Private banking Vs Wealth management | Top 10 Differences

Are you lucky enough to have access to private banking? How about having a wealth manager? Private banking and wealth management are two terms used interchangeably, though they function differently.

If you have ever wondered how banks manage deposits of the affluent, it means that private banking may be especially involved.

Meanwhile, wealth management has a wider role in handling assets and portfolios in general. This article will cover private banking and/vs wealth management.

What is Private Banking and Wealth Management?

Private banking and wealth management have something in common, but in private banking, one has his/her own roster of workers provided by a financial institution to manage and handle his/her assets.

This type of service, offered by either public or private establishments, has personalized financial solutions unique to the needs of each client, which are high net-worth individuals (HNWIs).

On the other hand, wealth management involves managing an account holder’s portfolio, how to profit from trust funds, and mitigating paper loss while considering the portfolio’s risk appetite (conservative, moderate or aggressive).

Usually, a wealth manager offers many asset classes: stocks, funds, real estate, etc.

Nonetheless, in either private banking/or wealth management, the wealthy with at least six-figure U.S. dollar assets are usually the clientele.

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What Does a Consumer Banking and Private Wealth Management Executive Do?

Consumer banking and wealth management executives (private) need to have the necessary skills for being effective executive managers.

They are also responsible for many things and should be adept with their financial products and services.

Among these include:

  1. Investment advisory. Financial executives need to have sound and practical financial advice that benefits their client’s investment goals whenever they are asked, or should the need for advice arise.
  2. Financial planning. Executive managers need concrete plans on how to grow assets with minimal risk. 
  3. Asset management. They need to have in-depth knowledge and expertise on how to properly grow and optimize investments.
  4. Relationship management. They are responsible for telling their investor about their institution’s investment products specific for the growth of/her asset.
  5. Insurance policies. They should inform their “boss” about the clauses—what is included and excluded—in their policies. Accounting services.
  6. Executives should know how to audit each investment portfolio transaction.
  7. Legal and tax services. Account officers must be able to properly comply with the legalities of offering investment products and managing them.
  8. Team management. Executives have the personnel to which they need to manage and delegate duties and responsibilities.
  9. Account recording. Wealth managers should have a ready copy of their investor’s portfolios, especially when meeting their investors for regular fund performance.
  10. Other financial services. Wealth managers must know other financial services that their account holder needs that are inclusive of their offered products and services.
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A good consumer banking and wealth management executive should be able to relay all information clearly and concisely but informatively to their special client.

Excellent managerial, transactional, and accounting skills are also a must-have for private banking and wealth management executives.

What are the Benefits of Private Banking?

Because private banking is specifically catered to an individual with a high net worth, this service is much more profitable to have access to.

A dedicated staff, access to specialists, higher interest rates, exclusive perks, and freebies, increased privacy, and personalized financial solutions are some of the benefits of private banking vs wealth management.

Private banking also offers a more accessible financial service, should an individual need such service.

They will not have to wait or line in queue for transactions, and they have a dedicated private banker to transact with. Nonetheless, access to private banking is an only invitation scheme.

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What is Wealth Management Banking?

Wealth management banking involves managing a portfolio of a wealthy individual, a big company, or a rich organization. They are somewhat the asset management for the well-off.

They are specialized management divisions in a bank or a sole institution (such as Goldman Sachs) that have experts in overseeing and supervising large sums of assets and high-profile investment portfolios.

Wealth managers have certifications and qualifications that they need to train for and acquire.

What Does Private Banking Involve?

Private banking is offered by most banks and is involved in the financial planning, retirement planning, investment management, tax services, inheritance, and insurance claims of a high net-worth individual’s whole assets, liquid or non-liquid.

They manage all of the HNWI’s financial instruments that are enrolled in their institution.

Private banking also involves inviting only prospects with clients that have 6 or 7-figure assets. With this level of income portfolio, hefty fees and taxes are involved with such big wealth.

What Does Private Wealth Management Do?

What private wealth management does is a specialized and personalized level of banking. Investors which have exclusive entry to this form of treatment are solely catered to individuals and not to institutional investors.

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Private wealth management also optimizes their client’s deposits and investments and finds ways to reach their client’s financial goals and plans.

What is the Difference Between Wealth Management and Private Banking?

Wealth management banking also caters to the affluent, but the difference between private banking and wealth management banking is in the product and service offered and the number of their clients.

In wealth management banking, different asset classes and financial instruments can be offered on top of guiding an investor to open a deposit account.

In private banking, only deposits and savings are being offered by an executive manager, though they can also advise on what investments to enroll in.

Wealth management banking can handle both individuals and institutional investors (groups of individuals, organizations, or companies), compared to private banking which only provides its service to individuals.

Private banking is an only invitation service, while wealth management can offer their service as long as one meets their requirements.

Private banking has a dedicated staff and its primary intermediary is a private banker. In wealth management, the wealth manager handles many portfolios.

The former, private banking, has a concierge-like treatment in a bank, whereas the latter has a more general treatment of clients.

Most retail and private banks offer private banking, while a wealth management service is offered by larger financial institutions such as investment banks.

Wealth management involves financial planning for whole assets under management (AUM), while private banking has specialized and personalized financial plans for an individual’s assets.

You don’t need to fall in line with private banking. In wealth management, you may slightly wait for your turn.

Private banking and wealth management may come with freebies and perks, but in private banking, it is explicitly stated.

When a wealth manager makes a wrong decision, portfolios under him suffer. In private banking, only one individual’s portfolio suffers.

Facts About Private Banking vs. Wealth Management (A Summary)

Private banking and wealth management are two interrelated services provided by banks and other financial institutions.

Actually, private banking and wealth management have similarities in terms of asset and portfolio management, but they still have striking differences.

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Private banking is an exclusive invitational service catered to high net-worth individuals to manage and grow their liquid and non-liquid assets.

Special treatment is involved in private banking, as you have your own private banker.

Wealth management, on the other hand, can both manage and give financial advice to institutional investors and well-off individual clients.

It is important to know about private banking and wealth management because they are the lifeblood of a financial institution.

A large sum of money, which the affluent invest or deposit in a bank, means higher banking fees and larger capital for investing by banks for their profit.

This would mean that a financially healthy bank relies on the deposits and investments of HNWIs, large companies, and organizations. 

Knowing private banking vs wealth management is important and has an impact on society: among small depositors and investors.

It is worth knowing, even for small account holders, because assets are secured in being withdrawn and redeemed, in full and with ease, as banks are healthy and far from closing down.

Read: Top Wealth Management Firms | 2022

FAQs on private banking and wealth management

What is the minimum asset required for private banking/ wealth management?

It depends on the institution. 100,000USD for some, 250,000 for others. There are also establishments that only allow millionaires to access this service.

How much do you charge for banking and wealth management?

On average, 1.00% of total assets if total assets amount to 1,000,000USD.

Are my private banking/ wealth management assets tax-free?

No, in the US, the government even charges about 25% for one’s assets. But there are investment instruments that are tax-free in nature, such as municipal bonds.

Private banking vs wealth management, which is better for me?

If you’re an individual who was invited to private banking perks, then grab the opportunity. Otherwise, choose wealth management.

What if the bank still closes even when they have private banking and wealth management?

Your assets are insured and the government will return a portion of your assets.

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