The World Of Private Banking

Personal Finance

The World Of Private Banking

In this introduction to the world of private banking, we explore the range of services offered by private banks and highlight some of the leading institutions in the industry.

Published on 12 September 2017

High net worth individuals, by their very nature, tend to have more complex financial goals and concerns than your average investor.

Private banks offer comprehensive and customised banking, investment, and other financial services for affluent individuals. Clients of these institutions benefit from having a dedicated private banker who coordinates all of their services, which greatly simplifies the communication process. Simplification in banking usually means less stress for the client – and that’s good news for all concerned.

When you call your private banker, there are typically no machines, no waiting on the end of a phone, no verifying who you are via a pin system and then having to do it all again when you finally get a live person on the line. It’s a seamless process. If you call (or text or email), your private banker answers – they are there for you if and when you need them.

Private banking customers use a wide range of facilities, including banking, financial planning, investment management, trust, and philanthropic and tax services. Private banks aim to provide a one-stop shop for all their clients’ financial needs, and are committed to building long-term relationships with their customers.

The oldest

Private banks are among the oldest banks in the world. C Hoare and Co. is the oldest privately owned bank in the United Kingdom. Established in 1672, they state on their website that, “your relationship manager will take the time to look after you and your family”. It’s this ethos, the wish of the bank to look after, and the client to be looked after, that continues to drive wealthy customers to them.

Various famous customers have opened accounts at Hoares over the years. Jane Austen, the novelist, opened her account in 1816. Her mother’s family opened an account in the 1690s, and her father and siblings has a relationship with Hoares spanning 70 years. Samuel Pepys, John Dryden, and Lord Byron were also loyal customers.

Monte dei Paschi di Siena has been in business since 1472 and is now one of Italy’s largest retail banks. The Berenberg Bank in Hamburg, Germany, was founded in 1590. Apart from being two of the oldest banks in the world, these grand institutions have something else in common: some families that are customers of theirs today first started investing with them over 500 years ago. That alone speaks volumes about the level of service and commitment that these banks, and others like them, provide to their exclusive clientele.

The biggest

Private banks have weathered global political upheaval and heightened regulatory scrutiny over the last few years very well, and last year their assets under management (AUM) were up by 4% on average.

The largest private bank in the world, with just over US$2 trillion in assets, is UBS. But this Swiss behemoth has more going for it than just its size. It also ranked first in a customer satisfaction survey among private banking and wealth management providers. This survey means a great deal to UBS, and they are committed to maintaining their position at the top of the ranking.

Bank of America came a close second in terms of size with AUM of US$1.97 trillion, and Morgan Stanley claimed the third spot US$1.95 trillion.

The chart below shows the ten largest private banks in the world in terms of AUM.

top 10 private banks worldwide by assets under management

Source: Scorpio Partnership 2017 Private Banking Benchmark

The bottom line

It is important to note that just because a private bank is bigger in size or richer in history does not mean it is necessarily better in terms of investment performance and service quality.

Choosing a private bank is a high-stakes decision. If you are looking for a private bank, it is imperative that you take the time to thoroughly research and compare the various institutions out there to see which is best able to meet your individual needs.

Private banks vary significantly in terms of size, areas of expertise, range of products and services, geographical presence, and fees. The minimum investment threshold also differs dramatically from bank to bank – ranging from as low as US$1 million to over US$10 million.

Whichever institution you choose, your private banker will work closely with you to understand your financial needs and goals, and develop and implement a complete, customised plan to help you achieve lasting financial success and security.

And more than merely managing your money, your private banker will strive to build a long-term relationship with you – a relationship based on trust, communication, and service excellence.