Private banking and wealth management are terms that overlap. However, the financial services offered through private banking and through wealth management differ slightly. Wealth management is a broader category that involves dealing with the optimization of a client’s portfolio, taking into account his aversion to, or comfort with, risk, and investing assets according to his plans and financial goals. Private banking typically refers to an envelope solution for high-net-worth-individuals (HNWIs) wherein a public or private financial institution employs staff members to offer high-net-worth clients personalized care and management of their finances.
The primary difference between private banking and wealth management is that private banking does not always deal with investing clients’ assets. Private bank staff may offer clients guidance on certain investment options, but not all banks will be involved in the actual process of investing assets for their clients. Most clients utilizing private banking services open deposit accounts of one kind or another. Wealth management employees, including financial advisors, provide advice to clients to help them improve their financial standing and assist clients in investing assets with the goal of generating high returns. In general, private banking can extend to encompass wealth management, but wealth management firms cannot provide clients with private banking facility services.
In general terms, private banking involves financial institutions that provide financial management services to HNWIs. In some instances, an individual may be able to obtain these services with assets less than $100,000, but most banks that provide private banking do not accept clients who have assets less than $500,000. Private banking tends to be exclusive and is reserved for clients with substantial amounts of cash and other assets to be deposited into accounts and to be invested.
Private banking provides investment-related advice and aims to address the entire financial circumstances of each client. Private banking services typically aid clients in protecting and growing their assets. Employees designated to aid each client work to provide individualized financing solutions. These employees also help clients plan and save for their retirement and structure plans for passing accumulated wealth on to family members or other indicated beneficiaries.
There are consumer banks of every size with private banking divisions. These divisions offer considerable perks to HNWIs to obtain them as clients. Private banking clients with large accounts generally receive enviable rates and concierge-like service, guaranteeing them instant access to the employees working with their accounts. Private banking clients never have to wait in line or use a teller for services. Anything the client needs can be done with a phone call. A private banking client can contact the lead advisor working with his account and complete just about any transaction, from cashing a check or ordering more checks to moving large sums of money from one account to another.
These perks are all part of the banking institution’s plan to benefit financially. Banks pursue wealthy clients because their business generates significant sums of money in profit for the bank, guarantees repeat business and brings in…