You might feel as if you have a good relationship with your bank. You can go in to ask for financial advice and they may even offer a number of online services that are advantageous for you to use.
However, did you know that the wealthy have a much different banking experience than you do? Many of the wealthiest around the world get to experience the benefits of something known as private banking. The biggest banks in the world all provide this kind of special service to certain clients.
What is a private bank? It’s a system of benefits and services provided to clients of a bank that have an extremely high net worth. How does it work? Read on and we’ll walk you through what you need to know.
What Is a Private Bank?
So what exactly are we talking about when we talk about private banking?
It’s difficult to give a straight answer because there are so many different potential benefits that private banking can offer.
One of the more basic benefits is a special version of the normal checking or savings account. The added benefit that private banking provides is that of a ‘relationship manager.’ This is an employee from the bank that is assigned to an account holder and personally handles all their matters.
This manager can do a number of things for their high profile clients. They can be put in charge of handling expenses, like paying bills or invoices. They can help to arrange mortgages and other large financial agreements.
In addition, a private bank offers very specialized investment services. A relationship manager from the bank can give a great deal of financial advice to their clients. Beyond that, they might even control the client’s portfolios and do their investing for them.
They can help their clients plan for retirement and put money aside to pass on their heirs. Essentially, a private bank could potentially be willing to do just about any financial task for their clients.
Why Private Banking?
Why might a high profile individual choose to get a private bank account? It’s right there in the name.
The sense of privacy is one of the big benefits to many of those who do go ahead and get a private bank account. Often, an individual is allowed to stay anonymous when working with their private bank account. That means the individuals running their money never have to know who they are actually working for.
Other than privacy? There are certainly some financial perks.
Generally speaking, the high net worth of these individuals provides them with preferential pricing and much easier access to funds. If a private bank account holder wanted to get a mortgage, they would be given prime interest rates or even free-of-charge lines of credit. They might be able to do business overseas with a much more favorable foreign exchange rate.
Banks want to ensure that these clients remain, customers of theirs, so they’ll provide a number of perks to ensure that these individuals stick around.
The investment opportunities are given to those with private bank accounts also tend to be better than those offered to bank members who aren’t private members. A high net worth individual has a much higher chance of being offered access to an exclusive hedge fund than the average bank client would.
Can You Get a Private Bank Account?
Who can get a private bank account? These perks are probably sounding pretty good to you. Maybe you want to sign up yourself.
You might be in luck: there are some banks out there that will allow customers with $50,000 (or even less!) in assets to open a private account. If you qualify for that distinction, it might be time to start looking into the top private banks out there.
However, you should note that many private banks have a much higher standard for who will be able to join the exclusive league of high net worth account holders. Many banks require a minimum of six figures in assets for one’s membership to even be considered.
Larger banks might stretch that minimum even higher. Some of the top private banks around the world will only accept those with one million dollars or more in assets to become private account holders. That’s going to be a much more difficult benchmark for you to hit.
Drawbacks to Private Banking
With all these advantages, is there any reason not to open a private bank account if you have the opportunity?
There are a few downsides that are worth considering.
For one, there’s the relationship you have to the bank employee who manages your account. This is an individual you have to put a lot of trust into. They are managing your assets and money. Plus, at the end of the day, you aren’t their direct boss— the bank is.
You’ll need to keep a close watch and be certain your money is being taken care of.
The turnover rate for employees at banks is also quite high. This remains true even at the upper and more exclusive levels of banking. That might mean you get a good relationship going with your account manager only to have them split on you. You’ll have to start anew with a brand new person.
This can be frustrating and can happen many times over the life of your account.
Understanding Private Banking
What is a private bank? It’s a question many investors and asset-heavy individuals might be asking. A private bank account can offer many advantages to those who have the level of wealth needed to gain access.
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