WHAT IS PRIVATE BANKING? – Private banking is investment banking and other financial services provided by banks. The high levels of income with high net worth individuals. The meaning of private in private banking is customer service rendered on a more personal basis than in mass-market retail banking. Private banking has the most exclusive subset of wealth management comparing to others. It largely consisted of banking services involving in deposit taking and payments, asset management, limited tax advisory services, and brokerage.
It does not refer to a private bank, which is a non-incorporated banking institution. The internationalisation of the economy, developments such as the Internet and mobile phones ensure that banks have to innovate and look for new markets. The growth of HNWIs is low in traditional private banking markets like Europe, compared to Asia where the number of millionaires has grown to 3.6 million. Technological developments have made sure that online banks can offer banking services without an extensive network of offices. The regulation of rewards and the regaining of confidence after the banking crisis requires a new level and different methods for services.
Private banking is the way banking originated. The first banks in Venice were focused on managing personal finance for wealthy families. Private banks became known as ‘Private’ to stand out from the retail banking & savings banks aimed at the new middle class. Private banking has been viewed as a very exclusive niche that only caters to HNWIs with liquidity over $3 million, though it is now possible to open private banking accounts with as little as $350,000 for private investors. The Private banking division provides services such as wealth management, savings, and tax planning for their clients. In private banking, services clients pay based on the number of transactions, usually calculated as a yearly percentage of the total investment amount.
Private also leads to bank secrecy and minimising taxes through careful allocation, or by hiding assets from the authorities. Swiss and some banks have been criticised for such cooperation with individuals practising tax evasion. Although tax fraud is a criminal offence in Switzerland not requiring banks to notify taxing authorities. Historically, private banking has developed in Europe. Some banks in Europe are known for managing assets of some royal families. The assets of the Princely Family of Liechtenstein are managed by LGT Group. Assets of the Dutch royal family are managed by MeesPierson. The assets of the British Royal Family are managed by Coutts.
Most private banks define their value proposition along one or two dimensions and meet the basic needs across others. Some of the dimensions of the value proposition of a private bank are the one-bank approach, unbiased advice, strong research and advisory team and parent bank. Many banks give the “parent brand” to gain a client’s trust and confidence. They believe there is no incentive to push exclusive products, and the client gets the best of what they offer. A few banks claim to have a “strong advisory team” that reflects in the products they offer the client.
A couple of banks also define their value proposition on their unified platform, their ability to comply with all regulations, and serve the client without restrictions. They have a strong presence worldwide and present private bank offerings as a part. Private banks offer an integrated proposition to meet clients personal and business needs to be known as One Bank approach. Few banks define their value proposition along this dimension, because private banking concerns understanding a client’s need and risk, and tailoring the solution. Most modern private banks nowadays give an open product platform.
CUSTOM PRIVATE BANKING SERVICES
- As a client of The Private Bank, your dedicated private banker partners with a team of specialists to help you meet your financial needs and goals as part of a wealth plan, and provides you access to.
- Deposit and cash management services.
- Competitive rates and relationship-based pricing.
- Custom credit strategies and solutions.
CREDIT SERVICES OF THE PRIVATE BANKS
- Strategic borrowing may enhance your wealth plan by helping you.
- Optimise cash flows and income.
- Manage investment allocations to seek asset diversification and lower portfolio risk.
- Realise estate financial planning goals while preserving personal liquidity.
- Increase tax efficiencies while preserving and growing your wealth.
- Finance purchases while avoiding depleting your cash reserves.
CASH MANAGEMENT SERVICES OF THE PRIVATE BANKS
- As a client of The Private Bank, you have access to a range of premier checking and savings accounts that provide exclusive features, benefits, and competitive rates.
- Convenience, flexibility, and control to help you manage everyday cash flow and bill payments.
- Online services including remote deposit, credit management, money movement, and secure account management solutions.
- State of the art online security and mobile access 24×7.
RISK MANAGEMENT SERVICES OF THE PRIVATE BANKS
- Foreign exchange risk for protection against foreign currency fluctuations, such as having foreign denominated assets or a mortgage on a property overseas.
- Liquidity risk for protection against short and long-term liquidity risks associated with unforeseen events, business succession planning, estate planning, and wealth transfer.
- Interest rate risk for protection against future rate increases associated with floating rate loans.
BENEFITS OF THE PRIVATE BANKS
High returns on Investments – Because banks devote highly trained staff and enormous resources to the management of HNWI accounts, most of these accounts receive returns on their investments that consistently outperform the market. This spectacular performance is often attributable to access to high-return investment opportunities like hedge funds.
Excellent Services – Many other services like real estate investments that may only be available to customers with considerable assets may be discounted through the use of personnel associated with the bank. The considerable assets that an HNWI brings to a banking institution are often rewarded by the bank by providing services like tax preparation and planning, traveller’s checks, or corporate checking at discounted rates.
One To One service – The assignment of account manager to handle a client’s assets allows the client to have access to a middle-level management to upper-level official without having to go through the customer relations staff first. This easy access minimises any obstacles to providing input on investment or wealth management decisions and allows the bank to develop strategies that are unique to client’s financial situation.
PRIVACY – The services offered to the client remain largely confidential. Modern banks prefer to keep their activities with exclusive clients unpublicized for many reasons. Many tax shelters that limit exposure to taxation may be utilised legally but may contribute to negative public opinion. Banks seek to limit their adoption by competitors because many of these strategies are proprietary.
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