Being modest in size is not necessarily a disadvantage for a private bank, especially if it services clients with significant assets. A more personalised service for wealthy individuals can be seen as a unique selling point for a smaller bank. John Schaffer speaks with Arbuthnot Latham CEO, James Fleming, as he discusses the bank’s strategy and growth plans
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Arbuthnot Latham describes itself as a ’boutique bank’, arguing that its small size gives its private banking clients a bespoke service that differentiates it from the larger players.
The bank, headquartered in London, has an assets under management figure of £666m ($1bn) for 2014, up 26% from the 2013 figure of £528m. Arbuthnot made profits of £3.6m in 2014.
With a client base of approximately 3.5k, the 180 year old bank has historically concentrated on UK clients. However, with the opening of a Middle-East office in Dubai in July 2013, the bank has increased its international focus.
James Fleming, Chief Executive Officer at Arbuthnot Latham, speaks calmly and assertively about the private bank’s position in the market.
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By GlobalDataFleming is no stranger to private banking, with 25 years of experience in the industry. He joined Arbuthnot Latham in 2012. He moved over from Coutts, where he held the position of head of international private banking and managing director of the UK entrepreneurs, landowners and inpatriates business. Prior to that, he was the managing director at SG Hambros UK.
With controversies shrouding the private banking industry over the past few years, Fleming feels he joined a bank that ‘lacked’ some of the difficulties of larger rivals.
"Arbuthnot Latham has always been run quite conservatively, with a small ‘c’. Being small, it is obviously not in a position to take too many risks and as a result of that policy, it has navigated carefully through the financial crisis."
Fleming has had no intentions of rocking the boat at Arbuthnot Latham. His strategy has been to continue with the bank’s focus, keeping aligned with its client base.
"The bank started as a merchant bank and over the decades it has become much more focused towards the high net worth (HNW) clients and their business activities.
"I didn’t change that. I took that basic strategy and developed it further to have a clear focus on sectors where wealth is being created."
Well formed
Fleming feels there are numerous benefits of a boutique bank. "We can make decisions quickly. We do not have numerous committees that we have to go through to get an ultimate yes or no as to whether we can do something. Thus, we can serve our clients better."
Fleming adds that Arbuthnot Latham has had clients moving over to it from competitors due to dissatisfaction with service. He cites the frequent change of relationship managers (RMs) and slow decision making processes as reasons behind wealthy individuals migrating to Arbuthnot Latham.
Having a personal touch is certainly important for wealthy private banking clients and Fleming feels that these relationships are crucial for the bank. Fleming says the general target market of the bank having £2 – 20m in value and defines the bank’s ultra high net worth (UHNW) client base as having above £20m in investible assets, with some individuals having significantly more.
According to Fleming, the client base is predominately made up of individuals who have created their wealth in their own right, rather than inheriting it.
The objective for Arbuthnot Latham is to continue growing, but not to become "industrial" in size.
"I’m a firm believer that small is beautiful, but I’d like to be a little larger than we are now."
Autonomy
The distrust towards banks post the financial crisis has contributed to several changes in customer behaviour, a predominant one being wealthy individuals putting their wealth managers under more scrutiny. Dissatisfaction has lead to HNWIs and UHNWIs moving their assets to other institutions rather than having blind faith in their RMs.
"A much greater fluidity of client movement has developed in the last four to five years. By that I mean, traditionally, a client would stay with a bank for a long time and if changes were made in strategy or RM, the client would generally just live with it and would move on. Now the clients will not tolerate any shortage of service."
New frontiers
Although Arbuthnot Latham has traditionally been associated with a London-based clientele, it has acquired a number of international clients.
"Obviously the UK in recent years has expanded its own market to have quite a substantial resident but non-domicile sector. We offer international private banking services to that community.
"The Dubai office opened two years ago. That’s gone better than we could have hoped for in terms of establishing roots and building up a momentum of growth."
In the UK, Fleming reveals that the bank is concentrating on other areas of the country, with a focus on Exeter in the South West and Manchester in the North West, though the London market remains its priority.
"It’s not an obvious strategy for us to become less London centric, because actually, within the M25, there’s an enormous market place for us. But it is the recognition that there are other important areas in the country, and that recognition may extend further in due course."
Favourable environment?
The recent UK General Election revealed a majority vote for the Conservative party and this has come as a relief for most of the private banking industry.
Fleming reiterates his support for London as a financial centre, as he feels the UK has a transparent legal system and is politically stable.
"We obviously have a well regulated financial centre and I think we lead the world, in that sense, in terms of regulation. Clients know they will have protection, both legally and from a regulatory perspective. We have a strong and high level of expertise in London, relative to the rest of the world."
