Private banks and bankers used to be able to provide services that ordinary banks couldn't provide if you had $1 million, or even $10 million. Fortunately, due to changes in the financial industry, most of these services are now accessible to ordinary, non-wealthy people if they are willing to do some research. Private banks provide four general types of services: banking, investment, advisory, and perquisites. It is also important to note that these services are not without cost, which you can largely avoid if you roll your own.
Banking Services
In addition to providing standard banking services, private banks also provide other services. It receives your deposits, processes your payments, transfers your money, and offers loans, among other services. All of these services are available to you at your ordinary non-private bank as well, but in the old days, you had to visit the bank in person. With the availability of online services for these tasks, setting up your own private bank equivalent is no longer a difficult task.
Imagine yourself traveling abroad, meeting someone delightful you want to spend more time with, and deciding to extend your trip. Private bankers used to assist with logistics - they would collect your mail, sort through it, and deposit or pay any checks or bills you received. In the event that your new travel expenses weren't covered by your incoming checks, they could also offer you a quick loan. You could also get local currency delivered.
Nowadays, handling such matters is much easier for individuals to handle on their own. Direct deposits are made to your account upon receipt of incoming funds. Depending on your preferences, you can have your bills automatically paid or you can pay them online. There is an ATM nearby that offers local currency.
Private bankers enjoyed a competitive advantage when it came to loans, in particular. Having intimate knowledge of your finances, your private banker was uniquely positioned to approve a loan immediately, whether it was a short-term loan or a longer-term loan to purchase a third home or restructure your business. The majority of credit cards now allow you to take a cash advance of a size at least as large as a prudent banker would approve.
Services Related To Investing
Investment arms are available at private banks. It is estimated that they charge a fraction of the assets under management, but the fee decreases as the number of assets under management increases. It is true that most banks offer investment options nowadays, and every brokerage firm offers banking services as well. The firm will also be able to manage your money for a fraction of the value of your assets. A smaller fraction of the money under management can be used to create your own investment portfolio. Buy low-cost mutual funds or ETFs in your brokerage account and you'll likely do as well as the rich guy whose private banker has arranged for a top investment advisor to manage his funds for a fraction of the cost.
Advising Services
Private bankers can also provide all kinds of services that the wealthy need, including tax accountants, estate planners, investment managers, etc. A private banker can be an excellent source of advice if you are very wealthy. As long as you are willing to do the legwork yourself, you probably do not need a banker if you are not that wealthy. The process of finding a good tax professional, accountant, and lawyer who can prepare a will or a trust is not difficult.
Concierge Services
A concierge service is one type of perk. It is possible for your private banker to arrange for you to receive hard-to-get tickets, invitations to exclusive events, assistance with complicated travel arrangements, etc. In recent years, this type of service has become so popular that just about every credit card issuer offers it - in particular, all the upscale credit cards offer concierge services. It is becoming more common for companies to outsource work to firms that specialize in it. To accomplish these tasks, you are probably better off hiring a personal assistant to assist you, or doing them yourself if you have the time.
Legitimate needs
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It is likely that private bankers would be interested in your business if you have investable assets of more than $25 million, and they may be able to provide you with services that are worth the $125,000 or more they will be expected to cost each year. To restructure a multi-million dollar business so that Dad can partially cash out and pass the remainder to his children would require the expertise of experts in accounting, taxes, and estate planning, as well as a banker. It is probably best to start with a private banker if you are interested in receiving such services.
Consider the case of buying a private jet. In spite of the fact that you may be genuinely wealthy enough to purchase one, you probably do not have all that cash sitting around. Depending on the amount of cash you do have and the investments already in progress, your private banker will be able to prepare a custom financing package. As part of the service, they will also handle the payment and provide a conference room for you and the seller to complete the transaction. The services you need can almost certainly be obtained for much less than what a private banker would charge (if they would accept your business).
Conclusion
The Internet and innovation have made it possible for ordinary people to access banking services at very reasonable prices - even those that were once reserved for the rich. Due to the fact that all banks now own brokerage firms, and all brokerage firms now own banks, you have a choice when selecting the company where you will roll out your own private bank. Brokerage firms offer the advantage of taking out loans secured by your investments - the interest rate is usually half to a third of what you would pay on a credit card cash advance. Having a bank near you provides the advantage of being able to get cash, speak to a banker, use their conference room for closing transactions, etc.If you want to put together a billion-dollar deal, avoid money center banks and regional banks - they are only interested in earning millions of dollars in fees. Your goal is to find a bank that's one step smaller than your current one. Especially for banks with a local connection, bankers at that size are more likely to provide personal services than only to large corporations. Moreover, a banker who provides personal service is just as valuable as an individual banker.
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