Private Banking Guide
What is Private Banking? Who uses private banking? What are the benefits of private banking? How do I find the right private banking services for me? What does private banking cost? What’s in it for the banks? Is it worthwhile making the switch to private banking?| What is Private Banking? | Top |
Before you decide whether or not private banking is for you, we need to know just exactly what private banking is, and what it offers over and above that of your local high street bank. The term ‘private banking’ is normally used when talking about services such as banking, investment and other financial related services that banks provide to their more important clients, i.e. those who have deposited lots and lots of money with them. Where the ‘private’ bit comes into play is that the customer service and advice offered to a client that has a private bank account is given on a more personal level by specific bank advisors who ‘personally’ look after the clients private account, rather than being treated as one of the masses that use the services offered by the high street banks. It has always been assumed that private banking was the domain of the wealthier individuals amongst us with liquidity in the range of around two million dollars (give or take a few dollars). However, this is not the case as some banks offer private banking services for clients who have accounts with them of around fifty thousand UK pounds. A private bank or a division of a mainstream bank offer such services as wealth management, savings, inheritance and tax planning for their clients.
Now, not all banks offer the same private banking services, although, most if not all of the high street banks offer private banking services in one form or another. There are also a number of private banks (banks which are privately owned) that offer private banking services for the more wealthy amongst us. Indeed, there are some private banks that stipulate you need a minimum of half a million UK pounds before they will offer you private banking services, some other banks will provide private banking services for those individuals that have deposited 50,000 GBP in disposable cash, and other banks will offer private banking services for those who deposit an amount somewhere in between. In other words, private banking is offered at some level by most of the banking institutions in the UK.
| Who uses private banking? | Top |
For those of us old enough to remember such things as gentlemen’s clubs, the smell of polished oak tables, bowler hats and pin striped suits, then private banking may well fit in somewhere to that way of thinking. The lord of the manor discussing his financial affairs with his personal banker, the local merchant discussing business opportunities with their private bank over a cigar and a brandy. Well, times have changed, today the people that use private banking services come from a wide cross section of the public, rock stars, city slickers, professional sportsmen and sportswomen, in fact anyone with enough money to make it worthwhile for the banks to offer private banking services.
| What are the benefits of private banking? | Top |
There are different levels of service offered by different financial institutions associated with private banking. In the good old days, private banking meant having the luxury of being able to contact your very own financial advisor any time of the day (and if you were very very rich, at night as well) to talk over any financial queries or concerns you may have had. You could also contact him or her regarding a variety of specialist subjects including mortgages and pensions. It was like having your own encyclopaedia on financial matters, and of course, you also got a rather splendid personalised chequebook. Some of the real private banks still offer a similar service to the one described, but for the rest of us, well, we get a slim line version of private banking.
For those of us that have telephoned our bank with a question or query regarding our account and had the experience of being transferred to a call centre in some far away land, where the person on the other end of the phone has no idea of what you are talking about and cannot or will not transfer you to some one who may be able to help, then the idea of talking to a sympathetic human being sounds like a gift from heaven.
Most banks offer private banking services that include access to your own personal advisor, the fact that a few hundred of their private banking clients also have access to the same ‘personal advisor ‘, does not make your advisor all that personal. However, in most cases your advisor will be courteous and polite and, if necessary, will put you in touch with a specialist who should be able to advise you on various types of investment queries, including overseas investment, help with setting up offshore accounts, etc. If you have opened a private banking account with your chosen bank, you should be able to obtain advice on private equity, hedge funds, currency funds and derivatives. You will also be able to get advice on loans and mortgages, and advice on buying an overseas property. A private banking account should also allow you to obtain credit references when required, for example, if you need to raise credit in a country where you have no previous credit history, or the bank should be able to assist you with alternatives in regard to raising cash in a foreign land when contemplating a particular deal.
| Find private banking services for Your self? | Top |
It’s all in the name; go for a bank that is well known and has a good reputation, or one that has been recommended to you by a valued acquaintance or colleague. Choose a bank which has premises that are convenient for you to visit. I know that in most instances the majority of our banking needs are catered for by the Internet and the telephone, but it is always reassuring to be able to discuss a particular problem or question with a friendly face. If possible, arrange an initial meeting with the person who is going to be your personal advisor, after all, you don’t want your personal advisor being someone you hate! Do your own research on how successful your potential bank is at investing in your chosen areas, and do they offer all the services you require.
| What does private banking cost? | Top |
’By the very nature of the service on offer, i.e. private banking, it is not going to be cheap. However, the more services you take advantage of via your private banking account, the more cost effective it is. Expect to pay for the service you get. Private banks are unsurprisingly not cheap, although you will generally find that the more services you use with a private bank, the cheaper the service will be. When looking to put your money into a private banking account, be careful you do not end up paying for services you do not use. The whole idea of having a private banking account is that it is supposed to save you money by giving you access to the right information and advice, you should not end up losing money on the deal. It may well be that you can find a bank that offers private banking services on a ‘pay for what you use ‘ basis, so that you only end up paying for what services, information and advice you actually need. You should also be aware that there are other costs involved, for example, you are likely to receive a lower rate of interest on your account than the standard rate offered by your local high street branch, and if you go over your agreed overdraft maximum, or make a credit card repayment late, do not for one minute think that you will be let off, you won’t.
| What’s in it for the banks? | Top |
Well, nearly all of us have heard the saying ‘all your eggs in one basket’, and that is what the banks want us to do, put all our financial affairs into one bank. Of course, now that you have a private bank account, you are going to ask for advice on a number of financial related issues, such as mortgages, insurance, investments, and when you personal advisor offers his or her expert opinion on the matter, no doubt he or she will guide you down the path of one of the offerings your chosen bank has as a financial product. Another benefit to the bank is that once they have you as their client, you become their captive, and they no doubt will advise you to invest in one of their investment funds rather than taking an overall view on what is on offer.
| Making the switch to private banking | Top |
At the end of the day, you get what you pay for, so if you really need to have your own (or nearly own) personal banking advisor, then opening a private banking account may well be the answer for you. But if the reason is the smell of cigar smoke, pin stripe suits and a bowler hat, then there may be better products and services offered by the banking fraternity, that could be better suited to your requirements, especially in these turbulent times.
