Private Banking

What is Private Banking?

Private banking is personal financial services for high net worth (HNW) and ultra high net worth (UHNW) individuals and their families.

Services include, but are not limited to, deposit accounts, money transfers (like wires), mortgage and other lending solutions, financial planning, as well as tax and other advisory services.

While the vast majority of people must go into a physical branch to receive financial services, private banking clients have a dedicated relationship manager that will often take transaction instructions by phone or email. 

It’s common to see private banking services rolled under the wealth management divisions of the financial institutions that provide them (as opposed to the personal banking division).

Private Banking Client Demographic

While specific definitions and asset thresholds vary by firm and jurisdiction, most retail banking customers typically have under USD $100,000 in investable assets.

A second segment, often referred to as mass affluent, includes personal banking customers with between $100,000 and $1MM in investable assets. As customers approach this $1MM asset threshold, they start to become much more attractive to the wealth management and private banking groups at bulge bracket banks.

But the core private banking client is considered HNW or UHNW, which means $1-10MM or greater than $10MM, respectively, in investable assets.

These are usually high earners, which may include business owners, entrepreneurs that have had a successful exit, senior managers and executives at large corporations, partners in professional services firms (like law, engineering, accounting/advisory, etc.), and healthcare professionals like dentists and medical specialists.

Private Banking – Benefits & Features

Private banking services can be expensive; in fact, many clients pay several hundred dollars a month (or more) just for a basic package. 

But with those fees come a variety of features and benefits that make private banking very attractive. These include, but are not limited to:

Exclusivity

Because these services are reserved for very affluent customers, there is absolutely an air of exclusivity. This is clear when you walk into a private banking office, which has a much more prestigious vibe than a typical bank branch.

The physical products they offer also indicate a certain status. For example, private banking credit cards are often black and/or metal; adorned with silver or gold letters and logos (so they clearly stand out). They typically have very robust reward programs that may include concierge booking services and unique travel benefits. 

Privacy

While some private banking clients seek status from the relationship, others value the element of privacy that it affords. Consider celebrities, professional athletes, or other high profile individuals that prefer not to conduct personal financial business in a busy branch setting.

Private banks go to great lengths to ensure that privacy and confidentiality are held in the highest regard.

Convenience

Consider that most bank clients do some online banking. They may have a mortgage rep if they own their home, there may be a different advisor that helps with financial planning and excess cash, and they probably go into the physical branch to conduct other transactions with different tellers, too.

Whether a client is in it for the prestige or for the privacy, one of the biggest features of a private banking relationship is the convenience. Private banking clients have one banker that does all of the above, and these clients have direct email and telephone access to that one person.

Team Approach

Most private bankers are supported by a team of experts. There are credit analysts and tax specialists available, plus (by being under the wealth management division) there are many investment advisors and portfolio managers available to support clients with their investment needs. 

Trust services, as well as will and estate planning, are also often offered to private banking clients on a fee-for-service basis.

Creativity

Because of the team approach and the breadth of expertise, private bankers tend to design creative financial solutions. 

Consider a client that needs a lump of cash to purchase a vacation property. Instead of selling securities to free up cash, a private banking team may work with the client’s accountant to devise a tax-efficient strategy to free up the necessary cash – perhaps they use leverage against a commercial property and write off the interest expense, instead of triggering capital gains on the sale of stock.

A Career in Private Banking

Private banking is a great career path that offers tremendous earning potential. 

Private banking exists at the intersection of wealth management and retail lending, so it requires unique, highly specialized experience and expertise. But a banker can’t just have great technical skills; they must also be very good with people and very comfortable sourcing new client opportunities. 

It’s such a high margin business for financial institutions that competition in the market is fierce for these HNW and UHNW prospects; the relationships are considered extremely valuable. And because many of these clients are also business owners or professionals, private bankers can serve as a great source of referral business to other divisions of the firm (particularly the commercial banking arm).

Private Banking vs. Wealth Management

As previously noted, most firms group private banking and wealth management under one reporting line. 

This works well because there are many common themes, including that both groups share the HNW and UHNW target demographic. Private bankers and wealth managers also typically share tax and estate planning resources, as well as trust and other advisory services. 

The key difference is that private bankers usually aren’t investment advisors, and wealth managers generally don’t provision credit or lending solutions. 

Private bankers offer basic banking services and complex credit solutions, but asset allocation decisions and the actual purchase and sale of securities are executed by a wealth management professional, often referred to as either an investment advisor (IA) or a Portfolio Manager (PM).

Related Resources

CFI offers the Financial Planning & Wealth Management Professional (FPWM)™ certification program for those looking to take their careers in wealth management to the next level. To keep learning and advancing your career, the following resources will be helpful:

• Private Banking 
• Effective Communication for Client Facing Advisors
• Asset Management
• Private Wealth Management
• See all career resources