Coutts Sets Aside £110 Million To Compensate Clients

Stephen Little

1 September 2014

Coutts, the private bank and wealth manager which is owned by Royal Bank of Scotland, is to set aside £110 million to compensate clients that have been sold unsuitable investment advice.

The £110 million is part of the £206 million provision that RBS has already made for compensation in its private banking division and comes after the announcement in June that Coutts was conducting a review of investment advice given to clients dating back to the 1950s.

Michael Morley, chief executive Coutts UK, said in a statement that the firm was “working hard” to address instances of failings in the suitability of advice given to customers.

"We want our clients to be absolutely certain that every investment made by them is indeed suitable, and continues to be suitable. If not, we will ensure that portfolios are appropriately adjusted, and if clients have suffered any financial detriment, they will be compensated in full,” said Morley.

"The trust of our clients in the stewardship of their wealth is our number one priority and our review is designed to make sure that suitable advice was given and put things right when it was not," he added.

The 300-year-old private bank announced in June that it was undertaking a review in the suitability of advice for all clients prior to 26 November 2012, the date Coutts implemented the Retail Distribution Review. One of the files goes back to 1957 and the review is not expected to be completed until 2015.

The move was in response to a “Dear CEO” letter sent out by the FCA's predecessor, the Financial Services Authority, to UK wealth management firms warning them that in several cases clients had been sold financial products that the FSA considered excessively risky given a client’s stated risk profile.

Coutts was fined £6.3 million by the FSA in 2011 for suitability issues around its sale of an AIG bond. In the same year, HSBC was fined £10.5 million, while Barclays was fined £7.7 million for broader suitability failings.

The news comes as RBS, still majority-owned by the UK government, considers the shape of its private banking business. In an internal memo seen by this publication last month, RBS said that it was thinking of selling the international arm of Coutts as it intensifies its focus on the domestic market.

Ever since RBS was bailed out by the then-Labour UK government amid the financial crisis over five years ago, there has been speculation over the future of Coutts as part of the RBS stable.

The international arm has clients in Asia, the Middle East and Europe, with offices in Hong Kong, Singapore, Abu Dhabi, Qatar, Dubai, Geneva, Zurich and Monaco.