Isio: How to break up with your private bank

Rob Agnew is a partner and head of private capital at Isio How do you know when something isn’t working out? Red flags that seem obvious in hindsight can be difficult to spot in the moment, and rose-tinted glasses keep us in unhealthy relationships long past their sell-by dates. And that’s why assessing your private bank is so hard.

We choose private banks to manage our wealth because we trust them with our money and to provide the very highest quality of service and expertise. Well-known private banking brands convey prestige and we are reassured by the status of a longstanding institution. 

For anyone coming into new money from selling their business or from inheritance, for example, a private bank can feel like the obvious solution – a one-stop shop offering discretion, sophistication and access to investment opportunities that are otherwise out of reach. But over time you might get the feeling that what you were promised at the start isn’t what you are getting now. If this is happening to you, how can you tell? And what can you do about it? The comfort trap

The reluctance to change a private banking relationship is understandable. Wealth brings complexity and the effort and risk of overhauling a relationship that is ‘adequate’ may feel like too much. The administrative burden of moving accounts, transferring assets and dealing with paperwork often discourages change.

Emotional ties also reinforce inertia. Longstanding family associations with an institution, a sense of loyalty to an adviser, or the prestige of a well-known name will all impact the decision to break up with your private bank. These factors create a sense of comfort, but comfort is not the same as quality.

Complacency can be costly. Private bank investment solutions which should be personalised are increasingly turning out to be variations of a central model. Fees are rarely transparent and it is difficult to establish the total cost, and even harder to compare between banks and determine value for money.

Performance is reported selectively, usually against peer groups that provide little meaningful benchmark for success against your personal objectives. Meanwhile, what is presented as advice can often be more akin to product sales, with private banks incentivised to promote what suits them, rather than what best serves their clients. Recognising the red flags

Despite the difficulties of evaluating your private bank relationship, there are clear red flags to look out for. The most significant is when you ask for your strategy or portfolio to be adapted to a specific objective and that request is met with hesitation, or declined altogether. You are paying for bespoke wealth management and any friction suggests you are receiving a service that is standardised rather than tailored. 

You should also be able to identify an all-in cost of service. Where this is obscured, it is a sign that your interests may not be fully aligned with those of your private bank. Equally important is understanding the nature of the advice itself. Too often, investment recommendations are shaped less by client objectives than by what the bank is best positioned to sell. When recommendations resemble a bank’s historic strengths and pushy to the point of feeling sales-oriented, rather than based on impartial advice, it is a clear sign that the relationship is no longer serving your needs. 

Dealing with the same people matters. High turnover of senior bankers, who are being replaced by less experienced staff, is another warning sign that quality of service could be set to deteriorate. This can reduce the quality of your engagement to a transactional, rather than deeply personal, relationship. 

Investment performance is more complex to assess and if markets are benign you may feel less inclined to scrutinise returns. Private banks often benchmark your portfolio performance against broad industry averages, but comparisons should show your portfolio relative to a portfolio with similar objectives. If you have a long-term growth objective, ask for performance to be compared to one of the world’s leading pension funds or endowments. Don’t settle for mediocrity disguised as competence. 

Finally, don’t get sucked in by glossy reports and curated events. They can create the impression of sophistication, fuelling the inertia which makes severing a private bank relationship more difficult. The essential question you need to ask yourself is whether your bank is providing genuinely bespoke advice and excellent value. Knowing when it’s time to look around

When doubts accumulate, ending the relationship can appear daunting, but there are simple steps you can take to make looking around for a new partner straightforward. The first step is an audit assessing whether fees, performance and service have met the commitments your bank originally made. The next is to evaluate what you are getting against other providers and not just banks, but genuine investment specialists. 

When making a change, preparation is crucial. Understand exit terms, transfer processes and potential tax considerations. This will help you switch in a way which minimises disruption and ensuring continuity for your portfolio. 

Trust in an investment specialist

Just as in other professional fields, there is a distinction between generalists and specialists. You likely wouldn’t want your GP performing brain surgery. Wealth is no different. Private banks can provide high quality banking services but for managing wealth and investments, a specialist will have genuine expertise in constructing and managing portfolios and adapting strategies to your evolving needs.    

Wealthy individuals and their families are increasingly turning to investment specialists, or establishing a family office which works in close partnership with them. This arrangement offers control, independence and access to sophisticated knowledge and high-quality solutions in a world where the challenges to successfully managing wealth are growing. 

In an environment where the financial needs of wealthy individuals are increasingly complex but the potential to protect and grow wealth is higher than ever, remaining in a comfortable but unproductive private banking relationship is a significant risk. While potentially daunting, the best decision you take this year might be to break up with your private bank. 

Ready for a better approach? Visit isio.com/private-capital or contact rob.agnew@isio.com

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