The managing director of UK private bank Adam & Co stresses the importance of trust and close client relationships, qualities that stand out even more starkly as the wealth management sector grapples with fall-out from the Goldman Sachs scandal.

At a time when financial scandal is again roiling the markets, the head of UK private bank Adam & Co is enthusiastically stressing its image of being trustworthy and a firm that does not punt its balance sheet on the latest economic fashion.

Adam & Co - founded in 1983 - has its origins in Scotland, with three offices in the country plus two in England (including London) and an international branch in Guernsey. Compared with the big-hitters like Bank of America and UBS, Adam & Co is a relative minnow with £1.5 billion (around $2.3 billion) of client assets under management.

But asset size is not an issue that concerns David Cathie, managing director at the bank, who has been at the firm since the start of 2005.

“You look at our balance sheet - it’s very solid. One of the reasons RBS has identified wealth management as being a core activity for the whole [RBS] group is that we are a liquid business and we have surplus deposits on our balance sheet. We don’t leverage our own balance sheet. For every pound we take in, we lend only about 40p out,” Cathie told WealthBriefing in a recent interview.

In that sense, Adam & Co stands in total contrast to its state-owned parent, Royal Bank of Scotland (also owner of Coutts and RBS Coutts). Its ultra-conservative balance sheet approach is the polar opposite of the fractional-reserve system that is standard for most of the world's private sector banks, where only a small proportion of client deposits are covered by actual reserves. In that sense, Adam & Co’s business model in some ways resembles the traditional Swiss private banking one and those of Scottish banks in the 18th and 19th Century. Results have been solid in the past 12 months: Adam & Co has managed to hold profits steady at £24 million for last year, despite turbulence in financial markets and a record year in 2008.

Cathie also argues that the bank’s business lines are designed to reassure its 9,500 clients that their affairs are under total control. There are three segments: a) banking services (such as loans, mortgages, deposit accounts), b) investment management, and c) custody. In the latter business segment, Adam & Co acts as a custodian not only to its own clients but also provides the service to external customers, he said.

“When a client comes to us we are in control of every element of the service we provide. If there are any mistakes made, for example, we can sort it out fast.”

Cathie, who replaced Ray Entwistle five years ago, chose the very different world of Adam & Co after an extensive career in far larger firms, including National Australia Bank.

Why make the switch to a smaller firm?

“The moment I walked into the offices in Edinburgh, I felt this firm offered a traditional service to clients, unlike where financial organisations were huge and rather anonymous. It is very much relationship-based,” Cathie said.

The firm does not operate a rigid standard of minimum investable assets, leaving advisors to use their judgement over clients’ suitability.

Cathie says that his colleagues are well aware of the issues affecting their parent firm, but also stressed that RBS’ top management has publicly stated how important private wealth management is to its overall business vision.

“I am very optimistic about the future and about where we are in the RBS group. We are benefiting from significant investment from our shareholder [RBS] in a new technology platform that will improve the client and staff experience.”

“I see a very bright future for the business where there is a brand that people trust.”

At a time when markets are digesting the impact of the Goldman Sachs financial scandal, trust is once again at a premium in wealth management.