If you’re a high net worth mortgage client and you’re struggling to agree on a home loan, you’re not alone. The Financial Times has recently reported that private banks are increasingly trying to become more ‘exclusive’ and have begun a fresh ‘cull’ of clients in an attempt to become more profitable.
If you’re looking for a high-value mortgage, it can pay to speak to a broker with experience in dealing with private banks and non-traditional lenders.
The FT reports that banks are ‘quietly exiting parts of the business that are not profitable’. HSBC closed its in-branch financial planning arm in 2012 although the bank continues to offer ‘Premium’ investment services for clients with £150,000 in investible assets.
This move followed Barclays decision to close its branch-based investment advisors in 2011. Its private banking arm will still provide services to clients with around £500,000.
“The banks are focusing more than ever on profitable clients and even the higher net-wealth clients are feeling it,” said Andrew Nolan, executive director with Stonehage, a wealth management adviser. “Loans for very high-net clients are becoming more difficult to get. Also at the smaller net-worth end the costs of capital are increasing.”
And, it’s not just the large high street banks that are withdrawing their services from clients. In recent months a number of private banks, which pride themselves on establishing personal relationships with their customers, have started a cull of clients. Many have begun ‘managing out’ clients with investment portfolios of hundreds of thousands of pounds.
“They are weeding out lower-margin clients,” says Stewart Richardson, partner with RMG Wealth Management. “They are being told that if you don’t like it, you’ll have to move on.”
Deutsche Bank Private Wealth Management recently told one long-standing client: “We continually review our commercial position to take in to account the increasing complexity and operating costs of managing client assets.
“If this may lead to a client-facing unnecessarily high fees relative to the balance of their account, we will provide them with sufficient notice so they can find a more cost-effective solution to their investment needs.”
The reviews come as private banks focus their attention on annual fees rather than charging per transaction, which can be a more erratic source of revenue. According to the FT, high value mortgage and investment advice for high net worth finance clients ‘is becoming harder to obtain as firms, faced with increased regulatory costs, retreat from the market.’
Hugh Wade-Jones, director of London mortgage broker Enness Private Clients, said: “While it is true that some private banks are conducting reviews of their clients, there are plenty of banks out there with an appetite to lend to large mortgage clients.”
“We’ve spent the last five years developing relationships with dozens of private banks in the UK and overseas who are keen to lend to high net worth individuals. And, they will often offer extremely competitive pricing to encourage clients to switch their banking.”