Private banking refers to a particular category of banking services which targets the specific needs of wealthy individuals or High Net Worth Individuals (HNWI). As opposed to retail banking that caters for the masses, private banking provides customised products and services, and individual wealth management for each client.
What is the Difference Between Private Banking and Retail Banking?
Formulated towards wealthier individuals, private banking provides a tailor-made service portfolio which includes, investment management and advice, private wealth management and other specialised extra services. In contrast, retail banking is the type of banking service that offers classic banking solutions such as savings, deposits, loans, and credit cards to everyday people.
Is There a Minimum Wealth Requirement for Private Banking?
There are usually prospects in private banking and the clients must adhere to some minimum assets under management requirements even if, in some cases, the wealth manager will look at case-by-case. The amount of this threshold varies from bank to bank but most start from about £1 million. On the other hand, other banks could provide interesting reconciliation programs for the people who hope to achieve this requirement in the near future.
The Core Principals of Private Banking
From personalised wealth management to detailed financial planning, the structure of private banking emphasises confidentiality, discretion, and a wide array of tailored services:
Discretion and Confidentiality
The principle of discretion is at the core of every private bank. Quite frequently, clients pass private banks with sensitive financial data and therefore any confidentiality that protects them, is highly regarded.
It is well known that private banks offer high levels of privacy concerning the individual and financial information of their clients. Assistant private bankers’ tasks, whether involving simple purchases and sales or multiple family office activities, are carried out under the utmost privacy.
There are also policies related to confidentiality on the part of the private wealth management firm ensuring that the wealth management activities of clients are not exposed to the public domain and any scrutiny from the outside.
Comprehensive Financial Planning
Private banking goes far beyond making deposits and taking out loans. One of the basic services ot offers is financial planning and this service covers all the client’s financial needs. It contains:
Tax Planning: Private banks design special projects in collaboration with tax planners to avoid making the clients obliged to huge taxes and maintain and continue building their fortunes.
Estate Planning: Estate planning is commonly offered as a part of private banking services to enhance the transfer of wealth generation to generation in a cost-efficient manner from the perspective of inheritance taxes.
Retirement Planning: Clients seeking either early retirement or effective measures towards a sound life in retirement can always be assisted by private banks in achieving these goals.
Personalised Wealth Management
The most important aspects of private banking remain focused on wealth management. Private Banking does not only ensure that people save and invest money but helps them define what financial outcomes would be sufficient for them and what amounts of risk they can take. Therefore, they always have several options prepared for any given situation.
Long-Term Relationship Management
In private banking, the clients cultivate long-term relationships with their bankers. This particular principle of relationship management is not only limited to the provision of financial services; it is engaging the client on a journey.
Every client is appointed with a private banker who keeps in touch with the client and undertakes measures to help the client with new developments as the situation changes. Investors have to change their investment strategy, and the client inherits money or possessions or undergoes new taxation laws, in any case, the private banker will be assisting with any changes needed.
Unique Investment Opportunities
Another fundamental aspect of private banking is the opportunity to offer unique investment possibilities. Private banks have a variety of strategies of investment which members of the public cannot attain therefore their members stand a better chance of increasing their wealth.
These unique investment opportunities may consist of:
Private Equity: Investments in companies usually not publicly traded that high net worth individuals can make.
Real Estate Opportunities: Relevant investment products in selected high-end property investment areas for clients to increase their investment portfolios.
Alternative Investments: Investment options in hedge funds, private equity, and other forms of investments that are unconventional, but would add value to investment returns while moderating risks.