A private bank offers the client the required mortgage, but its proposal is based on a broader banking relationship that includes transferring investments or deposits. The adviser should not assess the mortgage in isolation—or assume that the investment transfer is simply an administrative condition attached to the loan.
Willow supports professional advisers through its wealth manager and financial adviser partnership service. This article forms part of Willow’s HNW clients, private banking and property finance guide series.
Willow’s role is to assess the mortgage and property-finance proposition, including its pricing, structure, underwriting and alternatives. Willow does not advise on whether the receiving bank’s investment service or portfolio is suitable. That assessment remains with the client’s wealth manager and other appropriately qualified advisers.
Establish Exactly What the Private Bank Requires
Private banking is often relationship-led. A bank may consider the client’s income, property, investments, business interests, expected liquidity and wider banking requirements together rather than applying a standard mortgage formula.
That can create valuable flexibility, particularly for clients with complex income, substantial assets, large loan requirements or unusual repayment plans. However, the terms of the wider relationship should be made explicit.
The adviser should establish:
- the minimum value of investments or deposits expected to be transferred;
- whether the transfer is a formal lending condition or a relationship expectation;
- whether assets must be transferred before the mortgage completes;
- whether the assets must remain with the bank for the full mortgage term;
- which investment, custody or advisory service the client would use;
- whether the bank will accept existing holdings through an in-specie transfer;
- whether particular assets are unacceptable and would need to be sold or replaced;
- what happens if market movements reduce the transferred portfolio’s value;
- whether mortgage pricing depends on maintaining a particular relationship balance; and
- what happens if the client later wants to move the investments elsewhere.
These points should be confirmed rather than inferred from the phrase “private banking relationship”. Different banks can structure their eligibility, investment and lending arrangements differently.
A competitive mortgage does not automatically make the associated investment transfer suitable—and an attractive investment proposition does not automatically make the mortgage competitive.
Measure What the Private Bank Mortgage Actually Provides
The starting point is to identify why the private bank route is being considered. If the same lending outcome is available without transferring investments, the relationship condition becomes a more significant part of the comparison.
Potential mortgage benefits may include:
- a larger loan than a conventional lender is prepared to offer;
- individual assessment of bonuses, partnership income, dividends or international earnings;
- interest-only borrowing supported by an acceptable repayment strategy;
- flexibility around complex ownership or property arrangements;
- borrowing across more than one property or jurisdiction;
- the ability to consider future liquidity or wider assets;
- bespoke fixed, variable or part-and-part repayment structures;
- greater flexibility concerning overpayments or early repayment;
- access to foreign-currency or multicurrency facilities, where appropriate; or
- coordinated banking, investment and lending services.
Not every client needs these features. If the private bank is providing a standard mortgage at broadly standard terms, transferring a substantial portfolio may be harder to justify solely on the lending benefit.
Questions for the Mortgage Comparison
- How much can the client borrow under each realistic route?
- What is the rate, reference rate and margin?
- How long is the pricing fixed or agreed?
- What arrangement, valuation and legal fees apply?
- Are there early repayment charges or minimum-interest periods?
- Is the term appropriate for the client’s repayment plan?
- Does the bank retain discretion to review or reprice the facility?
- Is the mortgage benefit dependent on maintaining transferred assets?
Assess the Investment Transfer as a Separate Decision
The client’s wealth manager should assess the proposed transfer on its own merits. The mortgage requirement should not displace the normal consideration of investment suitability, risk, service and cost.
Investment Strategy
Can the receiving bank maintain the client’s current strategy, asset allocation and risk profile? If not, the adviser should identify what would change and why. A new portfolio should not be treated as equivalent merely because its broad risk label appears similar.
Charges
The comparison may need to include investment-management fees, advice charges, custody or platform fees, underlying fund charges, dealing costs, foreign-exchange costs and any performance-related fees.
Existing Holdings
Some investments may be transferred in specie without being sold. Others may be unavailable on the receiving platform or unsuitable for the new service. This could require a sale, repurchase, fund conversion or change of investment.
Tax Position
Selling investments outside tax-advantaged arrangements can potentially create taxable gains. The client’s tax adviser should assess any disposal, ownership or cross-border implications before instructions are given.
