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The article keeps saying their advantage is their ability to "find solutions other banks can't". I don't know what that means. Exotic loan terms? Collaterali

The article keeps saying their advantage is their ability to "find solutions other banks can't". I don't know what that means. Exotic loan terms? Collateralizing difficult-to-value assets?

inflatableDodo 7y ago
Firstborn as collateral, probably. “They lend their own money and tend to be able to come up with solutions that other banks can’t.”, is also true about the Hells Angels.
_wmd 7y ago
I'd imagine for a client, most of the value of this bank is access to what I can only imagine to be the most fantastically exotic network it sits at the centre of
- walrus01 7y ago
  As a person that is definitely not part of the global one percent, my imagination ran to something like the Eyes Wide Shut orgy scene. Fidelio.
colechristensen 7y ago
Perhaps without duties to investors or depositors they aren't hung up on rules and risk mitigations, specifically a banker being able to make decisions based only on their own judgement.
- throwaway981238 7y ago
  They have depositors but you're right that they don't have investors, and decisions are made by people (i.e. the partners who own the bank) exercising their judgment instead of "Computer Says No!", like at most banks.
- nabla9 7y ago
  Hoare is unilimited liability company. Partners are responsible with their personal assets. They are more risk averse than normal bank, they trade growth to stability.
  - frenchman_in_ny 7y ago
    Brown Brothers Harriman still is (or used to be that way -- my info is dated) in the US, too. Random story - I worked with one of the Hoares many moons ago, in the banking industry. Funny to read this on HN.
  - colechristensen 7y ago
    But it is a different kind of risk aversion when your fiduciary duty is to yourself instead of someone external. Like how I don't have to have health inspectors come investigate my kitchen to make myself lunch.
    - nabla9 7y ago
      It's not just personal responsibility. Everyone is responsible for the whole and have fiduciary duty to everyone else. Owners will watch each other.
chadash 7y ago
There are a lot of advantages that a small privately owned bank might have over large giants. For example: * Banking based on reputation - sometimes you know that someone is trustworthy and good for the money, but the numbers on paper don't show it. Maybe their credit score was dinged for some reason that's easy to explain. Maybe you know their family personally. A small bank might be able to lend to people who are excluded by the big banks' algorithms. * Big banks are under more scrutiny. That doesn't mean they don't do things with dirty money, but they are being watched more closely (I'm not accusing this particular family of shady banking practices... just noting that there is indeed a large amount of dirty money out there that flows through banks, and some banks are more willing to look the other way). * As you said, collateralizing weird assets. Some banks might allow a thoroughbred horse as collateral. Most probably don't have the expertise to value these things and so they don't want to allow it as collateral.
0xDEFC0DE 7y ago
>Collateralizing difficult-to-value assets? A family like this definitely has connections. Maybe they collateralize favors that can be given to them and word of those don't get out because it's a tight-knit group.
jsty 7y ago
There's a few good examples in this article [0] by Barron's, but amongst the access to not-widely-available investments mentioned by other posters, there's a general desire to understand the client as a person rather than a data point. It's less likely you go in seeking a loan etc and get told "risk model says no" because you have your assets tied up in a business or other non-standard investments their processes aren't built to understand. This is available to a similar degree at other private banks. [0] https://www.barrons.com/articles/SB50001424053111904571704577407973233243382 https://www.barrons.com/articles/SB5000142405311190457170457...
ataturk 7y ago
Kneecapping the competition, piracy, whatever it takes.
nabla9 7y ago
* Flexibility when accessing cash. Even very wealthy individuals can have cash flow problems. Allowing payment despite lack of funds is big thing for millionaires who don't want to be embarrassed. When the banker knows you personally, they can asses the risk and give loans quickly. When you want to buy something very expensive very suddenly these banks can move money, even bags of cash, immediately. * Wealth management trough tax, trust and estate planning. * Connections that give access to some forms of private equity. Bankers can arrange meetings and they know people.
myrandomcomment 7y ago
So banking is a complex mess of years and years of regulation that seem to change when the government does or there is an event. An example for me personally was trying to buy a house after the crash. (This bit is simplified vs the details of rules). They changed the loan laws to put incoming as the key limit on what you could write a loan against. I had made a nice chuck of money on my last startup and was very lucky enough to be in the position to be able to write a check for the house. That however would make no sense. The interest rates where very low and having a mortgage has a tax benefit. The issue was that I had moved to another startup and traded salary for stock, so my income was to low to meet the requires for the home loan (they ignore the fact that my net holdings could cover the house 8x). No major bank could write the loan. However I was able to find a private bank that because of their structure and the fact that they carried the paper (did not sell the loan on) where able to write the loan no issues. I just structured stock sales each month to cover the mortgage, ignoring my income (which was a number picked to cover the family expenses less the housing cost). I was only able to set this all up because it was a private bank that looked at the full picture. That’s the key value of a bank like this.
- charlesdm 7y ago
  ^ very true. Larger banks also do this, but you need someone high up the totem pole to connect with. Most lower level employees cannot approve these things and just input things into the system (which has a risk model that spits out a yes/no answer).
  - barrkel 7y ago
    Well, this is one reason to use a mortgage broker who has the contacts and can work the system for your circumstances. (My mortgage broker, whom I've never met, has sorted out something similar for someone who was self-employed. I got his number by word of mouth.)
- whitepoplar 7y ago
  What bank did you use?
- 7y ago
jeffdavis 7y ago
Big banking is about standardizing things so that they remove all of the thinking and make things more fungible. Standard people with standard jobs buying standard houses and only some numbers change. But there are enough non-standard things around that also benefit from banking. (No, I'm not talking about crime or bad actors, just people who don't standardize their business for some reason or another.)

