Private banks are financial institutions which offer wealthy clients a range of products and services which extend from familiar retail banking-style facilities to more esoteric ones designed solely for the ultra net worth.
Private banks hold clients’ money and assets
, and will often provide lending facilities (which may allow borrowing against property or your investment portfolios
). They also provide a host of other services useful for high net worth individuals, like investment advice and financial planning. Many private banks also offer lifestyle-type services (also known as concierge) such as helping clients get their children into the best educational establishments or obtain access to world-class healthcare or exclusive events.
How it works
Private banking in its proper sense is two levels above retail banking; in between is what is variously known as “premier” or “priority” banking, which is intended for the mass-affluent market (but still comes under the gamut of wealth management).
Premier banking is where investors start to get offered access to a wider range of services, but it is in private banking’s service standards that clients should really start to notice a difference. Personal, high-touch service is the hallmark of private banking; a client can expect to deal predominantly with one representative, often called a relationship manager, who should be intimately acquainted with their needs.
Another hallmark of private banking is confidentiality. This is not to be confused with banking secrecy or hiding money away for wrongful purposes like evading tax. Rather, the confidentiality a private bank provides is intended to protect the interests of private clients. There may be myriad reasons why confidentiality might be a priority for a high net worth individual. Those from politically unstable regimes may fear the seizure of their assets or kidnappers exploiting knowledge of their wealth. For most, however, private banking is simply about discretion.
The capabilities and expertise a private bank is able to offer will vary significantly according to its size, corporate structure and ethos. Some private banks provide a fairly narrow range of deposit, everyday banking and lending facilities; others, however, can form part of a full-spectrum wealth management offering which could include investment management advice and execution, financial planning and wealth structuring services.
Private banks are in fact very active in investment management and financial planning today as these are a natural extension of their services. Equally, while some venerable private banking brands prefer to stay small and relatively under the radar, the global banking groups tend to have higher-profile private banking brands which might sponsor exclusive events and so on (this may well be attractive for some clients).
Private bank services may include:
- Deposits and everyday banking facilities (although traditional cash accounts and cheque book facilities are increasingly rare)
- Lending against investment portfolios and property
- Managing investment portfolios with in-house investment expertise
- Wealth structuring/financial planning capabilities
- Lifestyle/concierge-type offerings (many private banks place great importance on hospitality too)
Due to the nature of their extremely wealthy clientele, the most exclusive private banks might also offer a number of very esoteric services such as advice on investing in art
or vineyards, or financing for yachts and planes.
But despite all these differences, many private banks appear to be similar. Their websites typically list very similar services, and often only the differences in branding are easily apparent to clients. Clearly, when selecting a professional partner to look after your money, it is crucial to see beyond this level of abstraction. Potential clients should aim to use an informed method to choose a private bank to suit their needs.
Who can become a private banking client?
Private banking is the preserve of highly-affluent individuals. Nowadays, private banks often require minimum account sizes in excess of £500,000, and in many cases substantially
more. Yet private banks have a sophisticated understanding of their client base and realise that a person’s current investable wealth today may not be a true reflection of their eventual wealth over the long term. If someone’s money is tied up in an operational business and they seem likely to be a valuable customer in time, a private bank may take on a client who falls a little below its standard asset threshold.
There is doubtlessly a certain cachet in being a private banking client for many people, but even those with the level of assets required to engage a private bank may not chose to do so. Some high net worth individuals may prefer not to deal with a private bank at all, but with another type of wealth manager, such as an investment management institution.
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. Or, if you would like to discuss your situation with our straight-talking team, please do get in touch here