While some may use the terms private banking and wealth management interchangeably, there are important differences between them. Wealth management typically involves tailored financial planning services, investment management or a combination of both. Private banking usually entails a variety of retail banking services that are typically reserved for high-net-worth or ultra-high-net-worth clients. This may include personalized handling and management of banking, retirement and other accounts, as well as dedicated customer support from the bank. If you’re interested in working with an institution that can provide private banking or wealth management services, a financial advisor can help.
What Is Wealth Management?
Between wealth management and private banking, the former tends to be more of an individualized service that aims to help clients with their portfolios and overall financial situations. Wealth management services often fit into two main categories: investment management and financial planning.
Investment management is a popular service for those who aren’t interested in managing their own investments. In exchange for a fee that’s typically based on a percentage of a client’s total assets under management, a wealth manager will decide how to invest the client’s money. Wealth managers will usually consider the overall financial profile of each client before investing.
For example, clients who are more risk-averse may see their assets invested in stable, upward investments, like bonds or exchange-traded funds (ETFs). Clients who are more comfortable with risk or who have longer time horizons may be comfortable with their assets being invested in individual stocks or options.
A valid criticism of paying for investment management is that you’re likely to see just as good, if not better returns, by investing in index funds or ETFs yourself without needing to pay a fee. However, investing with a wealth manager can often give you access to advanced strategies, portfolio models and investment opportunities.
Financial planning, the other arm of wealth management, tends to be even more tailored to the individual situation of the client. When it comes this, a financial advisor will usually work with the client to develop a financial game plan that will help them meet their financial goals.
Let’s say a client wants to retire by 50 and pay for two college educations, all while living in Washington, D.C. A financial advisor can help figure out how much the client needs to save and how much the client can afford when it comes to living expenses. The advisor can also help devise a plan to help meet stated goals, from spending habits to investment advice. Financial planning engagements may also be more focused in nature, dealing with one or two specific financial issues.
What Is Private Banking?
Private banking services are also built specific to the needs of clients, albeit in different ways. First and foremost, private banking doesn’t tend to entail detailed financial advice on investments or long-term financial plans.
Although private banking clients do have access to specialized bank employees and services, they won’t usually be working with a financial advisor as part of the private banking experience. On top of that, wealth management services are usually carried out by wealth management firms or a separate arm of the bank.
While minimums vary across different financial institutions, private banking is typically available to those who have at least a seven-figure net worth. Some institutions, such as JPMorgan Chase, have even higher minimums, though family members may be able to take advantage of services as well even if they don’t hit certain minimums. If you qualify for private banking services, you’ll have access to a variety of special services. These may include dedicated concierge services so that you never have to wait on hold, favorable interest rates on loans and invite-only products such as credit cards.
Ultimately, however, private banking is usually just an expanded take on the types of normal banking services you might receive as a client of Chase, PNC, Wells Fargo or whomever you choose to keep your money with. Private banking clients are the same as many other clients in that they have checking accounts, savings accounts, investment accounts and retirement accounts. The main difference lies in the fact that private banking clients may have easier and expanded access to the bank’s financial and banking services.
Who Should Use Wealth Management Services?
If you’re considering wealth management services, you should be looking for help managing your investments, planning your financial future or both. If you’re just looking for someone to manage your investments, you may already have a private banking relationship, as both services tend to be reserved for those who are high net worth. If you’re a private banking client, you may consider wealth management if you want more specific advice on how to handle your finances.
However, wealth management isn’t reserved just for the ultra-wealthy. If you’re looking for help planning for your financial future, there are certain wealth management firms that are open to smaller accounts. Those looking for investment portfolio management services have even more options. While some firms have high investment minimums, there are lots of robo-advisor services out there that you can use for investment help at little to no cost and with lower minimums.
Who Should Use Private Banking Services?
In theory, everyone should want to have private banking services at their disposal. Having access to better customer support and better product offerings is always a win. Unfortunately, if everyone used them, then these services wouldn’t be very private.
Most banks offer private banking services to their more affluent clients, so you may not have to do very much to become a private banking client if you amass enough in assets held at a given bank. However, if you aren’t a private banking client at your bank, it may be worth looking around to see if you qualify for them at a different institution. Ultimately, you should use private banking services if you can qualify at a bank that you’re comfortable banking with. There often isn’t a charge for private banking services, so there’s not much downside, if you qualify.
While wealth management and private banking services tend to target similar clients, there are key differences that you should be familiar with. Wealth management is a more comprehensive type of financial service that can help clients develop financial plans and invest prudently.
Private banking, on the other hand, is a suite of services offered by a bank that can make banking a more pleasant experience. With access to an expanded suite of banking products and dedicate support services, you won’t need to rely as heavily on the traditional avenues when it comes to transferring funds, applying for new lines of credit or other cumbersome banking tasks.
Wealth management and private banking are both useful. So make sure you know how to make each service work best for you.
Tips for Investing
Investing for the future isn’t always an easy thing to do on your own. A financial advisor may be able to help you figure out how to invest and how to plan for your financial future. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you decide to manage your investments on your own, it’s a good idea to be prepared. For example, check out our free investment calculator and get started today.
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