Private banking goes beyond exclusive investment-related advice, and deals with managing investments to address a client’s entire financial situation. Services include: protecting and growing assets in the present, providing specialized financing solutions, planning retirement and passing wealth on to future generations.

High Reward Ceiling
A large part of accounts in private banking do not carry FDIC insurance and this could mean investors could lose everything in the account to bad portfolio management and poor stock choices. Aggressive management by a savvy private banker can provide massive financial gains for investors. This also leads to large financial rewards for the fund manager.

Personal Client Interaction
A private bank primarily concerns itself with investing and growing wealth. Through private banking a professional banker or stockbroker has an opportunity to work closely with clients to determine investment goals and retirement needs than at a public bank. This is because a private bank doesn’t do the majority of its business opening checking and savings accounts.

No Room for Failure
Most Private Banks define their value proposition along one or two dimensions, and meet the basic needs across others. Some of the dimensions of value proposition of a private bank are parent brand, one-bank approach, unbiased advice, strong research and advisory team and unified platform. Many banks leverage the “parent brand” to gain a client’s trust and confidence. These Banks have a strong presence across the globe and present private bank offerings as a part of the parent group. “One Bank approach” is where private banks offer an integrated proposition to meet clients personal and business needs. Since Private Banking concerns understanding a client’s need and risk appetite, and tailoring the solution accordingly, few banks define their value proposition along this dimension.

Most modern private banks follow an open product platform, and hence claim their advice is unbiased. They believe there is no incentive to push proprietary products, and the client gets the best of what they offer. A few banks claim to have a “strong advisory team” that reflects in the products they offer the client. A couple of banks also define their value proposition on their unified platform, their ability to comply with all regulations, yet serve the client without restrictions.

Posted on Oct 08, 2014

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