High street banks have been shutting branches while recent years have seen private banks grow and prosper in Scotland
Our banking habits have been changing. And while digital transactions on smartphones are a wonderfully convenient innovation, it’s those finer aspects of personal and business banking which still require human attention and service.
The expectation that TSB – once the venerable Trustee Savings Bank tracing its Scottish roots back to Ruthwell in
Dumfriesshire more than 200 years, and a pillar in every town – will disappear from UK high streets is another indication of change.
TSB’s Spanish owner, Sabadell, has sold the bank on to Santander, another Spanish player, in a £2.65bn deal. It is expected to result in the closure of the remaining branches where customers can deal with financial matters in a personal way.
While high street banks have been shutting branches for decades, recent years have seen private banks grow and prosper in Scotland, and according to Mark Prentice, Head of Banking at Hampden Bank, based in new premises in Edinburgh’s Charlotte Square, there is a direct correlation between these trends.
“The closure of traditional bank branches doesn’t appeal to everyone,” he said. “Some people prefer a more personal relationship than that offered by the high street banks’ drive to internet banking, and private banking offers a more human touch.”
Chris Thomson, of Union Bancaire Privée (UK), known as UBP, said that in contrast to traditional high street banks, private banks can offer bespoke solutions, delivered at pace. This is attractive to high net worth (HNW) clients who often are time-poor because they are hands-on running a business.
High net worth individuals usually have assets in both property and cash, consistent levels of top-tier salaries and associated bonuses, and monies from the dispersal of family assets or the selling of a business.
Those with massive wealth are often classed as UHNWI (ultra-high net worth individuals) such as rock star celebrities, with Taylor Swift worth more than £1bn, top-level professional sports people such as Roger Federer, and those who have sold stakes in international tech companies supported by Silicon Valley investors.
Swiss-based UBP, with its wood-panelled offices on George Street overlooking St Andrew Square in Edinburgh, is a relatively recent arrival in Scotland and supported by one of the most strongly capitalised private banks in the world.
“Scotland is attracting and creating more HNW individuals and families,” Thomson said. “With the erosion of some traditional ‘corporate’ careers and loss of heavy industries, not to mention the lessening of state support at all stages of life, there has been a significant uptick in entrepreneurial activity in Scotland over the past decade.
“Many of these new businesses have gained real value quickly, with frequent exits for founders who in turn are settled happily in Scotland. We see a rise in entrepreneurs from overseas relocating to Scotland – for lifestyle reasons and because they can tap into an excellent professional ecosystem to support their plans.”
Alisdair Dewar at Coutts, also in Edinburgh’s George Street and with offices in Glasgow’s Queen Street and Aberdeen’s Marischal Square, said that Scotland has long been synonymous with financial stewardship, innovation and prudence – qualities that align closely with the ethos of private banking.
Coutts can claim Scottish heritage, set up on the Strand in London by a goldsmith John Campbell from Angus. It has played a crucial part in the City of London’s growth and in 1969 when the Westminster Bank and the National Provincial formed the larger NatWest Group, Coutts remained NatWest’s private banking arm.
Some people prefer a more personal relationship than that offered by the high street banks’ drive to internet banking
- Mark Prentice
“Scotland has a significant population of HNW individuals due to generational wealth and entrepreneurial success, especially in energy, tech, interactive entertainment and agriculture, outlining the importance of private banking services here,” said Dewar.
“And Scotland combines th e infrastructure and connectivity of a cosmopolitan business hub with cost efficiencies compared to London, making it an attractive private banking hub. It also benefits from good transport links to London and international financial hubs, making it accessible for global clients and talent.”
Prentice, a former head of corporate banking at Lloyds Bank, said the fact that Scotland is home to a pool of professionals is a significant contributory factor in the strength of its private banking sector.
“High net-worth individuals want access to good lawyers and accountants, financial planners and people who can help them with their tax affairs, and there’s a strong pool of quality advisers in Scotland,” he said.
“In Scotland people like to build long-term relationships; they want to be able to speak to their doctor, their dentist, and their banker. Scotland will always be good at that: your lawyer will put you in touch with your accountant who will put you in touch with your banker.”
There is a recycling of talent from larger retail commercial banking operations into the private banking sector
- Sandy Begbie
Sandy Begbie, Chief Executive of Scottish Financial Enterprise (SFE), noted: “In Scotland, given our long history in banking – and despite the terrible financial crisis of 17 years ago – there continues to be an exceptionally strong talent base, with a recycling of talent from larger retail commercial banking operations into the private banking sector.”
Furthermore, Thomson said the same rationale which makes Scotland attractive to high net-worth individuals applies to its attraction as a location for private banking.
“Our clients appreciate all that Scotland has to offer in terms of lifestyle for them and their families, and so having a private bank ‘locally’ is appreciated,” he said.
“Clients with capital for us to manage and/or complex debt requirements live north of the Border for the quality of life. Scotland has excellent universities, global travel connectivity, deserted beaches, world-famous golf courses, forests, mountains, and the largest financial sector outside of London.
“There’s also a thriving start-up and tech sector with associated venture capital and private equity professionals – an ecosystem that allows our entrepreneurial clients to grow their businesses. We can work closely alongside clients’ other professional advisers because the ‘network’ of advisers in Scotland’s main cities is collaborative and well connected.”
Many HNW individuals require nuanced, often bespoke, planning to ensure that wealth is preserved
- Alisdair Dewar
Dewar also emphasised that Scotland is home to major banks, asset managers, and fintech firms.
“With a strong concentration of investment management capability and established expertise in legal, tax, and accountancy services, it is one of Europe’s most established financial centres,” he said.
Begbie agreed that the strength of the financial and professional services eco-system in Scotland means that many private banks can run their operations from here effectively.