The article keeps saying their advantage is their ability to "find solutions other banks can't". I don't know what that means. Exotic loan terms? Collateralizing difficult-to-value assets?

inflatableDodo 7y ago

Firstborn as collateral, probably. “They lend their own money and tend to be able to come up with solutions that other banks can’t.”, is also true about the Hells Angels.

_wmd 7y ago

I'd imagine for a client, most of the value of this bank is access to what I can only imagine to be the most fantastically exotic network it sits at the centre of

walrus01 7y ago
As a person that is definitely not part of the global one percent, my imagination ran to something like the Eyes Wide Shut orgy scene. Fidelio.

colechristensen 7y ago

Perhaps without duties to investors or depositors they aren't hung up on rules and risk mitigations, specifically a banker being able to make decisions based only on their own judgement.

throwaway981238 7y ago
They have depositors but you're right that they don't have investors, and decisions are made by people (i.e. the partners who own the bank) exercising their judgment instead of "Computer Says No!", like at most banks.
nabla9 7y ago
Hoare is unilimited liability company. Partners are responsible with their personal assets. They are more risk averse than normal bank, they trade growth to stability.
- frenchman_in_ny 7y ago
  Brown Brothers Harriman still is (or used to be that way -- my info is dated) in the US, too. Random story - I worked with one of the Hoares many moons ago, in the banking industry. Funny to read this on HN.
- colechristensen 7y ago
  But it is a different kind of risk aversion when your fiduciary duty is to yourself instead of someone external. Like how I don't have to have health inspectors come investigate my kitchen to make myself lunch.
  - nabla9 7y ago
    It's not just personal responsibility. Everyone is responsible for the whole and have fiduciary duty to everyone else. Owners will watch each other.

chadash 7y ago

There are a lot of advantages that a small privately owned bank might have over large giants. For example: * Banking based on reputation - sometimes you know that someone is trustworthy and good for the money, but the numbers on paper don't show it. Maybe their credit score was dinged for some reason that's easy to explain. Maybe you know their family personally. A small bank might be able to lend to people who are excluded by the big banks' algorithms. * Big banks are under more scrutiny. That doesn't mean they don't do things with dirty money, but they are being watched more closely (I'm not accusing this particular family of shady banking practices... just noting that there is indeed a large amount of dirty money out there that flows through banks, and some banks are more willing to look the other way). * As you said, collateralizing weird assets. Some banks might allow a thoroughbred horse as collateral. Most probably don't have the expertise to value these things and so they don't want to allow it as collateral.

0xDEFC0DE 7y ago

>Collateralizing difficult-to-value assets? A family like this definitely has connections. Maybe they collateralize favors that can be given to them and word of those don't get out because it's a tight-knit group.

jsty 7y ago

There's a few good examples in this article [0] by Barron's, but amongst the access to not-widely-available investments mentioned by other posters, there's a general desire to understand the client as a person rather than a data point. It's less likely you go in seeking a loan etc and get told "risk model says no" because you have your assets tied up in a business or other non-standard investments their processes aren't built to understand. This is available to a similar degree at other private banks. [0] https://www.barrons.com/articles/SB50001424053111904571704577407973233243382 https://www.barrons.com/articles/SB5000142405311190457170457...

ataturk 7y ago

Kneecapping the competition, piracy, whatever it takes.

nabla9 7y ago

* Flexibility when accessing cash. Even very wealthy individuals can have cash flow problems. Allowing payment despite lack of funds is big thing for millionaires who don't want to be embarrassed. When the banker knows you personally, they can asses the risk and give loans quickly. When you want to buy something very expensive very suddenly these banks can move money, even bags of cash, immediately. * Wealth management trough tax, trust and estate planning. * Connections that give access to some forms of private equity. Bankers can arrange meetings and they know people.

myrandomcomment 7y ago

So banking is a complex mess of years and years of regulation that seem to change when the government does or there is an event. An example for me personally was trying to buy a house after the crash. (This bit is simplified vs the details of rules). They changed the loan laws to put incoming as the key limit on what you could write a loan against. I had made a nice chuck of money on my last startup and was very lucky enough to be in the position to be able to write a check for the house. That however would make no sense. The interest rates where very low and having a mortgage has a tax benefit. The issue was that I had moved to another startup and traded salary for stock, so my income was to low to meet the requires for the home loan (they ignore the fact that my net holdings could cover the house 8x). No major bank could write the loan. However I was able to find a private bank that because of their structure and the fact that they carried the paper (did not sell the loan on) where able to write the loan no issues. I just structured stock sales each month to cover the mortgage, ignoring my income (which was a number picked to cover the family expenses less the housing cost). I was only able to set this all up because it was a private bank that looked at the full picture. That’s the key value of a bank like this.

charlesdm 7y ago
^ very true. Larger banks also do this, but you need someone high up the totem pole to connect with. Most lower level employees cannot approve these things and just input things into the system (which has a risk model that spits out a yes/no answer).
- barrkel 7y ago
  Well, this is one reason to use a mortgage broker who has the contacts and can work the system for your circumstances. (My mortgage broker, whom I've never met, has sorted out something similar for someone who was self-employed. I got his number by word of mouth.)
whitepoplar 7y ago
What bank did you use?
7y ago

jeffdavis 7y ago

Big banking is about standardizing things so that they remove all of the thinking and make things more fungible. Standard people with standard jobs buying standard houses and only some numbers change. But there are enough non-standard things around that also benefit from banking. (No, I'm not talking about crime or bad actors, just people who don't standardize their business for some reason or another.)