Service and Governance
The client should understand whether the new arrangement is discretionary, advisory or execution-only, who makes investment decisions, how frequently the portfolio is reviewed and what reporting or planning service is included.
Concentration of Providers
Moving lending, cash management and investments to one institution may simplify administration. It can also increase dependence on a single provider. The client should understand how easily each part of the relationship can be changed later.
Model the Combined Cost, Not Just the Mortgage Saving
A lower mortgage rate can produce a clear cash saving. The adviser should then compare that saving with any additional investment and transfer costs.
Illustrative Example Only
Assume a client requires a £5 million mortgage. A private bank offers a hypothetical rate of 4.70%, subject to the client transferring £2 million of investments. An alternative property lender offers 5.10% without an investment-transfer condition.
The indicative annual mortgage-interest difference would be £20,000, before considering fees, repayment profile or changes in the underlying rate.
If the transferred investment service costs an illustrative 0.45% more each year than the client’s current arrangement, the additional annual portfolio cost would be £9,000. If one-off transfer, dealing or restructuring costs totalled £6,000, the first-year difference would reduce to approximately £5,000 before tax, performance differences and other charges.
These figures are hypothetical and are not representative of current mortgage or investment terms. Investment performance cannot be predicted, and actual costs must be obtained from the relevant providers.
A proper comparison should cover the expected holding period rather than only the first year. It may include:
- mortgage interest under reasonable rate scenarios;
- mortgage arrangement and renewal fees;
- early repayment or exit charges;
- investment-management and underlying product charges;
- custody, platform, dealing and foreign-exchange costs;
- one-off transfer or portfolio-restructuring costs;
- potential tax arising from necessary disposals;
- the cost of maintaining the required private banking relationship; and
- the financial effect of losing flexibility to move either relationship.
Expected investment returns should not be treated as a guaranteed offset against mortgage costs. The comparison should work as a cost and suitability assessment without relying on favourable future performance.
Examine How the Investment Transfer Would Work
The transfer mechanism can materially affect cost, timing and market exposure.
In-Specie Transfer
Compatible investments are re-registered with the receiving provider without the fund manager redeeming the existing units. Availability depends on the holdings and receiving platform.
Cash Transfer
Investments are sold and cash is transferred. This may create dealing costs, tax considerations and a period during which the client is outside the market.
The adviser should establish:
- which holdings can transfer in specie;
- which holdings require conversion, sale or replacement;
- whether protected, bespoke or illiquid investments can move;
- how long the transfer is expected to take;
- whether the mortgage can complete before every asset has moved;
- how dividends, distributions and corporate actions will be handled during transfer;
- whether the client could be outside the market during a cash transfer;
- what transfer, dealing and foreign-exchange charges apply; and
- whether moving the assets alters their ownership, wrapper or tax treatment.
The client should obtain investment and tax advice before assets are sold or restructured. Willow can coordinate mortgage timing with the relevant parties but does not advise on the transfer mechanism’s investment suitability.
Test What Happens After Completion
A comparison that ends on the mortgage completion date is incomplete. The client may want to move investments, change adviser, sell the property, reduce the mortgage or refinance several years later.
The professional team should ask:
- Can the client remove investments while retaining the mortgage?
- Would removing assets alter the mortgage rate or banking status?
- Is there a minimum relationship balance?
- What happens if markets reduce the portfolio below that amount?
- Is the relationship reviewed annually?
- Could the bank decline to renew an interest-only or short-term facility?
- Can the mortgage be refinanced elsewhere without moving investments first?
- Are investment withdrawals restricted while the mortgage remains outstanding?
- Is any part of the portfolio pledged as security for the lending?
- Are the mortgage and investment agreements legally separate?
Transferring investments to establish a banking relationship is not necessarily the same as pledging those investments as security. The documentation should make clear which arrangement applies.
If the investments are also pledged, further considerations arise around eligible collateral, lending values, withdrawals and the consequences of market falls. Those risks should be assessed separately from the mortgage’s property security.
Compare the Transfer-Linked Proposal With Real Alternatives
The relevant comparison is not always “accept the private bank’s terms or abandon the purchase”. Other lending routes may exist.