“If you compare the strength of our financial and professional services ecosystem in Scotland to places like Leeds, Manchester or Birmingham, Scotland’s is much stronger, deeper, and more mature,” he said.
“Another reason many private banks locate operations in Scotland is cost. The quality of the talent we have in Scotland, the relatively competitive cost of doing business here together with the benefit of an attractive way of life compared to London, are all contributing factors to the fact that we are seeing jobs and investment in Scotland.”
Indeed, many of the experienced figures working in Scotland’s private banking sector, such as Prentice and UBP’s Scottish director Richard Lockhart, have worked at senior levels in the major banks and appreciate that many customers miss the professional banking relationships that were once the bedrock of mainstream banking.
There are, though, a range of barriers to growth currently confronting the sector in Scotland, such as reports of a wave of directors having left Britain following the UK Government’s abolition of favourable treatment for non-domiciled residents, the prospect of tax rises in the autumn Budget, and the tax differential between Scotland and England.
Prentice acknowledged that Hampden has seen some clients relocate their operations from Scotland to England because their business is UK-wide and they can function just as easily from England as Scotland, but stressed that, so far, such moves have been rare.
“Our fear would be that there will be more, because that would not be good for Scotland,” he said. “And there’s certainly been a lot of discussion about the fact that we pay more tax in Scotland than in England and what we can we do about that.”
Begbie, himself a former RBS veteran, stressed that addressing the tax differential between Scotland and England has played a central part in SFE’s policy agenda for some time.
“The tax differential is a barrier to investment and attracting jobs to Scotland,” he said.
“On occasion we hear the phrase ‘Scotland allowance,’ referring to the phenomenon of organisations seeking to move senior people to Scotland expecting some form of compensation for the higher tax to which they will be liable. We’d like to see a tax realignment with the UK, though don’t anticipate that happening before the elections next May.”
Dewar said that following last year’s UK Budget, adjustments to areas such as Capital Gains Tax, dividend allowances, and Inheritance Tax thresholds sharpened the focus on proactive tax planning among HNW individuals in Scotland and that Coutts is seeing an increased appetite for early engagement on succession planning, restructuring of assets and philanthropic giving.
He suggested that in Scotland specifically, these dynamics are amplified by the nature of local wealth.
“Many HNW individuals have assets tied up in landholdings, agricultural businesses or multi-generational family enterprises. These require nuanced, often bespoke planning to ensure that wealth is preserved and passed on effectively in a shifting fiscal environment,” he said.
“In that sense, policy changes and even the prospect of future change are both a challenge and an opportunity: a challenge because they can disrupt planning, but an opportunity for private banks to demonstrate expertise and build trust by guiding clients through uncertain times.”
Despite these political challenges, there remains ample evidence that Scotland’s private banking sector is in fine fettle. Thomson is convinced that the prospects are good.
“Entrepreneurs are creating wealth in Scotland more quickly than previously and need help with how they deploy the capital generated from a business exit,” he said.
“More traditional wealth creators – typically from longstanding family-owned businesses and landed estates – also appreciate good advice from experienced professionals and private banks are well placed to provide that.”
Dewar noted that Scotland’s economy is diversifying and attracting new wealth from
sectors such as renewable energy, technology, life
sciences, film and television production and interactive entertainment.
“While this inter-generational wealth transfer will require new engagement strategies, it also provides opportunities to make sure that the private banking sector in Scotland is always growing and evolving to meet its clients’ needs,” he said.
And Prentice suggested that the sector has benefited from a shift in the perception of its offering to clients.
“Historically, private banks were seen as being for the lords and ladies, dukes and duchesses rather than for normal people, but you don’t have to be mega-wealthy to be with a private bank,” he said.
Instead, he likens the customer’s decision to opt for a private bank over a high street bank to deciding on whether to book the train to London first class or standard class.
“If you want to get a bit more space and comfort, you pay that little extra to travel first class: that’s what private banking’s like,” he said.
“We’re not mainstream, but we’re not mega-expensive. You make your choice and, if that’s what you want, you pay a little extra to get it.”
Scotland’s financial services – an evolving ecosystem
For a century, Edinburgh’s Charlotte Square was the financial heart of the Capital until the turn of the millennium. Then the advent of new technology led to many investment companies and supporting bankers and advisers moving away from the Square.
Hampden & Co was one of the few banking institutions which set up its services on a corner of the New Town’s UNESCO -listed square. The bank patiently waited for the refurbishment of new premises across the street.
Now Hampden has moved into its spectacular setting with its private client rooms, a conference room for meetings, and with high levels of supporting technology.
Other banks offering private banking services are Weatherbys Private Bank, which established its office in Edinburgh in 2015, while Handelsbanken, not strictly a private bank but a new arrival after the banking crash in 2008, has picked up high net worth customers, with its offices in Aberdeen, Falkirk/Stirling, Edinburgh and Glasgow. RBC Brewin Dolphin, part of Royal Bank of Canada, has private wealth and investment planning offices in Edinburgh and Glasgow.
Ensuring that banking maintains its commitment to customer service, the Chartered Banker Institute, formerly the Scottish Institute of Bankers, works on training and ethics. The organisation has recently appointed Paul Denton, a well-known Scottish banking figure, as president and chair. Denton has more than 35 years’ experience in financial services with senior roles at RBS, NatWest and Co-operative Bank.
He has been the Chief Executive of Scottish Building Society, based at Dalry in Edinburgh, since 2019. He joined the institute as a member in 1988 after completing the professional qualifications. He also has an MBA from Edinburgh Business School.
Research from TheCityUK has hailed Scotland’s financial and related professional services industry as a critical driver of jobs and economic growth, showing that the industry employed 151,000 people and accounted for 10.5 per cent of Scotland’s total gross value added (GVA) in 2023.
