As Barclays starts to transfer its sub-£500,000 clients into a new ‘lighter touch’ private clients division, senior figures in the industry are divided over whether the bank’s decision should be applauded or abhorred.
Some say sub-£500,000 clients deserve more than what the private clients division will offer in terms of service. As revealed by Wealth Manager in November of last year, clients will now be handled out of call centres in Glasgow, Birmingham and London. They will be given a new point of contact, known as a private client services manager, who is not regulated but is overseen by a regulated private client manager. The overhaul follows a 35% reduction in private banker headcount this week, down to 180 and a regional management restructure.
The bank said there will be no change to the investment proposition that those in this bracket receive. A spokesperson said the new division will continue to support existing clients ‘through a combination of services including discretionary portfolio management, advisory services and execution-only’.
Wealth Manager understands there will be no change to the charging structure.
Plan branded ‘outrageous’
John Howard-Smith, chief executive of PSigma Investment Management, has branded the launch of the new division as ‘outrageous’, arguing that £500,000 is still a lot of money and these clients should not be treated as ‘a commodity’.
‘This goes back to the age-old argument that people with this sort of wealth should be treated as clients and not customers,’ he said.
‘If we were to go through the same process, would I think it is right to be looked after by a call centre? In my mind you are treating those affected as customers rather than clients.’
Howard-Smith said Barclays’s strategic decision was ‘short-termist’ and he would look to capitalise on any opportunities that may arise from it.
For example, hiring any disaffected staff or attracting new clients, particularly given the potential these clients might have to increase their net worth over time.
‘If I find the right investment managers who want a home, I would be very happy to take on people with clients with less than half a million pounds. I still think it is a lot of money. We are sitting here with open arms and saying “we think you are important”,’ he added.
Richard Whitehead, chief executive of boutique Dart Capital, echoes Howard Smith’s sentiments. ‘I think the decision they have made is incredibly arrogant. There are lots of well run and well managed wealth management businesses that would be perfectly happy to look after the needs of these individuals,’ he said.
Barclays’s open recognition that it wants to service its smaller clients more cost-efficiently flies in the face of the assumption that larger organisations can provide economies of scale.
Consultant Michael Maslinski points out that banks have historically struggled to provide a viable service for smaller clients due to the bureaucracy associated with them and the fact that management is distant from the end-client.
‘Sometimes these [smaller] businesses are capable of providing both the service and advice in a more cost-effective way than the big organisations that have all of the bureaucracy required to show that you know your client to your boss and your boss’s boss,’ he said.
‘It is difficult when management is very remote from the client. So much of the cost in these organisations is servicing that internal system.’
Maslinski is supportive of Barclays’ new division, arguing that the industry ‘should be more honest about what they can deliver to whom’.
‘We have all known that for some time clients with sub-£500,000 can’t afford the advice that is of a calibre worth having. Frankly, this is an acknowledgement that this is the case. I would say £500,000 is quite a low cut-off. It probably should be double that,’ he said.
A chief executive of a medium-sized wealth management company, who would prefer not to be named, has also welcomed the move, describing it as an ‘intelligent decision’.
‘If you look at self-service models, people want DIY and the appropriate architecture around their engagement with these organisations. The role of advice becomes diminished. You can see the business model – you get advice through a call centre on a commoditised-basis,’ he said.
He anticipates that Barclays will have already calculated the attrition rate, which is likely to be relatively low.
‘It is just impossible to deliver a bespoke private client service to a large number of clients,’ he said. ‘We need to be brutal about how it is going to work,’ he added.