01 Jul 2020

Q&A: Could you consolidate your private banking needs?

An increasing number of private equity professionals are choosing to combine their UK and offshore banking providers and foreign exchange services for efficiency. 

If you’re a private equity professional with a complex income structure, a combined approach to UK and offshore banking and foreign exchange could be more convenient and effective. Here private banker Lee Colwill and FX specialist David Bimpson from Investec Bank plc join forces with James Torode from Investec Bank (Channel Islands) Limited to discuss how private equity professionals could get more from private banking.

What is the typical income profile of the Private Equity professionals we work with?

Lee Colwill: “Our clients are often on an upward career trajectory and their private banking needs increase over time. This is because the composition of their income becomes more complex.

 

Private equity Partners may receive part of their remuneration in carried interest and foreign currency and some of this income may be earned offshore from investments held overseas.”

Lee Colwill, Private Banker
Lee Colwill, Private Banker, Investec

Borrowers need a private bank that understands the sector intimately and can take their total wealth into account when providing loans and considering appropriate repayment structures.

What financial challenges do they face?

David Bimpson: “When it comes to transactional banking, private equity professionals who are paid in foreign currency but have financial commitments in Sterling need to manage Foreign Exchange exposure. This includes minimising fees associated with conversion by holding funds in a dedicated currency account.”

 

James Torode: “In addition, if they receive profit shares from a fund with overseas investments and they are a UK non-domiciled resident, they may want to hold and manage this income offshore.”

 

Lee Colwill: “From a borrowing perspective, the Investec GP Trends 2021 report shows that 53% of private equity professionals feel that mainstream lenders lack a true understanding of their income profile. This lack of understanding could limit affordability calculations and reduce loan availability. Therefore, they need a private bank that understands the sector intimately and can take their total wealth into account when providing loans and considering appropriate repayment structures.”

Successful business man sitting on private plane with glass of wine
Lee Colwill, Private Banker, Investec

Clients receive combined UK and offshore support and direct access to our FX specialists. This gives them full visibility of their finances and assistance that is based on a holistic understanding of their wealth and goals.

To overcome these challenges, clients are consolidating their private banking. What does this involve and what are the benefits?

Lee Colwill: “Clients receive combined UK and offshore support and direct access to our FX specialists. This gives them full visibility of their finances and assistance that is based on a holistic understanding of their wealth and goals.

 

In practice, clients can hold multiple currency accounts and can also manage their finances online in one place. We can set up new accounts or easily transfer existing ones, while assets can also be held and managed by Investec Wealth & Investment or Investec Wealth & Investment (Channel Islands).”

 

James Torode: “For UK resident non-doms we can incorporate bank accounts in the Channel Islands for overseas earnings and segregate these accounts by capital and income to aid efficient management and tax reporting. We offer debit cards in Sterling, US Dollars and Euros as well as various savings products and an execution-only custody and dealing service. Discretionary management is offered by our sister company Investec Wealth & Investment (Channel Islands).”

 

David Bimpson: “From a foreign exchange perspective we can personally monitor the market; action trades when agreed rates are met (market orders) or set exchange rates up to 24 months in advance (forwards), but the real benefit is having a personal relationship so we can tailor our approach.”

  

Interested? Please get in touch to discuss consolidating your private banking or FX experience.