The two biggest names in UK private banking are under pressure from their parent companies. Barclays Wealth’s downsizing has sparked an exodus of top management from the firm, raising deep questions over its future, while Coutts is undergoing a strategic review by parent RBS.
Barclays Wealth & Investment Management, one of the super heavyweights of UK wealth management, is undergoing a senior management meltdown. Peter Horrell, the division’s CEO who succeeded Tom Kalaris, has announced his surprise resignation, a departure quickly followed by his senior peers.
As a result, Barclays Wealth is now the "go-to" bank for rivals seeking top talent and teams of advisers who can decamp, along with a decent book of client business, according to industry insiders. Other defectors include Henry Fischel-Bock, head of European and UK wealth management at Barclays and Kevin Gardiner, chief investment officer for Europe.
In what’s being called a flight on "intellectual talent," Catherine Grum, a director of wealth advisory; Oliver Gregson, head of discretionary wealth management; and Kevin Gardiner, chief investment officer for Europe have left. The global head of investments and solutions, Rory Tobin has also decided to go elsewhere.
The departures come in the wake of the decision last year to absorb Barclays Wealth into the parent bank’s Personal and Corporate Bank division, which was completed in May of this year, headed by Ashok Vaswani. That restructuring had been accompanied by a downsizing under which as many as 40 percent of Barclays Wealth’s staff were to be laid off or re-assigned.
At the same time, Barclays Wealth announced plans to cut the number of wealth markets it serves globally from about 200 to 70 by the end of 2016.
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The wholesale departure of Messrs Horrell & Co has raised questions over whether Barclays is still interested in being a full-service international player. Indeed, talk is that Barclays Wealth in America, in Africa and Asia may prove surplus to requirements before long.
In a statement, Vaswani said that Horrell "has overseen the creation and implementation of W&IM’s strategy, securing investment in the business from Barclays and positioning W&IM for long-term and sustainable growth".
Christopher Wheeler, a widely-followed analyst at Mediobanca, contends that Barclays Wealth staff "are not convinced that they are seeing a business that is still core to Barclays’ operations."
He told PBI: "My sense is that there is confusion on commitment and I still think they might sell the US wealth management business."
The scale of defecting talent is, according to rivals, raising that danger of a vicious circle under which other staff have become discontent and start looking for jobs, a trend which crucially could spread to clients who may be concerned that their investments may not be serviced properly in the future.
Barclays Wealth is at pains to reject such assertions. The business is one with "immense growth potential," it declares. "Integrating the business into Personal and Corporate Banking presents significant opportunities to improve our client offering and deliver a truly seamless and integrated service to our clients globally."
It is pointed out that the number of initiatives/activities in the pipeline "demonstrates the ongoing investment into the business to support its growth plans."
Barclays claims to be leading the way on innovation in digital and mobile, including voice biometrics being rolled out to corporate and retail customers and mobile banking being extended to Wealth clients.
It is also on track to develop a consumer offering for self-directed (or do-it-yourself) buy and hold investors, to be rolled out initially in the UK in 2015. Barclays Stockbrokers, one of the UK’s largest execution-only stockbrokers, is the ideal springboard for the development of this, Barclays sources say.
Meantime, Horrell will stay on to the end of the year while a search for his successor is conducted. Barclays bankers favour the appointment of a wealth management professional for the CEO role, and say the choice of somebody from the retail banking side of the bank would hurt morale even more.
RBS to conduct review of Coutts
In a strategy eerily similar to the shrinking of Barclays Wealth, RBS is to conduct a review of its private banking arm Coutts which could see sale or dispersal of some of its operations.
Coutts also now sits within the parent bank organisationally, after being combined with the RBS Commercial and Private Banking division in order to better connect it with successful entrepreneurs and growth businesses.
"As part of the transition, we are reviewing our private banking business so that it works best for our customers," RBS Chief Executive Officer Ross McEwan announced, in the bank’s half-year results. The RBC chief is known to consider that Coutts has been under-performing.
Although there are highly speculative suggestions that Coutts’ overseas businesses could be sold, analysts don’t see such a "nuclear option." After its CEO Rory Tapner was recruited in 2012, the bank heavily pruned its international business, reducing the number of countries it served from 170 to 70.
However, Coutts Swiss offshore banking business may well disappear, a business line which a number of banks are exiting due to a crackdown on the US’ and other countries’ tax evasion. In addition, Coutts Asian private banking business could come under close scrutiny as profits are notoriously hard to generate in the region’s competitive wealth industry.
HSBC is selling more than CHF 10 billion in Swiss-based assets to Liechtenstein’s LGT Group while Standard Chartered continues to negotiate the sale of its own Swiss private banking.
While Coutts itself declines to comment officially on the possible outcomes of the review, well-placed bankers point out the bank, traditional adviser to HRH Queen Elizabeth II, has "an iconic brand and high name recognition at home and abroad."
"The issue is to ensure that any restructuring of Coutts is implemented in a way that doesn’t damage the brand and hamper its ability to service clients internationally," one senior banker says. "Coutts is one of the most desirable assets in the industry."