Old money chases new money clients

NEW research claiming that Britain's super-rich population is set to soar will have several well-connected City bankers rubbing their hands with glee. The number of people with more than £5m to spend will reach nearly 6700 by 2007, 60% more than last year, according to figures from wealth analysts at Datamonitor.

Collectively, this elite will own £62bn of liquid assets - cash, stocks and bond investments - up from £37bn last year. Several of Britain's traditional private bankers - from Rothschild to Coutts - are aware of the trend and are in the midst of a drive to win the favours of the latest wave of nouveaux riches.

Coutts, owned by Royal Bank of Scotland, is carving a name for itself as the bank of choice for Britain's showbiz and football multi-millionaires - including David and Victoria Beckham and Sir Elton John - much as private bank Leopold Joseph, now up for sale, became synonymous with pop stars including the Rolling Stones.

The British are, of course, up against the might of Swiss banks, led by UBS, which have years of experience of dealing with the world's fabulously wealthy.

Suspicions about the orthodox origins of some of these pools of new money are, however, growing. Prejudices about the legitimacy of funds leaving Russia for these shores were compounded by the recent arrest on fraud charges of Russian billionaire Mikhail Khodorkovsky, head of oil company Yukos. Some City banks will be carrying out a few extra checks on their growing lists of private bank accounts.

Rothschild has had ambitious plans to capture the hearts and wallets of the super rich ever since the English and French arms of the bank unified earlier this year under a single chairman, Baron David de Rothschild. The normally reticent family-owned financial house has enjoyed the recent bout of publicity from luring former Bank of England Governor Sir Edward George as a director in its investment banking arm. Shadow Chancellor Oliver Letwin is another NM Rothschild director.

Meanwhile on the private banking side, a Rothschild charge card is currently being rebranded with the intention of making the most of the kudos expected by anyone brandishing an allegiance to one of Europe's oldest private banking dynasties.

The card is already available to a select few clients who 'meet certain criteria', according to Mike Bussey, London-based chief executive of Rothschild's 350-strong European private banking and trust team. Those privileged few collectively have about £850m stashed away through Rothschild's London offices in King William Street, and plenty more through Rothschild offshore accounts in Guernsey.

'The charge card is just part of the kitbag but it is not one of the lead offerings,' Bussey says. For Rothschild, which is not a High Street lender, advice is the name of the game. It is concentrating on estate financial planning and asset allocation as much as portfolio management. At the bottom is cash management - 'where the accounts come in', adds Bussey. Rothschild's private bank, chaired by Paris-based Baron Eric de Rothschild - David's cousin - has about 5000 private clients worth about £8bn i assets.

As Rothschild, RBS and more recently Barclays try to expand, they are having to deal with the increasingly stringent finan cial regulations for taking on new cus tomers, Russians included.

The latest scare attached to taking on 'dodgy Eastern European money' is part o an ongoing attempt to stem reputationa risk whenever banks take on new client The 11 September terrorist attacks two years ago an the ensuing rise in international terrorism have raised their awareness of this risk The head of Barclays' UK private banking Anthony Cooke-Yarborough, admits that when it comes to 'people from the Easter part of the world we take the view of erring on the side of caution'. Barclays, too, is keen to expand its wealth management ser vices to the very rich. Out of the £21bn under management in private banking, 'around a quarter to a third is focused on clients with over £1m to invest', say Cooke-Yarborough. 'We regularly turn people down - there is a flow of people going round London seeking to open up accounts. Very often they use idiosyncratic terms to describe their wealth which is very recognisable - every institution will tell you of those with 'certain US trea sury notes'.'

Since 11 September, however, prospective new clients have been 'far more understanding when asked for proper documentation eve in the UK with its aversion to identity papers'. While Cooke-Yarborough acknowledges the publicity surrounding money coming from former eastern bloc countries Barclays' 'know your client' policy applies equally to Middle Eastern money 'unquestionably moving out of the US to Europea institutions in London and Geneva, not by money laundering but by politics'. He confirms that Barclays wants to expand a Swiss private banking business, while there is no fixed acquisition plan for the time being.

On its home turf, Barclays splashed out £210m last month for upmarket UK private stockbroker Gerrard. The deal at a stroke doubled Barclays' private banking assets under management to £21bn.

Earlier last month, RBS added a Swiss dimension to its private banking with the Swfr550m (£243m) purchase of Zurich's Bank von Ernst, adding £6bn of extra managed funds.

Taking a more home-grown approach to snaring British millionaires is Allied Irish Bank. Upstairs at its Berkeley Square branch, 30 staff manage the financial affairs of about 700 people, having built the practice from scratch in five years. While the list includes many 'from showbiz, the House of Lords and the like', according to AIB's UK chief Aidan McKeon 'many are making a steady £5m a year but see themselves as ordinary people'.