Specialist Banking recently asked the broker industry for their thoughts on private banks and whether the latter offered products that other specialist lenders and banks couldn’t.

Do brokers feel that private banking is out of their depth?

“Every bank is different and a broker working with private banks needs to know what types of clients and deals they are looking for, who to contact, how to present a client situation, how to negotiate the best terms, what indicative terms to expect, and what will be required to secure credit agreement as quickly and smoothly as possible,” said Nigel Bedford, senior mortgage manager at Large Mortgage Loans.

“As this is a full time job, it is safe to say that most brokers do feel that private banking is out of their depth and only a small band of expert brokers are truly comfortable working with a range of private banks,” Nigel claimed.

Robert Collins, director at Sirius Property Finance, added: “I would imagine that some brokers could feel out of their depth dealing with private banks in the same way that specialist areas such as development or commercial can seem daunting to brokers who work in the mainstream areas of residential and BTL mortgages.”

Chris Dawe, sales director at LDNfinance, believed it was a question of familiarity for brokers.

“Many brokers exist within their comfort zone of dealing with the main high street lenders, possibly drifting in to the realm of the challenger banks for the less vanilla cases.

“This often means that they are less familiar with the process, products and practices of the private banks, meaning they will shy away from using them.”

Shaun Church, director at Private Finance, added: “Private banking is a specialist area which requires knowledge as to how private banks operate and an appreciation and understanding of the complex financial affairs of high-net-worth individuals that typically make up their client base.

“For some brokers who deal with more mainstream clients on a day-to-day basis, placing business with high-net-worth individuals and private banks can be a significantly different process.”

However, Daire Dowling, executive director at Arc & Co, stated that brokers didn’t feel that private banking was out of their depth.

“We see them as a tool for gaining our clients the best product suitable to their needs.

“We try and work as a team with them.”

What products do private banks offer brokers that others can’t?

“Private banks have a greater understanding of complex clients’ circumstances and can therefore offer tailored and specialised assistance to clients of this nature,” commented Shaun.

“They can also provide ancillary services such as wealth management and tax planning to offer a more holistic service.

“Having everything handled by one organisation can appeal to those high-net-worth clients who are cash-rich, time-poor.”

Robert believed private banks could be more flexible in areas such as domicile, income streams and ownership structures.

“The products themselves will generally be fairly standard, but the main points of difference tend to be around the borrower type or borrowing entity.

“Typically, the private banks can be very good at understanding complex income streams, offshore ownership structures or foreign domiciled borrowers, plus their rates are generally very good.”

Nigel thought that a main USP of private banks was how they could understand and assess non-standard income, and by doing so often lending the required amount when a high street bank couldn’t.

“Income and assets in foreign currencies, and indeed clients living and working overseas, are all fine for private banks.”

Daire added that private banks could offer bespoke products at large loan levels, such as £5-10m and above.

“[This] also gives flexibility to hedge against currency and cap against interest rate rises.

“[The] main negative is they can be very slow and if you don’t know what you are doing and who you are dealing with it can go very wrong.”

Why use a private bank instead of a specialist bank?

“When dealing with a private bank, you are often talking directly to a decision maker or at least someone who can build a case to present to a decision maker,” Chris added.

“This means that they will be interested in all elements of the case and able to take a view on most points if the risk is mitigated by another element of the client’s profile, [such as, pushing] the salary multiple based on background assets.”

Vic Jannels, chairman at AToM, stated that the speed of decision making was a key positive.

“[Their] rates are usually very competitive.”

Shaun concluded: “Private banking can be a more expensive option for borrowers, however a specialist lender can be even more costly.

“A broker can help advise an individual as to whether their circumstances are specialised enough to benefit from a specialist bank or whether a private bank or indeed a high street bank is sufficient.”