Depending on the client and property, Willow may assess:
- another private bank with different relationship requirements;
- a private bank prepared to accept deposits rather than managed investments;
- a specialist lender without an assets-under-management condition;
- a conventional lender able to accommodate the client’s income and loan size;
- borrowing across more than one property;
- a part-repayment and part-interest-only structure;
- short-term finance followed by a planned longer-term refinance; or
- a smaller mortgage combined with another source of client capital.
These alternatives may have higher headline mortgage costs or different underwriting requirements. Their advantage may be that the client can retain their existing investment strategy and advisory relationship.
A Balanced Comparison Should Show
- the benefit the private bank mortgage delivers;
- the assets the client must transfer to obtain that benefit;
- the total mortgage and investment costs over a relevant period;
- the practical and tax consequences of moving the portfolio;
- what flexibility the client gives up or gains; and
- whether a credible lending route exists without the transfer.
Keep the Professional Responsibilities Clear
Willow Private Finance
Willow assesses the property-finance market, explains the proposed mortgage structure, compares credible lending alternatives and establishes the private bank’s relationship requirements.
The Wealth Manager or Financial Adviser
The wealth manager assesses the suitability of transferring the portfolio, the proposed investment service, changes in risk, charges, asset allocation and the implications for the client’s wider financial plan.
The Private Bank
The private bank should explain its mortgage terms, eligibility requirements, investment proposition, service model, costs and the consequences of changing the relationship later.
The Client’s Tax and Legal Advisers
Tax and legal advisers consider disposals, ownership, cross-border issues, wrappers, mortgage documentation, security and any connection between the investment and lending agreements.
Coordination is important, but each adviser should remain within their professional remit. Willow can identify the value and conditions attached to the mortgage; it cannot conclude that the required investment transfer is suitable.
When to Involve Willow
An early, anonymous discussion may be useful where:
- a private bank has linked its mortgage proposal to an investment transfer;
- the client is considering moving assets primarily to secure lending;
- the adviser wants to know whether comparable borrowing exists without a transfer;
- the private bank’s mortgage terms appear attractive but its relationship conditions are unclear;
- the client has complex income or requires a large interest-only mortgage;
- the proposed investment transfer must complete before the property transaction;
- some existing holdings may not be accepted by the receiving institution;
- the client wants to preserve their existing adviser or investment manager;
- the mortgage and investment assets may both be subject to security arrangements; or
- the client needs a clear comparison between private-bank and specialist-lender routes.
The initial outline need not identify the client. The property value, required mortgage, income profile, available assets, proposed transfer amount and principal complication are generally enough to establish whether a fuller property-finance assessment is worthwhile.
Have a Client Considering a Transfer-Linked Mortgage?
Share a high-level, anonymous outline of the property transaction, required borrowing and the private bank’s proposed relationship condition. Willow can assess the mortgage proposition and credible lending alternatives.
Frequently Asked Questions
These answers provide general information. Private-bank eligibility, lending conditions and investment services remain provider- and client-specific.
Do all private banks require investments to be transferred?
No. Private-bank eligibility and relationship requirements vary. Some lenders may require or expect deposits or investments, while other private banks and specialist mortgage lenders may assess the property transaction without an investment-transfer requirement.
Should the adviser compare only the mortgage interest rate?
No. The comparison should include mortgage interest, arrangement fees, investment-management and custody charges, transfer costs, potential tax consequences, service differences, early repayment terms and the client’s future flexibility.
Can investments be transferred without being sold?
Some holdings may be capable of an in-specie transfer, but this depends on whether the receiving institution can hold them. Other assets may need to be converted, exchanged or sold. The wealth manager and tax adviser should assess the consequences.
What happens if the client later removes the investments?
The answer depends on the bank’s mortgage and relationship terms. Advisers should establish whether removing assets could affect pricing, service eligibility, renewal, refinancing or the continuation of the lending relationship.
What can Willow assess in this type of case?
Willow can assess the mortgage terms, lender requirements and alternative property-finance routes. The client’s wealth manager remains responsible for assessing the suitability, cost and investment implications of transferring the portfolio.