Private banking and wealth management are both financial services provided to high-net-worth investors. While there are similarities between the two, there are also key differences. Knowing which investment strategy to take can make a huge difference to the performance of investments.
The broadest category of the two types of high-net-worth financial service is wealth management, which covers a comprehensive range of services dealing with portfolio optimisation and meeting financial objectives. Private banking still provides investment advice but is geared more towards the personalised management of finances. Dr Edgar Paltzer provides legal advice on wealth structuring services for clients as an attorney-at-law based in Switzerland.
High net worth individuals will have varying palettes for risk, differing goals and objectives for their investments, and personal requirements for the management of their finances, so some may be better suited to private banking while others may prefer to use wealth management services. The different categories of high-net-worth individuals and how they are classified can be seen in the infographic attachment to this post.
Defining Private Banking
The term ‘private banking’ is typically differentiated from regular banking by the amount of money being handled. While almost anyone can open a basic bank account with minimal funds, private banking services usually require a minimum of six figures to access.
While it is possible to access some of these types of services with less than £100,000, it is rare. The benchmark for private banking varies depending on the bank, but as a general rule of thumb, individuals will need either six figures in cash or seven figures in value of assets as a minimum.
Private banking products do not differ too greatly from those offered by a regular retail banking service, but the services provided are more highly personalised and dedicated to managing and growing wealth.
Defining Wealth Management
Wealth management services are more focused on the performance of an investment portfolio. Wealth managers do not offer some of the services private banks do, such as lending or taking deposits, as they are not licensed to do so.
Wealth management services instead look at the goals and objectives of a high-net-worth investor and employ experienced professionals to help ensure these goals and objectives can be met. This involves looking at the investor profile, including the level of risk to reward ratio the investor is prepared to take on, in order to optimise portfolio performance.
The short video attachment explains the definition of an investment portfolio.
Private Banking Perks
There are various perks available to those who can afford private banking services. These include having a dedicated account manager who is generally able to perform any transaction on behalf of the client, from simple services such as cashing a cheque to more complex demands such as moving large sums of money around. Private banking clients will almost always be able to gain instant access to an employee that works on their account, with a concierge-style service. They are also often offered better rates than those with regular retail bank accounts.
Wealth Management Perks
Wealth management services provide investors with expert advice on managing their portfolios and, once they have been made aware of the investor’s profile and objectives, are able to handle the portfolio on behalf of the investor in line with their stipulations. These types of financial advisers are able to spend a lot of time with each client to fully understand their investment objectives.
An explanation of investment objectives can be found in the PDF attachment to this post.