name you know, who knows you, and who can expedite your business without having to get up to speed on your circumstances in 45 seconds. For the top-end private banks, each RM will have no more than a handful of clients – or ought to. Even some ultra-posh private banks pack their RMs’ lives with too many individual clients, leading to a dilution of the service they can plausibly offer. A couple of years ago, more than one industry research company lamented that the economics of private banking meant that the “Relationship Manager proposition” (they love their jargon) was “not economically viable” and what customers thought they were getting, they weren’t really. So, ask some pertinent questions before you sign up. How many RMs has the bank got, for instance. If it’s two, forget it. A good offshore bank should have a few tens, at least.

Next come investment advice. Again, nobody is naïve enough to believe that a bank asking for £50,000 in liquid assets is going to be able to give you the same level of service that a bank asking for £5 million is. But some species of investment advice ought to be on offer, either in-house, or via a selected and reputable external company. You might have to pay extra – in fact you usually will – for that high-end external advice, but going through a bank should have its benefits, including possible discounts in fees (make sure you ask for this and complain if it isn’t forthcoming: the tax or investment company is getting extra business from the bank, and there is not reason why that shouldn’t be reflected in the fee structure.) Fundamentally, though, the relationship manager ought to be able to advise you on at least the basics of investment – otherwise what are they for?

Telephone banking

Some offer a 24-hour service, some don’t. The ones that do stress the fact that expats are likely to be in odd time zones, so need someone on the end of the phone at odd hours. Some say that it has not proven worthwhile, and their clients phone during office hours in any case. “We tried it,” says a Royal Bank of Canada spokesman, “and it wasn’t worth it.”

You could, of course, look elsewhere rather than the familiar, largely British banking names. Jyske Bank, for instance, is a Danish banking group that has long-standing offshore operations and is present in Gibraltar and Zurich. The bank has a range of good products.

Another highly competent offshore bank is Sweden’s Nordea, which has offices in a good geographical spread of locations and has long-standing experience of offshore banking. It is the largest Scandinavian bank, so has a solid level of competence behind it. Not as well known as the British offshore banks, but worth a look.

It is probably worth steering clear of banks you’ve never heard of, even if – especially if – they appear to be offering amazing deals and services. Life just doesn’t work that way. A big, reputable bank is not going to go bust. Bank of Butterfield Guernsey, for instance, upwards of $4 billion under management, has 30 years’ experience in offshore banking, and has a parent bank that dates back to 1858. ‘One Horse Bank of Vanuatu’, on the other hand, with an office above a betting shop, is not a financial partner to be recommended.   

Gerrard Focus – best mid-range bank

Gerrard Private Bank’s Focus account keeps winning awards. Our close namesake magazine, International Investment, which writes from the opposite perspective to us – from the industry not from the end client’s perspective – has named Focus as the best offshore account for three years running. It’s not a surprise. Focus is about as good an offshore package as exists at the moment.

Gerard combines openness of access (minimum asset level required is a reasonable £50,000) with more of the trappings of the private bank than almost all the rest. Apart from the basic services you would expect – from multi-currency accounts to gold cards to a named relationship manager – Focus includes some useful add-ons like seamless funds transfers between bank and broker for investment purposes.