Are you tired of feeling like your bank doesn’t care about you?
With retail banking — the kind of banking most people have — it’s easy to feel like you’re a burden to your financial institution. You might face long hold times when you call for assistance or have trouble getting any live support at all.
For high-net-worth individuals, there’s a way around this inconvenience. If you have significant assets to deposit and/or invest at a bank or investment firm, you might qualify for premium services such as private banking or wealth management.
What’s the difference between the two? Some financial institutions use the terms interchangeably, so it largely depends on where you go.
Private banking, or personal banking, is an exclusive service available to wealthy banking customers. Each bank offers something different, but private banking is typically a personalized, high-touch service reserved for customers who keep a combined six figures or more on deposit or invested through the bank.
These are some of the most common private banking benefits available to eligible customers:
Direct support: A relationship banker assigned to you for one-on-one advising and a 24/7 support line.
Financial planning: Investment and tax advice, and retirement planning.
Better rates and fees: Waived banking fees, lower rates on loans, and higher rates on deposits.
One downside of this service is that your relationship banker may have incentives to sell you specific bank products, which can interfere with the banker’s ability to suggest financial moves that are in your best interest.
Wealth management is a service that helps affluent individuals protect and grow their wealth and pass money on to their heirs.
Wealth management is similar to private banking in terms of the services you receive. However, you can either get wealth management services at banks that offer them or through wealth management and investment firms.
Depending on where you go, there may be service tiers for wealth management, with the most valuable services available to customers who have deposits and investment amounts in the millions.
For example, Citibank offers Citigold, a wealth management service for customers who maintain average deposit and investment balances of at least $200,000. But if your net worth is $10 million or more, you can qualify for Citi Private Bank services, which include tailored advice for art collectors and sports team owners, and financing for things like aircraft purchases.
Some financial institutions use the terms private banking and wealth management interchangeably. So before you decide where you want to take your business, you’ll need to take a close look at the details.
Be sure to compare the assets you need in order to qualify, the services offered and the fee structures, before opening any accounts. You will also need to check into whether the advisors are fiduciaries, meaning they’re legally required to offer advice that serves your best interest and not theirs.
Private banking is best for the customer who already likes what their bank has to offer in terms of deposit and investment accounts, but wants more personalized services.
Why? Because you need to have a set amount of money on deposit and/or invested at the bank in order to qualify for private banking, and you’re usually required to have a specific checking account at the bank as well. So it’s important to make sure the bank offers products that work for you.
Additionally, your relationship banker may be incentivized to recommend the bank’s products to you, which can include anything from credit cards and loans to CDs and IRAs.
If these conditions work for you, private banking can be a convenient choice, since it allows you to do your banking and get your financial planning services in one place.
If you have enough assets, you might choose to use both private banking and wealth management services. But if you’re choosing only one, wealth management services are likely the best option. Both services include financial planning, but for wealth management, you can go to a non-bank firm. That means you’re less likely to be sold bank products you don’t need or be subject to other conflicts of interest.
Yes, wealth managers can also have conflicts of interest, but you can avoid this issue by looking for a firm that offers fee-based advising rather than commission-based advising. The best option is to choose a firm that charges an annual wrap fee that covers all of your support, rather than a firm that charges you separate fees and commissions for things like stock trades.
