Financial Services. A marriage of convenience
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13 September 2013
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18 October 2013
Alliance with a private bank strengthens existing and potential client relationships, argues Simon Lough. Simon Lough is director at Cripps Harries Hall in London.
Cripps Harries Hall has recently formed an alliance with Citibank International which is believed to be the first of its kind between a law firm and a bank. Citibank will provide banking services to the firm's key private clients. But why should solicitors seek to assist with clients' banking arrangements, particularly as they receive no income for doing so?
Cripps' experience, and that of many of the members of Asim, is that the ability to provide private clients with co ordinated legal and financial advice is a key selling point, particularly for relatively wealthy clients. Solicitors with a financial division can not only advise and act for a client on a company sale, but can also manage the proceeds in an investment portfolio, file tax returns for the client and advise on pensions.
At Cripps, all the financial and legal business of key private clients is co-ordinated by one partner who acts as a client manager. The responsibility for co-ordinating advisers is thus removed from the client and passed on to the firm. Cripps believes this enables it to offer better advice, since it has a better understanding of its clients and their objectives. It also saves clients time and money because they do not have to acquaint several different sets of advisers with their affairs.
However, if law firms want to help their clients with every aspect of their private business affairs, there is one obvious gap in the range of products offered. This missing link is the provision of banking services, which solicitors cannot provide because Bank of England and Law Society regulations prevent them from doing so.
Various studies have shown that high net-worth clients regard day-to-day banking facilities as the least important part of their relationship with the bank - it is tax and estate planning, as well as investment planning that clients believe are crucial. Because these are core services for solicitors' private client departments and finance divisions, should not law firms concentrate solely on providing these? What is the point in offering to arrange bank accounts when doing so appears to add little value to clients' existing arrangements?
Experience has shown Cripps that the ability to offer third-party banking services, co-ordinated with its own services to the extent that regulations allow, can be important to a number of clients. But it is essential that the services the partner is offering are a demonstrable improvement on those available in clients' existing banks.
Cripps is confident that this is the case with Citibank, particularly given that it also offers its premium Citigold service on preferential terms to the firm's clients.
Cripps has also found that by extending the range of products a law firm offers, its banking alliance can help it to attract new clients. As an example, a businesswoman, who had just sold her company, wanted to retire, establish an investment portfolio and live off the income. However, she wanted to have the option to raise money suddenly to invest in business opportunities, without necessarily having to liquidate her investment portfolio.
The arrangements negotiated, allowing her to borrow money from CitiBank, secured on her investment portfolio managed by Cripps, were a major attraction.
Another example is a barrister who had previously used a well-known private bank for all his financial affairs, but was concerned about the advice on tax planning and investment he had received. A friend recommended Cripps to him, but he was unhappy about the extra co-ordination role required of him if his tax planning, investment and banking arrangements were to be separated. The firm's ability to offer Citibank's services, co-ordinated with its own, removed this worry.
A banking alliance offers solicitors the opportunity to strengthen their relationship with existing key private clients and to develop valuable new business links.
It requires a sufficient critical mass of existing and potential clients to make the exercise worthwhile, particularly given the lack of direct income for the firm. But the ability to address clients' banking requirements has already proved its worth.