Private banks - are they really giving their customers the best deal?

15th June 2017

Private bank customers tend to get the best of everything – top service, exclusive products, a personal banker – but are they really getting the best deal for their money?

Savings products offered by some of the UK’s top private banks leave a lot to be desired when it comes to interest rates, compared with what is available elsewhere. For example, C.Hoare & Co pays nothing at all on its easy access account, the same amount as Cater Allen Private Bank pays, if you deposit between £5,000 and £99,999 in its easy access account, rising to just 0.15% on balances of £500,000 plus.

Clients of Citibank and Coutts & Co – the Queen’s bankers – will be paid the less than princely sum of 0.05% on their Citigold Flexible Saver account and Private Reserve Account respectively or as little as 0.01% on the Citigold Flexible Saver Account. The most you could get from Citibank is from the Citigold Reward Saver, which pays 0.5% for the first six months, but then even this falls to 0.1% after this period.

These rates are paltry compared with what you could achieve elsewhere by moving your funds from a private bank’s savings accounts to some of the best accounts on the wider market.

The increasing push by the challenger banks to garner savers means there is currently a rate war going on that private banking clients could benefit handsomely from. For instance, the best easy access account rate on the market currently is with Kent Reliance. Its Easy access account - issue 19 is paying 1.15% on balances of £1,000 or more. That is 11.5 times more than the 0.1% you get from many private banks and 23 times more than you get from Coutts & Co and Citibanks Citigold Flexible Saver account.

Does it make a difference really? You bet it does, especially if you have a significant sum on deposit. Let’s say, for argument’s sake, you have £100,000 on deposit in an easy access account. A 0.05% interest rate would give you £50 in interest in one year. Receiving 1.15% would give you £1,150 in one year. No contest really.

If you want to tie your money up for a period of time, you can do even better. The 24-months fixed-term deposit account with C.Hoare & Co will pay 0.75% on deposits of at least £50,000. Cater Allen Private Bank’s equivalent – Term Deposit Account – 24 months – pays 0.8% on deposits between £50,000 and £5m. Weatherbys Bank Ltd pays even more – 1.2% on deposits between £50,000 and £2m.

However, even this pales into insignificance when you look at the best buys in this sector. The top two-year fixed rate bond is with Atom Bank and its 2 year fixed saver paying 2% on deposits above £50.

Once again, assuming you have £100,000 deposited in this account, the amount you will gain is remarkable. At 1.2% you would receive £1,200 in interest per year, but it would rise to £2,000 a year if you were earning 2% in interest – an extra £800 each year, so £1,600 in total – effectively free money!

Of course, there are many reasons for using a private bank, including the personal attention, specific products and even the kudos that comes with having a private banking debit or credit card. These rates are also the ones that are in the public domain. No doubt for some super high net worth clients, the private banks will offer some exclusive deals that the rest of us will never know about.

However, when you consider how much more you could be earning if you put even some of your money outside of its scope, especially if you do not qualify for the very special treatment some customers will get, maybe you should take a look at the alternatives that are available to you.

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