20 years and counting

20 years and counting

Coutts has just celebrated 20 years in Yorkshire. But Peter Baber discovers that isn’t the only reason why the head of its Yorkshire operations is smiling

Early in December last year some 120 customers of Coutts were entertained at the Leeds Grand Theatre by the Children’s Chorus of Opera North, and by the members of the opera company itself performing excerpts from its latest productions.

It was, of course, a suitably upmarket event for a bank that is still perhaps best known for being banker to the Queen. But the event was also an important milestone for the bank itself, as it marked its 20th anniversary of being in Yorkshire.

“Leeds is one of the bank’s oldest regional offices,” says Mark Yellops, the banks’ executive director for Yorkshire. And unlike other banks which may be cutting back and centralising their operations, he says the 22 regional offices Coutts has is testimony to how it still values the importance of face-toface meetings.

Yellops, who has been with Coutts for 11 years but has worked in financial services for 26, opened up a newer office in his home town of Sheffield in 2006. “Face-to-face meetings are still absolutely critical,” he says.

“We are obviously a large wealth management firm, but people want to deal with people. If it is urgent they want to come and see you, or they want us to go out and see them.” But the 20th anniversary milestone isn’t the only reason why Yellops is feeling particularly bullish as 2012 turns into 2013.

The new year also sees new regulations in financial services known as the Retail Distribution Review come into force, and Yellops thinks that as Coutts is already very well prepared for that, their arrival will put his bank in a very good light.

The press has widely described these reforms as the end of providing financial advice for a commission, and instead the introduction of system based on fees, where all advisers have to gain qualifications in order to be able to advise.

Such a change has been brought about because of horror stories about people’s hard earned saving being eaten up by commissions they were not even aware they were paying.

Yellops says that while you could describe the changes in that way, they are actually a little bit more complex. “The regulator is trying to raise professional standards and increase transparency for financial investing,” he says.

“What they are trying to do is make it very clear to the investing public what services they are paying for. There will certainly be more transparency about when they are paying for the service or product that is being recommended, and when they are paying for ongoing advice.”

The reason why he thinks this is particularly good news for Coutts is because Coutts has already been adopting these practices for some time. Yellops says that as the cold light of the new regulations begins to shine on the industry, more and more current and would-be Coutts clients will come to realise the value of this.

“The standards we at Coutts are asked to achieve are actually well above the minimum standards the regulator is setting. But then you would expect that, because of the nature of the people that we are advising. So is he implying that some wealthy individuals who currently put their money elsewhere might realise that the financial institution does not have such high standards? Yellops is more circumspect.

“I am not saying other companies say you have to do A, B, or C,” he says, “but there is a reason why the regulator wants us to go down this route. I suppose it depends on how other companies present themselves to clients. Some companies have embraced the concept already, others are yet to face the market. I think the change will serve us well as an organisation.”

So what can a new client of Coutts expect in their first few contacts with the bank? To begin with we need a little scene building. Perhaps because of the minimum thresholds for entry – Coutts will really only accept as customers people who have over £1m in investable assets – Yellops says most of the clients he and his team deal with will already have sold at least one business in their lifetime – unless they are lucky enough to have inherited such wealth.

What the bank does with new clients is draw up a detailed wealth plan - a bit like a business plan, only for an individual’s wealth, and encompassing all his or her financial and personal objectives in life.

“This is a living, breathing document which lasts over time,” says Yellops. “We revisit it as often as the client would wish, but as an absolute minimum once a year.”

This plan is not something that just gets thrown together in an instant (like some business plans, you might say). In order for a Coutts adviser to be able to fulfil their job properly, Yellops says they have to have a very detailed – often very personal – knowledge of their client’s aspirations in life, their personal beliefs and choices, and exactly what their goals might be, and that takes time to find out. “We need to invest a lot of time,” he says.

“Very rarely does it happen in just one meeting. We often have to talk about very confidential things. We need to have a full picture of their financial circumstances. The most important driver is what their goals over their lifetime are. We need to understand those in detail.”

Obviously in such circumstances there is an ultimate need to get the money away into something where it can be earning a reasonable rate of return. Yellops, however, insists that it is just as important for the client themselves to take their time and think about what they really want to do.

He doesn’t mind them prevaricating too much – as long as he is able to make proactive suggestions while they decide. He says the need for this consideration time often stems from the hectic lives the clients themselves may have been living as they build up and exit their business.

“They will often have been very focused on their business,” he says, “and then they have moved into a sales process, which is also a very intense period and can be very tiring.

"Some of them step away from the business immediately while others may stay if that is part of the sale terms and conditions, but whatever happens they need time to think.

"The last thing someone wants to do is tie up money immediately. So we usually say: ‘Let’s think about this.’ And we keep thinking about it. It is often an education process in terms of talking about what’s available, and seeing them as individuals coming to terms with what they can do now.”

