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How Does Private Banking Operate?


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If you’ve been on your bank’s website, you might have seen something about its private banking or investment and advisory services offered. Usually, those products and services come with features that up the ante regarding personal attention, such as concierge banking and a variety of wealth planning perks. You may have also noticed that the typical private banking customer is one who has a high net worth.

Keep reading to find out exactly what private banking offers and decide if it’s the right way for you to help you reach your financial goals.

What Is Private Banking?

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Private banking is the service that retail banks provide for high-net-worth customers. This private banking relationship typically includes a laundry list of investment and banking services, all of which are provided to the customer by an individual financial planner or team that handles the account.

Often called relationship management, private banking is designed to provide customized service to clients to help them reach their financial goals. A private banker can essentially handle all their clients’ financial transactions, including bill paying, investing, special products such as jumbo mortgages and a wide array of wealth management services.

Private Banking Pros and Cons

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There are pros and cons to private banking. Make sure you review both when deciding if this type of service is right for you.

Pros

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  • Privy to individual attention, perks and discounts on financial products
  • Convenient to have all your financial matters handled in one place
  • Your transactions will remain private

Cons

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  • Private bankers often move around a lot — there is no guarantee you’ll keep the same one
  • Higher costs for private banking
  • Must be a high-net-worth individual to get the service

How Does Private Banking Work?

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Private bankers manage every aspect of their clients’ accounts, including paying bills, handling foreign currency transactions, transferring money among accounts or simply cashing checks. If a client wants a private banker to manage their investments, they will, but it’s case-by-case specific.

Wealth Management vs Private Banking

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Though related, private banking differs from wealth management, as they offer different services. Wealth management professionals gauge their client’s risk tolerance levels and invest their money to align with their overall financial goals, while private bankers provide dedicated, highly personalized banking and financial services to their clients, which don’t always involve investing their assets.

In other words, think of wealth managers as personal financial advisors and private bankers as personal financial assistants.

What Services Does Private Banking Include?

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The services vary among financial institutions. However, there are some services and products that most private bankers provide:

  • Special rates on deposit accounts
  • Discounted services on corporate checking accounts, tax preparation and estate management
  • General financial planning
  • Tax planning
  • Trust administration
  • Estate planning
  • Investment advice and wealth management
  • Lending
  • Lines of credit
  • Currency exchanges to investments
  • Elder care
  • Philanthropic giving

How Much Money Do You Need for Private Banking?

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If the idea appeals to you, you must typically have at least $250,000 in investable assets. Citi® requires its private banking clients to have at least $1 million in their combined accounts. Similarly, PNC requires you to have $1 million or more in investable assets. That said, the required amount you’ll need might vary by institution.

The Perks of Private Banking

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Of the many perks, some of the best are access to lower loan interest rates, better mortgage terms, higher APYs, fewer fees for financial products and higher limits for transactions.

For instance, according to its website, Chase Private Client even provides its private banking customers with “invite-only events ranging from one-of-a-kind family experiences and culinary demonstrations to global insights and leadership-focused events featuring J.P. Morgan and other industry experts.”

Citi gives its customers access to its Citi Entertainment program, which features music, sports, dining, theater and virtual events. Plus, Citi doesn’t charge its Citigold Private Clients — who must maintain a minimum combined monthly balance of $1,000,000 — a monthly service fee for their accounts.

The Cost of Private Banking

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Again, the costs — and the way banks collect them — vary among institutions. Some private bankers charge their clients commissions on products they sell, some charge fixed fees that are like monthly maintenance fees on bank accounts and some charge sliding fees, which typically represent 1% of the customer’s assets under management.

Final Take

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If you have enough assets to get it and you love the idea of all your financial transactions taking place in one institution, you might want to consider private banking. That said, it’s key to recognize the potential costs of private banking and the fact that your bank’s personnel might change frequently — as well as the reality that you’ll likely have to keep all of your assets in one place.

FAQ

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  • What is the meaning of private banking?
    • Also referred to as relationship management, private banking is provided by retail banks for high-net-worth customers. It typically includes banking and investment services and a dedicated individual or team to manage the customer's accounts.
  • How much money do you need for private banking?
    • In general, you would have at least $250,000 in investable assets to qualify for private banking services. That said, the required amount you'll need varies.
  • What is the advantage of private banking?
    • There are many advantages to private banking, including access to lower loan interest rates, better mortgage terms, higher APYs, fewer fees for financial products and higher limits for transactions.
  • What is the difference between a bank and a private bank?
    • Regular banking services are open to anyone there are many banks that don't even require a minimum deposit amount to open accounts. Private banking, on the other hand, is only available for individuals with higher net worth due to the high minimum balance requirements and potential fees.
    • Many banks with private services also have regular banking accounts available.

Barri Segal contributed to the reporting for this article.

This article was updated on June 9, 2023, to correct the amount of investible assets needed to become a PNC Private Bank client.

Sources


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