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Wealth Manager Profile: Robert Taylor and Natalie Merrens

Wealth Manager Profile: Robert Taylor and Natalie Merrens

Kleinwort Benson may be one of the elder statesmen of City institutions with roots dating back over 150 years, but it certainly does not have the sleepy image that many private banks seem to project.

Indeed, the firm has been in the business pages more often than it would no doubt have liked this year, after two changes of owner in less than 12 months.

Commerzbank came along after it rescued its rival Dresdner Bank before selling the business on to the Belgian-based holding company RHJ International last October.

Chief executive Robert Taylor admits that the high stakes pass-the-parcel perturbed some of his clients, but he insists the business is now in better shape than ever.

It is easy to imagine Taylor reassuring clients. He is a skilled orator used to moving in high circles, but one who has retained the common touch. No doubt a lot of his communication skills were learnt in his first job as a legislative correspondent for the then US Democrat congressman Les AuCoin.

After a stint as a financial journalist, which was followed by spells at Merrill Lynch, SG Hambros Bank & Trust and Coutts, he joined Kleinwort Benson in 2004.

Natalie Merrens, head of product advisory, is a slightly newer addition to the team, having joined three and a half years ago.

Unlike Taylor, her background was in the industry, where she started out as a foreign exchange trader. After time out for a masters degree, she took up a consultancy role with Ernst & Young’s high net worth team. She spent six years at the business, which was latterly moved into UBS, before joining Kleinwort Benson in 2006.

The experience served her well as one of her first tasks was to overhaul the group’s approach to risk profiling clients.

‘Having worked in consulting, I had seen first-hand how all of the banks assessed their clients’ attitude to risk,’ Merrens says. ‘We designed ours using a mathematical approach and made sure that you cannot fudge it. It is not just about clients’ goals and aspirations – their understanding is also crucial.’

Bespoke is very much the word at Kleinwort Benson, which targets individuals with investable assets of between £1 million and £20 million. The average age of the private bank’s clients is 53 years, which is largely reflected in their investment objectives.

Taylor says that most of them have already fully utilised their pension entitlements and their focus is predominantly on wealth preservation rather than capital accumulation.

Central to this are tax planning and targeting cash-plus returns that are also ahead of inflation.

‘A big concern for a lot of our clients is around capital gains tax (CGT),’ Merrens says.

‘If people are solely dependent on living off their capital, they might be tempted to another jurisdiction, but if you are still earning you might not have this choice. We think CGT is going to move back in line with income tax, the question is when.’

The political uncertainty ahead of the election is not making tax planning any easier, the pair admit. One such example is the mystery over how long the upper rate of income tax will remain at 50%.

‘Deferring tax through enterprise investment schemes and venture capital trusts has been very popular,’ Merrens notes. ‘We have been wary of products that turn income into capital though because the government is really clamping down on them.’

Kleinwort Benson is, however, launching a cash product that enables clients to roll up their interest payments for five years with a view to the higher rate of tax having been reduced back to 40% at the end of the next term of Parliament. Take-up is expected to be strong.

Last year Kleinwort Benson launched more than six products targeting the ‘once-in-a-lifetime opportunities’ that were available. These included a residential mortgage-backed securities fund last February, which returned an impressive 45% in 2009.

‘We had good interest in it but the problem for many clients was that it was dollar-denominated,’ Merrens says. ‘Inflows into our equity products were disappointing though because, as is often the case, people tend to want to sell out at the bottom and buy in at the top.’

Others are worried that they have missed the boat after the spectacular gains seen last year. She believes that equities do have further to run, but the markets will be volatile, although they will end the year in positive territory.

Looking forward, the pair believe clients’ concerns about inflation are premature and that the spectre of inflation is unlikely to return for at least a couple of years.

An issue that Kleinwort Benson will have to face sooner as a business is the retail distribution review.

‘We have been watching the RDR unfold and as more and more guidance has come out we have found that we will be subject to a number of points around charging and the overall training of our staff,’ Taylor says.

‘Ultimately, we are pretty much ready now for the final recommendations and the issue for us is more around reporting commission back to the clients.’

As the Mifid regulations already require similar disclosures, the firm will find this a fairly straight-forward exercise, he adds. One major positive that will come out of the RDR is focusing investors’ minds on charges. ‘It will come down to a question of whether you want to pay for alpha or beta. If you want alpha you will have to pay more,’ Merrens says.

Kleinwort Benson believes it is positioned to benefit from this as advisers outsource their investment services while many clients of the larger banks continue to move to smaller firms after being disappointed with their managers’ performance during the downturn.

With its ownership now on a secure footing and a growing uptake of its long-held multi-asset approach, the private bank expects to prosper for generations to come.

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