One frightening new aspect that may spur on people who have just sold their business is inheritance tax.

Yellops points out that if most of their wealth is tied up in their business, then this may not have been an issue for them before because, under business property relief, shares in a business are not subject to tax.

But as soon as they sell the business and those shares become cash, the whole issue of looking at ways of minimising inheritance tax suddenly becomes very pressing. And talking of children and descendants, there may be attitudes to risk to uncover. Some of that attitude may be bullish, but not all of it.

“They may compartmentalise how much cash they want to set aside for school fees or university education. They may want to set a low level of risk for that type of investment.”

Yellops says he has noticed over the 20 years that the average age of his clients has come down by a decade to late 40s and early 50s.

And because successful entrepreneurs at that age might also want to help out with another start-up, as a mentor, a business angel, or even a co-owner, they may also realise they have other uses for the money that they have made already. “They may also want to hold funds back in cash,” he says.

“They may, in short not really know what they want to do. So the last thing they may want to do is tie a lot of money into investments. Often the best advice is to take some time out and think.”

One thing that many of the clients he sees are usually interested in is philanthropy, or giving something back. While there are tax advantages to setting up charitable trusts, Yellops doesn’t think that is the only thinking behind such actions.

“My gut instinct would be that people do want to give something back,” he says. “These days a lot of the entrepreneurs I am seeing are coming less and less from a family-oriented business, but will instead have built their money up from scratch.

"That means they won’t have come necessarily from family backgrounds where there is any sense of family duty, and will instead have causes that are close to their heart. It is certainly a trend for people to consider giving to charity as part of their planning. Or to invest into social enterprise that creates wealth and jobs but is still a charitable cause."

Certainly he thinks that with the declining age of his client, the old idea that you sell your business and head off into the sunset is becoming less and less real.

“Twenty years ago some clients might have bought properties abroad and gone to live there full-time. But the trend now is for that to happen less and less. They may buy a dream car and a lovely holiday home abroad, but fewer are retiring away because they still have connections in the UK.

"Also the expectation of what that kind of expat lifestyle can bring has changed. As our client’s typical age has come down, they are less willing to play golf every day. It is something they may do with holiday home for a period of time, but they want other opportunities. Particularly in Yorkshire, I find a lot of entrepreneurs are very loyal to the region, and they care passionately about the regional economy and employment, and also giving something back by the other roles they take on. That is a fantastic thing.”

Whatever they decide, Coutts will have a specialist adviser to help them on such issues as pensions, setting up trusts, and issues to do with family business. Yellops says the bank has deliberately gone down the route of using specialist advisers wherever possible because it is unlikely that one person can cover everything.

These advisers will however feed into the individual wealth manager who advises the client, and for that person a key element of their role is being proactive.

“Our job is not about delivering advice and waiting for our clients to contact us,” he says. “It is about contacting them if something is changing.”

We meet the day after the Chancellor’s Autumn Statement, and Yellops says that morning there would already have been “a number of conversations” with clients about such things as what to do now that the pensions threshold has come down from £1.5m to £1.25m.

Personal service is of course something Coutts, by its very nature of being a private bank, is known for. People used to covet the purple cheque books and Mastercards all Coutts account holders were given.

Yellops says they are less of a draw now compared with the advice services the bank can offer. Still, it is worth hearing what perks being a Coutts account holder can bring you.

People who have a Coutts Mastercard gain access to a special concierge service, and Yellops says that because of that on one occasion when he was setting up the Sheffield office he was asked to liaise with that concierge and see if they could arrange to get tickets for a client at short notice for the Kirov ballet’s New Year’s Eve performance in Russia.

“We could facilitate that,” he says. “The concierge service had a Russian speaker who knew how to acquire such tickets on the open market. They are often sold out.”

On another occasion, during the Icelandic ash cloud incident, the bank as a whole sent coaches into Europe to pick up customers who it knew were stranded abroad.

“One of my clients from Sheffield took advantage of that and had a pleasant trip home including a stop at a vineyard in France,” he says.

It all makes Coutts sound like an extended family – a feeling that is reinforced as soon as you enter the bank’s offices in a Georgian building on Park Square in Leeds.

You feel as if you are being ushered into someone’s drawing room. So it comes as something of a surprise to hear Yellops suggest that, by the time the next significant anniversary comes around, Coutts might have moved out of there.

The office he set up in Sheffield, in contrast, is open plan and in a skyscraper. Still, when you hear about his enthusiasm for how he sees the region and his client’s businesses growing in years to come, you begin to understand why it might make sense to face the modern world.

“The drive towards manufacturing in hightech industries that this government seems to be keen on is massively in Yorkshire’s favour,” he says. “Prospects are brighter now than they have been for a long time.”