Company Profiles

Banking In Turbulent Times – In Conversation With Arbuthnot Latham

Tom Burroughes Group Editor London 23 November 2023

Banking In Turbulent Times – In Conversation With Arbuthnot Latham

This publication recently sat down with Arbuthnot Latham, the venerable UK private banking group (it also does commercial and corporate banking) to discuss its strategy in what has been a volatile and difficult year for certain firms.

This news service recently joined a horde of Arbuthnot Latham bankers and clients at the UK private bank’s 190th birthday celebrations in the plush setting of the Institute of Directors, in Pall Mall. WealthBriefing also took the time to chat with senior figures at the bank about its wealth strategy. (The bank recently issued its financial results.)

A great deal has changed in the domestic and international private banking space. In 2023 alone, there have been the sagas of Silicon Valley Bank, the shotgun wedding of Credit Suisse and UBS, and the political furore over how Coutts and NatWest handled, or mishandled, UK broadcaster and former political leader Nigel Farage as a client. In terms of more regular news, in early April the firm appointed Helen Keen, who previously worked at Coutts, as head of UK private banking. In October it appointed former Hampden & Co figure John Hilson as head of entrepreneurs, private banking.

We spoke to Kevin Barrett (pictured), managing director, private and commercial banking. He has been in the sector for more than 18 years, starting as a graduate trainee at HSBC and later moving to Arbuthnot Latham.

Kevin Barrett

Arbuthnot Latham’s business covers a range of fields. How does the firm manage the inevitable complexity? 
Barrett: What is unique about us is our relentless focus on understanding our clients’ needs and supporting them on their financial journey. We are a full-service, human-scale relationship bank powered by modern technology and it’s the personalised service that clients tell us they value.

It’s a simple approach that enables us to seamlessly engage with a client who is being served by one part of the bank and discuss our capability in another. Our clients have the assurance that they will relate to another expert who understands their objectives and can help meet them; few banks have the breadth of offering we have and are still small enough to care.

How large a slice of the AL business is the private banking side? In rough percentage terms, what share of annual revenue does it deliver, versus the other parts? Has this share risen/fallen?  
We are approximately 50-50 across private and commercial banking, with both seeing strong double-digit growth in client acquisition in recent years. Private accounts are up 30 per cent since January 2020 and commercial accounts are up 40 per cent over the same period. 

What are your staffing/recruitment goals for the private bank? Is it mostly from internal hires that you find people, or are you looking at those from outside? Have some of the big changes, such as the HSBC-SVB merger, and issues at Coutts, etc, caused some bankers to come over? 
As a rapidly growing organisation, we want to nurture talent from within the business while also offering roles at different levels to external candidates. We value our existing colleagues' understanding of our unique culture and their dedication to client service. Because of this, we place a strong focus on entry-level positions, offering work experience, internships, and graduate programmes to develop the next generation of talent.

We recognise however that a fresh perspective can be invaluable, and we also look to hire experienced and dedicated bankers in the market who align with our values and goals. In the last couple of months, we have brought in new bankers and launched several new propositions including in the technology sector, e-gaming, and construction. We find that despite the recalibration in the banking sector, people are keen to work for Arbuthnot Latham because of our reputation for stability, permanence, and putting clients first. 

You said the private bank has a net promotor score of 67 per cent and the commercial bank has a 69 per cent score. What do you think accounts for these scores and have they risen in the past few years? How much store do you set by such metrics? 
We take great pride in the improvement of our NPS in recent years. In 2020, it stood at 45 per cent, so achieving such an increase in our most recent client survey is very gratifying. One of our senior bankers consistently emphasises this point: people appreciate us because at the most basic level we answer the phone and are accessible. 

It may seem quite straightforward, but our clients know they can reach their relationship manager when they need to, which shouldn’t be a differentiator, but it is. Additionally, our clients value access to expert advice and bankers who actively listen to them, with a focus on assisting with their challenges rather than simply pushing products.

Our individual bankers and relationship managers play a huge role, but there is something institutional at play: not just our strong culture, but our investment in people, and technology to free up bankers to spend more time with clients. We have more work to do here though and we arekeen to make that happen.   

