Acquiring assets: Coutts & Co.'s hiring of nine private bankers from rival Barclays isn't likely to be the last grab for the British bank

Latin CEO: Executive Strategies for the Americas, May, 2001 by William Plasencia

IT MADE A NAME FOR ITSELF AS THE PRIVATE bank to Britain's Royal Family Now Coutts & Co. is shaking off its reserved image and moving aggressively to expand its client base in Latin America. Its first step: hire more bankers.

Last month, the company's Miami-based Coutts International division, which serves the Latin American market, scored a coup when it hired away 14 people--including nine private bankers--from British rival Barclays PLC. The acquisition of new talent and the contacts they bring with them are the cornerstone to Coutts' strategy for building new business during the next year, says division President Camilo Patino.

"We are always looking for good people and if we find them we'll find a way to bring them on board," Patino says. In the case of the Barclays defectors, Patino says they came to him. "The market is very fluid and the competition is fierce," he says. "People move from one place to another." (Mitch Heller, chief executive for Barclays Private Bank in Miami, did not return phone calls seeking comment.)

Coutts may not always find it so easy to attract new talent. Many companies are taking steps to defend themselves against further talent raids. For example, after Goldman Sachs lost a team of private bankers to rival Merrill Lynch last year, Goldman Sachs moved to prevent further defections and defend its client base by offering its remaining bankers bounties equal to 50 percent of annual commissions for retaining the firm's clients. Lawsuits and non-compete clauses in employment contracts have also been used as powerful defenses.

Private asset management has become as cutthroat as it has become sought-after by clients. During the past decade, centuries-old European banks began competing against global giants such as Citigroup, Chase Manhattan and, more recently, brokerage firms such as Merrill Lynch and Donaldson Lulkin & Jenrette, for a slice of the more than US$23 trillion in private assets managed worldwide. Latin America's share of that pie is estimated to be more than 17 percent, according to Merrill Lynch research.

Patino says Coutts has tried to adapt to the changing competitive landscape by adding new products and keeping its account threshold within reach of Latin America's up-and-coming wealthy: US$1 million in manageable assets will get you a private banking account with the British bank. "On average the accounts are a little bigger than that," he says.

By June, the bank will open a broker-dealer unit, Coutts Securities Inc., which will be operated by approximately 60 Coutts employees who have applied for licenses to sell investment products. The unit will help Coutts attract more clients from Latin America, an area that accounts for 95 percent of the clients served from the Miami office, says David R. Holmes, vice president in charge of investment services. Holmes hopes the newly acquired team from Barclays will give Coutts an edge in Central America and Venezuela.

Coutts' Miami operations opened in 1982 as a unit of National Westminster Bank. It survived the 1991 hostile takeover by Royal Bank of Scotland, and now manages a share of Coutts' US$45 billion in worldwide client assets. (Coutts does not disclose assets managed by individual regional offices.)

Despite Coutts' recruitment of Barclays employees, the bank makes a habit of farming out a portion of its portfolio management to outside firms, in some cases to competitors. "For example, we have Merrill Lynch and Barclays Asset Management for our UK equity programs and Morgan Stanley for our small cap portfolio," Patino says. "What we offer to our customers is a different proposition, because in terms of investment management we try to offer the best-in-class."

Coutts may not have had much choice but to diversify its offerings, given the stiff competition among private banks and asset managers. Investors have simply become more demanding, Patino admits. "People come to you now talking about asset allocation or volatility, especially the younger generation that are helping their parents manage their wealth," he says.