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Tuesday, October 16, 2018

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Opinion > Investec Private Bank

A guide to private banking

Peter Izard, BDM at Investec Private Bank | 07:27 Wednesday 15th August 2018

There are many misconceptions that shroud private banks.

Because they lack the high street presence of a retail bank, they can be seen as less accessible.

We believe this to be a common misconception: private banking shouldn’t be seen as inaccessible. We simply focus our efforts on helping clients with complex financial situations, who need something more than a cookie-cutter banking service.

Another myth is that clients need to hold assets with us before we will consider a mortgage application. This may have been the case historically at some private banks, but Investec Private Bank does things differently.

Who can use a private bank?

It varies from bank to bank, but here at Investec Private Bank, we ask for a minimum annual income of £300,000 and net worth of approximately £3m or more.

Our clients range from bankers to celebrities and are typically entrepreneurs and wealth creators.

You will not find a private bank on any sourcing system, but this is not because we are not open to brokers, or that we only transact through a select few. The reason is because most private banking mortgage deals are bespoke solutions, created specifically to meet the needs of each individual borrower. High-net-worth clients usually have more complex incomes than the average mortgage borrower and as such require a more tailored product, designed for their specific situation.

Clients can have varying incomes such as vesting shares and dividends, overseas investments or part of their salary derived from a foreign currency.

For example, senior bankers working in the City for a European or American bank may receive their salary in sterling, but their annual bonus in euros or US dollars. If their bonus is taken into account when assessing affordability, the loan will be categorised as a foreign currency mortgage.

Although our clients are wealthy, they may not want to liquidate their existing assets in order to buy a property and many find that investing their money elsewhere can offer a greater return than cementing it into property, hence the need for a mortgage. 

What makes private banks different from retail banks?

For starters, most private banks can offer more flexibility than a retail bank in terms of their criteria and the amount they can lend.

We take a holistic approach to the client and their financial situation. As a result, we can offer some very favourable terms, such as interest-only and high LTV lending.

We can offer mortgages to first-time buyers, those looking to remortgage, buy-to-let investors and foreign buyers.

We don’t take a tick-box approach to lending and instead our product will be exclusive to the client and where possible encompass all of their portfolio and earnings, unlike some retail banks, which may be limited by what earnings they can take into account.

The finances of high-net-worth clients can appear daunting compared to a normal borrower, but brokers shouldn’t turn their backs on this market. That’s where private banks like ourselves are here to help. In my next article, I’ll be explaining how private banks can work with brokers to assist high-net-worth clients.  

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