With its expensive suitability review now in the rear-view mirror, Coutts is able to focus purely on the future, with ambitious plans to double its assets under management (AUM) by 2020.
In the driving seat is the bank’s newly appointed head of wealth and investment management, Camilla Stowell.
Stowell was promoted to the expanded role from private office head in April as part of a wider restructure across its senior executive team.
‘The way I look at it [my new role], it is exciting from my perspective because it is end to end. So looking at the products, the platform, the services, the advice and planning a structure around how those are consistently delivered to meet the clients’ needs,’ she says.
For Stowell, a key part of meeting client needs is having a strong wealth management proposition.
‘Wealth management is one of the key focuses of the private bank because private banking is wealth management,’ she says.
‘We have done a lot of work over the last two years as part of our strategic plan, and – under Mohammad Syed, who is head of global markets – to evolve the investment platform and really bring in a disciplined and robust investment process that is fit for purpose for the future.’
She explains part of this has been a simplification of Coutts’ core investment strategies and building the firm’s internal investment proposition, as opposed to using standalone third-party offerings.
This centralised approach is a significant change, and arguably a much needed one, as a lack of central oversight previously led to the bank having to conduct a two and a half year long suitability review. This entailed reviewing client files going as far back as 1957 and in the end, Coutts paid out somewhere between £139 million-£200 million in client redress (the exact figure was not disclosed).
‘We have decided to actually back ourselves and our top down strategic asset allocation model,’ she says.
‘This is a change from how it was done in the past, but actually, I think it is the right thing because it still provides clients with good quality solutions and we continue to provide the financial planning and wealth structuring aspect.’
The new approach has so far proved positive. Parent group Royal Bank of Scotland (RBS) saw its income from Coutts and its sister bank Adam & Company increase by £13 million to £657 million in 2016, according to RBS’s full-year results published in February.
The profit for RBS’s private banking arm also saw an upswing, rising by 32% to £149 million over the course of last year.
However, this is not enough for Stowell.
‘We work to plans to 2020 and so we are part way through a strategic plan at the moment. Our assets under management are in the region of £17.8 billion which is more or less 15% up like-for-like, but our ambition is to get to £34 billion by 2020.’
Over 2016, the bank’s assets rose by £2 billion, a 14% year-on-year rise.
‘What does that mean? It means we have 14,000 clients and we want to increase [assets] across our broader client base and also increase our profile in the wider market.’
Stowell states there are a number of ways that Coutts can beef up its AUM.
Although she sees the lion’s share of the AUM coming from the private bank, she is also looking to the wider RBS group.
‘We can take advantage of the overall business model, so there are real advantages of being part of a large organisation,’ she says.
‘So for us, being the centre of excellence for the broader Royal Bank of Scotland and the Natwest business means that we can provide investment solutions into Natwest. The way we are doing that at the moment is through Natwest Invest, with the personal portfolio funds underneath.’
The personal portfolio funds are a suite of five passive risk-rated portfolios launched at the beginning of April this year. These also underpin the firm’s online investment service, Coutts Invest.
‘We had just started to open that up to Natwest customers and out of the £34 billion [target], we are looking to generate somewhere in the region of £3-4 billion through that channel.’
Having this channel offers Coutts a level of scalability that Stowell believes is getting harder to come by in wealth management.
‘That gives us scalability in wealth management and investment management as we go forward and I think that’s important, especially as everybody in the marketplace is going to suffer from margin compression. We are all going to have to find different ways and methods, and the verified opportunities to actually gain access to new customers and clients,’ she explains.
‘It is also about using the brand as well. Natwest is a great brand. I think we have identified that it has got approximately five million customers that would be eligible to consider Natwest Invest as one of the places to invest their cash deposits.’
She added that she is also looking at other areas of the wider business where there are pockets of assets under management, in the various institutions that she would look to bring in-house.
The new centralised business model, according to Stowell, now allows Coutts to achieve scale, therefore enabling it to take advantage of being part of a larger institution.
With scale, the issue has always been that it often leads to a shift away from the personal service many high net worth clients expect. But she sees the growth in scale as mutually beneficial internally and a means of funding the solutions for the high net worth and ultra-high net worth clients.
‘Scale just allows you to continue to provide value for money. We want to offer bespoke investment solutions, but in order for us to provide those at the right price for the market and the right price for the clients, we have the benefit of scale in a different area of our customer client segment. That allows us to be able to manage funds more cost-effectively at the upper end.’
Overall, Stowell sees the bulk of the new assets coming from a greater engagement with existing Coutts clients.
Out of the £17 billion, she is looking to draw in in the next three years, she expects around £7 billion to come from Coutts’ clients themselves.
‘So with the rate of growth we have seen the last two years, definitely we would expect that to continue and we are looking to continue that double-digit year-on-year growth within Coutts.’
The key to this is offering clients a wide range of choice within the bank, according to Stowell.
‘They like the fact that we are thinking about choice and we are giving them choice. Coutts Invest has been open to clients for the last 12 weeks. I was actually talking to one of my colleagues in one of our regional offices and we have a long-standing Coutts client that has investments elsewhere. He has now topped up his Coutts Invest position to £1.2 million, so clearly passive self-directed and easy access fulfils something for him.’
Another part of the strategy is looking at offering robo advice, she reveals. This is part of a wider digital push by the bank, which has committed to spend at least £20 million a year to upgrade its digital propositions.
‘We are working on simplified advice, so for want of a better word, robo advice. But we are thinking about that for Natwest, as well as whether or not it would be relevant for elements of Coutts,’ she adds.