In an industry that is inundated by digital disruption alongside the tradition of sticky client relationships, private banks can often suffer from an existential crisis. Hampden & Co. a new entrant into the UK market, has adopted a traditional model based upon client relationships. John Schaffer speaks with Graeme Hartop, the bank’s chief executive, to find out more
New entrants into the UK private banking industry are certainly not commonplace. In fact, Hampden & Co. is the first new entrant into the UK private banking space in over 30 years.
The Edinburgh-headquartered bank is backed by 250 shareholders with nearly £50m in capital raised for its launch. The bank has been founded by Ray Entwisle, former chairman of wealth management firm Adam & Company.
The private bank is entering the market at a rather challenging time for the industry. Private banks’ profit margins are being continuously squeezed by an ever-more strict regulatory environment and the threat of digital disruption are many – particularly coming from automated-advisory-services such as Nutmeg.
As a result, some private banks have completely streamlined their client focus, revaluated their business models, and some have also tried to combat the issues in the industry via mergers and acquisitions.
However, Graeme Hartop, chief executive of Hampden & Co., believes that, despite adversities facing the industry, there is space and opportunity for a new player in the UK private banking market.
"The high net worth (HNW) segment in the UK has performed very well, even over the credit crunch period. The numbers are growing and the amount of people using private banks is still relatively small in the scheme of the overall UK population," he tells PBI.
A traditional challenger
The original name for Hampden & Co. was Scoban. The firm’s name was changed after insurance advisory group, Hampden Holdings, became one of the bank’s largest shareholders.
Hartop was headhunted by Entwisle to take on his current CEO position. Previously a professional rugby player, Hartop has had a 26-year career in banking, beginning his career at Adam & Co. and moving to Scottish Widows, where he spent 19 years and served as managing director since 2003.
The Hampden & Co. business model is purely traditional in its approach to private banking. With two offices – one each in Edinburgh and London – the private bank aims at fostering personal relationships with its clients.
The bank offers a selection of products aimed at wealthy individuals. Hartop informs:
"The products set includes a current account, full lending capabilities including regulated mortgages, overdrafts, loans and full depositing capabilities."
In terms of client growth, Hartop says the bank aims to grow "gradually" and forecasts 1,000 clients by the end of the first year of its operations.
Hartop adds that the new private bank is "all about the client and providing the right service to that client".
Hampden & Co.’s client centricity is supported by a team of high quality private bankers who are professionally accredited. The staff of experienced bankers will bring an associated client base to the new private bank to form a portion of its initial clientele, which will also include the bank’s 250 shareholders.
The bank’s shareholders are intrinsic to its marketing strategy, which is based upon word of mouth, rather than an external advertising push. Hartop says:
"Essentially a lot of the strategy revolves around the existing shareholder base and the contacts that we have in the banking team. We’ve also got a number of connections in the professional market in terms of businesses such as lawyers and accountants."
According to Hartop, Hampden & Co. has numerous advantages over incumbent private banks in the UK.
"We’re coming into the market with a completely blank sheet of paper in that we’re a new start-up. We’ve got none of the legacy issues of the past. That will be an attraction for clients."
Graeme Hartop, chief executive at Hampden & Co.
Wealth in the cloud
Hampden & Co. have partnered with Oracle for its technology infrastructure and is using Flexcube, Oracle’s cloud based core banking platform. Hartop says that launching with a cloud based system gives the private bank "a lot of future proofing" for its IT systems.
"I think we’ve all seen a number of incidents in the UK where some of the more established banks have had big IT issues, so having the modern technology is a really significant benefit for us," adds Hartop. Additional benefits of the cloud, for a new private bank, include flexibility and scalability.
Currently, the main challengers to the private banking model – more often than not – come in the form of digital start-ups where costs can be cut drastically in comparison to the traditional private banking model. However, Hartop tells PBI that Hampden & Co. is not in direct competition with the automated-advisory market, where the concentration is purely on investments. The new private bank is looking to cater to the wider issues around wealth, he says.
"We’re upfront that if cost is the key driver, then probably our service is not for you. What we’re looking to do is to provide that holistic private banking service from a trusted advisor who is professionally qualified, and present a really good service around that. We’re competing in a different market place."
Although Hampden is not entering the market as a digital disrupter, the bank is certainly not digitally agnostic. However, Hartop reveals that digital channels such as online and mobile banking platforms are currently not available, upon the bank’s launch.
"We’re going to gradually roll out our digital channels. We will launch our internet banking in the near future but we’ll do so on a progressive basis, starting with look-up-only facilities, and then we’ll move onto fuller transactional and digital capabilities," he adds.
The mobilised bank
Hampden & Co. has been a trailblazer in its approach to receiving a banking licence in the UK, being one of the first institutions to be approved by the FCA’s Mobilisation process.
This allows the bank to receive a licence without its complete infrastructure being in place. Instead, a financial institution can apply for a license with a business plan and its senior members appointed.
Often challenger banks are restricted by the costs involved in an authorisation process and certainly this approval process has allowed Hampden to enter into the market without a huge initial investment in personnel and infrastructure, with the investment being developed after license approval.
Hampden & Co.’s core strategy, Hartop reiterates, is all about "getting back to traditional private banking with long term continuity of personnel and speedy decision making".