What is Private Banking?

Private banks, or private banking, offer personalized financial, investment and banking services to its High Net Worth clients. The existing products and services available in the mass market of retail banking are customized for such affluent individuals to offer them a more efficient wealth management mechanism. Usually, dedicated advisers from the bank help these clients to access a larger variety of financing and investment options. The advisers assist these high net worth individual clients to choose the most suitable financing options for them. Private Banking is not to be confused with a Private bank which is a banking institution that has not been incorporated.

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How Does Private Banking Work?

In private banking the client gets exclusive investment advice from the bank advisers to meet their entire financial management needs - including asset management, tax filing, financial planning, passing assets to the future generation and retirement benefits planning. Confidentiality is one of the main advantages of private banking. The customer dealings and services offered to these individuals are usually kept confidential. Under the private banking, the clients get customized solution to their financial management need, the banks do not disclose this information in public. This privacy is beneficial for both the bank and the clients. It restricts the other banks to offer a similar solution to the high net worth client and attract them into their services. A bank adviser or relationship manager is assigned to each of these clients. Besides giving advice, these advisers also maintain a direct liaison between the individual client and the management of the Bank. The amount of investable assets required for receiving private banking service varies from one bank to another. It may range from $50,000 to $500,000 worth of investable assets. Clients with such a large amount of wealth are able to invest in alternative options like real estate and hedge funds. It also helps is solving the liquidity issue of the banks. The specific services offered in private banking depend on the individual bank and may vary from one bank to another. The followings are some of the services to be expected in private banking: 

Deposit accounts (checking, savings, money market, CDs): 

Customers qualified for private banking may receive preferential pricing such as a higher rate of interest on their savings. 

Investment planning services: 

Private Bankers offer custom made investment strategies to these clients. This helps them to protect and grow their asset. 

Tax planning: 

The advisers help these customers to plan their tax most efficiently complying to the tax laws and regulation. 

Cash flow management: 

The high net worth individuals may get support from the bank in managing their daily cash flow. 

Mortgage loan and real estate investment: 

These high worth customers may obtain loans for their primary or secondary home. They may also get support for investment in real estate. 

Lending: 

These clients may also receive specialized types of loans with a flexible line of credit secured by their account. 

Risk Management: 

The advisers help their client in risk management. They guide the clients on how to protect their investment against interest rate fluctuation, foreign exchange risks, and liquidity risks. 

Inheritance: 

Private banking helps customers plan for transferring wealth to the future generation. Apart from getting personalized services and solutions the high net worth individual customers often get discounted services from the bank. The banks offer such discounts to incentivize wealthy customers to remain loyal to the bank. The Banks may also offer them the investment returns that outperform the market. Like these individuals may get access to an exclusive high performing hedge fund through the bank. After the global economic crisis of 2008, the rules relating to private banking became more stringent. The new rules ensure more transparency and accountability on the part of the banks so that the customers are advised appropriately and truthfully. Mostly the investment banks offer private banking services to its wealthy clients. Apart from that, some private banking firms offer the same services. According to the Euromoney's annual private banking and wealth management ranking in 2018 UBS a Swiss multinational investment bank and financial services company top the list of Best global private banking services overall 2018". The top 10 banks in this list are-

1. UBS, a Swiss multinational investment bank and financial services company, headquartered in Zurich and Basel.
2. JPMorgan, an American multinational investment bank and financial services company, headquartered in New York City.
3. Credit Suisse, a Swiss multinational investment bank and financial services company, headquartered in Zurich.
4. Julius Baer, a Swiss multinational private bank, headquartered in Zurich.
5. Citi, an American multinational investment bank and financial services company, headquartered in New York City.
6. Pictet, a Swiss multinational private bank, headquartered in Geneva.
7. BNP Paribas, a French international banking group, headquartered in Paris.
8. HSBC, a British multinational banking and financial services holding company, headquartered in London.
9. Goldman Sachs, an American multinational investment bank and financial services company, headquartered in New York City.
10. ABN Amro, a Dutch bank, headquartered in Amsterdam.