In overall terms, have rising UK central bank interest rates benefited the bank, or caused it a headache?  
Our model and emphasis on deposits means that we have benefited from a rising market. But because we believe in building long-term relationships with clients, we have continued to pass on increases in the Bank of England rate to our savings accounts.

We believe in offering competitive rates for the long term and clients trust us because of this. As a result, our cost of servicing deposits has risen, but it is incumbent upon us to pass on rates to our clients and ensure that our business is diversified enough to balance risk and reward in the current environment to drive revenue in other areas.

Our borrowing clients have not been immune from the increased interest rate environment but as we believe in long-term relationships, we have been proactively contacting our clients to discuss challenges and find solutions that work for them,

The bank’s footprint: where is the bank located in the UK, and is it happy with its current bases and does it expect that there could be changes in the next few years? 
What we have found is that clients served by our regional offices in Manchester, Exeter, and Bristol do appreciate a physical presence where they are. The ability to meet face-to-face is also important, so while some competitors have retrenched in recent years, we see even more value in being embedded within and supporting the business communities across our current UK footprint.

From our four offices across the UK, we feel we have a good coverage model for most of the UK, and with the benefit of technology now, we can serve clients anywhere.

An important issue for banks is a pipeline of future clients. Where are you getting new business from? How has this changed at all in the past five/10 years? 
Many new clients come to the bank via recommendation. Over the last few years, we have also worked on building our brand through PR and online, and we are subsequently reaching new clients who would otherwise not know about us. Once a potential client shows an interest in us, they speak to a relationship manager who will find the best way we can support them. 

We think we are doing a good job of that; we have seen 9 per cent growth in client numbers between 2022 and 2023.

A lot of banks say that they put relationships first, but we have been very proud of how we have been able to demonstrate to many new clients the value that we bring. 

Do your bankers/RMs have a rough idea of what sort of client/RM ratio makes most sense? What is the model for managing clients – RM+ team of experts, or another?  
Our clients want their bankers and their support to be accessible. At Arbuthnot, the client will have multiple points of contact with the banker and their assistant as the primary contact, combined with the investment manager and wealth planner. This provides long-term continuity for our clients with the multiple touch points, which is another differentiator as we know several private banks have centralised support to drive efficiencies. 

We talked briefly about digital banking services as part of the mix, and this is with a view to attracting younger clients. What’s the evidence that this is working as hoped? 
It isn’t just younger clients who this applies to, when we surveyed our clients, over 80 per cent felt that it was important to be able to engage with us digitally. We are investing further in our digital transformation which will be exciting for colleagues and clients. 

The benefit we have as a smaller bank is that our tech stack and legacy infrastructure is not as cumbersome as some of our larger competitors, so while no technological change is easy, we are able to operate nimbly to keep up with rapidly changing client demand.

Ultimately, clients come to Arbuthnot Latham because they want the best of both worlds. They want all the convenience and ease of modern digital tools, but they still expect to pick up the phone and speak to their dedicated banker or relationship manager when they need to. It’s about getting the balance right.
The world is a volatile place, as latest news shows. Do you think the AL brand is one that has resonance at times such as this, given how the firm has traditionally run its balance sheet? 
We have a proud heritage going back 190 years and manage our business conservatively. Clients want to deal with a well-run bank, with strong liquidity and a capital base that affords it to continue to focus on the client irrespective of the economic climate.  

At the start of the pandemic, from the day we started remote working, we increased the volume of client communications. For us it was about reassurance: that we’re still here for our clients, and that we’re in it for the long run as a business.

I think clients appreciated how open and approachable we were during a very challenging time and in all the uncertainty over the last three to four years, we have seen record growth in client acquisition and the growth of the business.

Because we retain a long-term focus, when uncertainty prevails, we carry with us a certain confidence that calmer seas are on the horizon, and I think our clients appreciate that.   

Our purpose is summed up in four words: helping you go further. We believe that is our mission, to support clients on their life journey and provide a banking and wealth management service that allows them to look forward with confidence. This, coupled with the thoughtful and long-term way we run the business, should give clients huge reassurance and peace of mind that whatever happens in the wider world, we are by their side for the long term.

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