Contract provisions

Types of contract

Describe the various types of private banking and wealth management contracts and their main features.

Typically, private banks and wealth management contracts take the form of terms and conditions that set out the services offered and the regulatory obligations of the private bank in offering those services. The services covered might include banking, advisory managed accounts, discretionary managed accounts or execution only offerings. Frequently, such terms will include additional annexes that detail further bespoke services offered to certain clients.

Generally, UK private banks and wealth management firms look to maintain the same terms with all clients because they have built their operational arrangements in line with their contractual commitments. This can make it difficult to offer negotiated terms to individual clients.

Contracts will generally be governed by the laws of England and Wales and it would be unusual for a UK firm to agree to change this.

For UK law purposes, when contracting with individual consumers, verbal commitments, statements in emails and on websites can all be construed as forming part of the contractual terms in place with the client.

Liability standard

What is the liability standard provided for by law? Can it be varied by contract and what is the customary negotiated liability standard in your jurisdiction?

The liability standard at law is negligence. It is generally deemed unfair to individual clients to contractually seek to exclude liability for negligence, wilful default or fraud and any attempt to do so would be disregarded by the UK courts in the context of a contractual dispute. 

For this reason, UK-based private banks and wealth managers typically seek to limit their liability to losses resulting from their negligence, wilful default or fraud or other material breach of contract.

Mandatory legal provisions

Are any mandatory provisions imposed by law or regulation in private banking or wealth management contracts? Are there any mandatory requirements for any disclosure, notice, form or content of any of the private banking contract documentation?

Yes. The FCA Handbook sets out certain mandatory provisions that must be contained within a client terms of business. These differ depending on whether the firm is contracting with retail or professional clients. They cover matters such as client categorisation, the services being offered, the complaints process and access to the UK Financial Ombudsman Service, a summary of conflicts of interest, an overview of how money and assets are safeguarded and the availability of compensation scheme protection.

The Consumer Rights Act 2015 also sets out certain expressly prohibited terms which apply to most private bank or wealth management terms of business with retail clients.

Many UK private banks and wealth managers now offer their services via websites and interactive platforms, there are also rules in the UK governing the customer experience in the context of the technology operation of these platforms.

In addition to the initial contract with the client, UK private banks and wealth managers are subject to ongoing disclosure obligations, most notably in relation to costs and charges and suitability reports (in the context of advisory services).

Limitation period

What is the applicable limitation period for claims under a private banking or wealth management contract? Can the limitation period be varied contractually? How can the limitation period be tolled or waived?

The Limitation Act 1980 sets out a six-year statutory limitation period for simple contracts and certain actions in tort. These periods run from the date on which the cause of action occurred.  

Connected to this, UK private banks and wealth managers are required to retain records in relation to their services for a period of five years (although time periods differ depending on the context). Firms will often retain records for a minimum of seven years to accommodate the statutory limitation period referenced above.

Law stated date

Correct on

Give the date on which the information above is accurate.

27 May 2020.