LIVE ISSUE: COUTTS - Coutts indicates signs of an image update with its M&C appointment

Time was when it was just the posh who deposited their wealth at Coutts, inspiring one of its most famous former customers, W S Gilbert, to write in The Gondoliers about "the aristocrat who banks with Coutts, the aristocrat who hunts and shoots".

No longer. These days it's just as likely to be Posh Spice, a National

Lottery winner, a Premier League footballer or a divorcee who has just

taken her ex-husband to the cleaners as it is the landed gentry or the

Queen.

The so-called "new affluent" market has been perpetually swelled by

young entrepreneurs who have built and sold businesses while still in

their 30s or 40s, liquifying millions of pounds. Or by a growing middle

class with lots of inherited loot to invest.

And, unlike old money, the new market has little time for bankers'

flummery or frock-coated flunkies greeting it at the door.

For Coutts, last week's appointment of M&C Saatchi as its first agency

in more than three centuries is an acknowledgement of a changed trading

environment.

The bank, which once looked after the financial affairs of Charles

Dickens, Frederic Chopin, Wilkie Collins and Lord Byron, still has a

client list to die for - but it isn't the only game in town any

more.

Internet share dealing and the creation of a single regulator - the

Financial Services Authority - have simplified the workings of the

industry considerably, making it easier for rivals to encroach on

Coutts' territory.

This has led to some formidable alliances, notably the one between HSBC

and Merrill Lynch, which allows the US investment specialist to feed off

the high-street bank's huge customer database.

Coutts' problems are compounded by the fact that it has changed its

strategy, management and ownership too many times for a sector like

private banking, where continuity is key. Andrew Fisher, its chief

executive and former Unilever marketer, is its fifth boss in eight years

and the bank is now a Royal Bank of Scotland subsidiary.

Moreover, the bank's image hasn't been helped by questionable lending

decisions which hit profits, a money laundering scandal in the US, and

reports of dissatisfied customers such as the rock star Phil Collins and

the heavy metal band Iron Maiden taking their business elsewhere.

Indeed, some industry sources believe that the decision to appoint an

agency has less to do with buffing up Coutts' image and more with the

RBS's need to show the City that it is getting to grips with its problem

child.

For the moment, advertising plans remain under wraps, although M&C

Saatchi insists the aim will be to restate Coutts' strengths rather than

go for a makeover.

"We're not attempting an update because Coutts is a strong brand with

strong associations," Moray MacLennan, the agency's joint chief

executive, says. "It's just that some of the associations aren't

necessarily the right ones."

Given that Coutts' market is so sharply defined, there's a widespread

belief that the bank should be giving priority to getting its internal

organisation right - each customer has a personal banker to advise on a

range of investment products - before turning its attention to

advertising.

"These relationships are crucial because they last a lifetime," a

financial expert comments.

Others question whether Coutts should even be considering becoming a

serious advertiser at a time when the dotcom collapse has seriously

reduced the number of newly created millionaires.

But Andrew Porter, the chief executive of Masius, the D'Arcy group

financial specialist, believes Coutts has reason to advertise because

its market is no longer small or exclusive. "It can't just market itself

to Who's Who any more."

He adds: "Coutts will be looking to secure its position in a market

which associates it with old school and old money." With this challenge

ahead, Gilbert's lyrics may prove hard to live down.