When diplomats in Washington and many of the other world's major capitals decide to open a new bank account, many of them chose Riggs Bank. The 165 year-old bank, whose main Washington branch is pictured on the ten dollar note, has been the preferred bank of many of the world's most important diplomats for over a hundred years.

Riggs and diplomats are so synonymous that the bank has branches in the British Embassy in Washington and its American counterpart in London. The bank serves nearly 95 percent of embassies in Washington and Riggs has built up an invaluable franchise in London, serving nearly 30 percent of the diplomatic community there. Growing the business further, the bank opened a branch in Berlin in 1999 in order to serve the growing diplomatic community there. "We believe we are the only bank with such relationship and we have closely courted these relationships over many years," comments Wadih Hanna, managing director of Riggs & Co of International Private Banking, which is based in London.

Hanna was recruited by Riggs to establish the private bank back in September 1999 from EFG Private Bank, where he was executive director for banking. "It represented a considerable opportunity for me to set up a major new business for Riggs, not only because of its renowned name, but also because of the chance of building up a bank from scratch, and not having to deal with the constraints of existing legacy systems," said Hanna, who has been in private banking for nearly 20 years.

The implementation of cutting edge technology was to be crucial to Riggs' new private bank's strategy. Riggs invested several million in building up an integrated IT platform that allows straight through processing using technology such as "virtual private networking", in order to allow secure global access for delivery of services to its clients. The idea behind this was to provide the latest technology, not through the Internet, but rather our own secure computer-based offering, which is not subject to the vagaries of Internet security guarantees," explains Hanna.

Clients have access to all account information through the private network, with the aid of a relationship manager, and can look at various risk scenarios given asset allocation preferences. But, crucially, according to Hanna, the role of the relationship manager is as important as ever. "I do believe it is a very tight market for all private banks who aim to attract high quality people. It is our belief therefore that in order to be better placed to attract such people the challenge for private banks is to develop the most effective tools and infrastructure that they possibly can so as to support their client relationship managers."

So far the London office has employed 18 people, and is taking on another three. Seven of the current 18 are relationship managers and the three new staff are all to be relationship managers. The Jersey-based office employs five. Hanna says that getting the three additional relationship managers with the right skills is not easy. "There's a small pool from which to pull from and salaries for the best are consequently being pushed up." But support staff numbers have been kept to a minimum. Riggs has outsourced its IT functions to a third party and has managed to keep back office staff down to a minimum.

Portfolio performance

Riggs & Co believes that clients are increasingly looking at performance of their money managers, and consequently, placing more pressure on asset managers to deliver on performance. As a result Riggs is trying to incorporate elements of performance criteria into its pricing structure. "Clients are increasingly looking for performance and to that end it will be necessary to be able to have the ability to administer a pricing strategy that can readily accept remuneration linked to performance. This is what we have been developing, " says Hanna.

Currently, Riggs follows discretionary portfolio management, with the equities slice of the business invested exclusively into exchange traded mutual funds. So far the bank has steered clear of alternative investments such as hedge and private equity funds, although that might change in the future.

Riggs is selling its performance-based services to private clients globally. Riggs Bank's connection with the diplomatic community means the "core constituency" for the private bank is drawn from this group. But broadening the bank's client base will be a key goal of the new bank. Hanna thinks that much of this will come naturally, through referrals from diplomats, given their vast network of connections. "Many ex-diplomats move into senior positions, where a new set of contacts are made, and this is one area of growth for our bank."

Analysts believe Riggs unique relationship with the world's diplomatic community gives it a well-established group of private clients, which it can grow its business on. "Riggs has established such a niche business that it can grow this into a private banking franchise without too much difficulty. But the test for Riggs & Co. will be how much they can deliver on the performance promise," argues a private banking analyst in London.

Hanna believes they can and furthermore sees "very strong growth" in the years ahead.