“Small is beautiful” is the title of a proselytising early-1970s book on business and society and the statement still resonates almost 40 years later. Being small-scale is proving a winner for wealth management as some of the biggest names in the sector have suffered in the financial turmoil.

London & Capital, a firm set up in 1986, says it is enjoying a “surge of interest” from high net worth clients disenchanted with the big private banking houses. But while L&C, a firm with $3 billion of assets, might be expected to boast of its niche player status, its views are echoed by others in the wealth management industry.

“We are seeing a very strong move in the business towards medium-size firms and the boutiques,” said Michael Maslinski, who runs the eponymous wealth management consultancy firm, Maslinski & Co.

“Although the larger families will use the larger private banks, many are looking elsewhere for their trusted advisor,” Mr Maslinski told WealthBriefing.

James Lawson, a director at Ledbury Research, a firm that carries out analysis and consultation work for the industry, agreed: "Certainly the more niche wealth managers are benefitting from the malaise that the larger banks are suffering from: whereas size and scope once portrayed client advantages of access and strength, they’re often now associated with excessive risk exposure and uncertainty."

The problems of large wealth management houses such as UBS – suffering massive credit write-downs and enduring a bruising legal fight with US tax authorities – or the heavy losses at Merrill Lynch, Citigroup, Royal Bank of Scotland and Fortis – have hit the image of some of the largest firms, if not irreparably. By contrast, stand-alone private banks, such as Switzerland’s Julius Baer, have fared relatively well.  

Dudley Edmunds, of the wealth management recruitment Culliford Edmunds, says there has definitely been a move of clients from the larger to the smaller firms, at least in the short run, although he is unsure how sustained such a move will prove to be.

“I think that there has been a shift to smaller companies partly out of desperation and partly due to the muddle that the large companies are in. How long the shift will continue is, I think, debatable as the smaller companies do not have the product, support and overall platform of the big players,” he said.

As Mr Edmunds’ comments suggest, there is a continued debate on whether the benefits of being a big, integrated banking firm with access to the widest possible array of products outweigh the nimbleness and personal touch that is thought to come more easily at a smaller operation.

London & Capital certainly thinks its status as a smaller player is currently working in its favour. In a recent note, it said the recession has seen some of the larger wealth management firms cut services they offer to people with £2 million or less to invest, which leads a large pool of assets looking for a new home.

“As a result, HNW clients have flocked to the smaller boutiques, where they have discovered a more personalised, flexible and bespoke service-led approach.  London & Capital has been a primary beneficiary of this sea change and has seen new account openings rise by 84 per cent in comparison to this time last year,” the firm said.

Iain Tait, executive director and head of private client services, London & Capital, said: “Many HNW clients, looking for an exceptional wealth management service, are now recognising the benefits of working with a smaller firm where service and attention to detail is in many cases far superior to the larger houses.

“In terms of attracting new clients, we have benefited from the current climate and have seen more referrals from existing clients over the past 12-18 months than ever before.  We have also managed to retain nearly all of our existing client base with less than 1 per cent leaving us over the past year, a credit to the commitment and innovation that we deliver.”