Private Bank – Is It Worth It for High-Net-Worth Individuals?

When you’ve got $5 million to $500 million in liquid assets, and you want to protect as well as grow your wealth, a private bank is the way to go, isn’t it? No, it is not. While it may seem that private banks are the best option for safely securing your wealth and growing it under the guidance of experienced bank managers, the truth couldn’t be further away from it. If you have $50,000 or even $500,000 in your account, you could benefit from using the services of a private bank. However, for high-net-worth individuals who have entirely different financial goals and challenges, private banks aren’t that helpful. What they need are experienced private wealth management firmsinstead and that too with the right financial advisors. If you are a high-net-worth investor worth $10 million or more, check out our extensive guide for finding such an advisor for yourself.

Additionally, one of the best private wealth management firms you can consider is Pillar Wealth Management. We are an independent white glove firm that deals exclusively with clients with $5 million to $500 million in liquid assets. We offer a range of financial and advisory services, including investment management, risk management, estate planning, retirement planning, tax optimization, and more. Our wealth managers hold more than three decades of experience serving our affluent clients and helping them attain true financial serenity. Contact Pillar Wealth Management today to set up a no-obligation meeting.

In this blog, we’ll be discussing what a private bank is, how it works, whether a private bank is worth it and how to choose the right organization instead. Let’s get started.

What is Meant by a Private Bank?

A private bank is a type of financial institution that provides various financial services to its customers. As compared to other banking services, private banking is specifically meant for high-net-worth people. However, private banks don’t always limit their services to the high-net-worth only. Some banks maintain a cut-off at $100,000 rather than $1 million to serve more customers. 

Sometimes, certain consumer banks or even other financial institutions can offer private banking services through a separate department within the firm. A private bank can serve many purposes, such as investment guidance as found in investment banks, trust, and estate planning, and some wealth management services.

How Does a Private Bank Work?

Private banks work much like your regular banks. As a high or ultra-high-net-worth individual, you can open an account and avail several perks and benefits that are aimed at helping you to manage your wealth.

Additionally, you also get access to exclusive features and services such as dedicated advisors, discounted rates, and even invitations to special events. While all this sounds great, it doesn’t always lead to financial success.

If you simply want a better and more exclusive banking experience, by all means, go ahead and opt for private banking. However, if you are approaching a private bank,intending to protect your assets, growing your portfolios, formulating your legacy and retirement plans, and overall working towards meeting your life goals and ambitions, a private bank may not be the one for you.

Is a Private Bank Worth it for High Net Worth Individuals?

So, now the question arises, is a private bank worth it? The answer is it depends. For simply banking purposes, sure, a private bank is certainly worth it for high-net-worth individuals.

However, if you have $5 million to $500 million in liquid assets and you want comprehensive wealth management services, a private bank simply won’t cut it, and you might need to consider going to a private wealth management firm instead. Here’s why.

Services

For starters, if you want wealth management services, you would probably want everything in one place. Working with several managers or institutions not only drives up your costs but only makes your wealth management more inefficient as there’s no integration and coordination of strategies.

Likewise, you won’t always be able to avail all the services you require at a private bank. For instance, they might offer investment consultancy services but won’t execute those investments, so you’ll have to approach a broker separately.

Similarly, not all private banks offer tax management services, which is a crucial factor for high-net-worth families. Start chatting with us to learn about all the services we offer at Pillar Wealth Management.

Customization

Another problem you will face at private banks is the lack of customization. While you might find some tailoring in some services, overall, private banks don’t offer a lot of customization. For instance, if you consult them regarding your portfolios and investments, they will ask you some basic questions regarding your risk tolerance and return targets, but that’s about it.

Then, based on that, they will offer you fixed investment packages that have been proven to be successful for them and don’t carry many risks. Such an investment strategy might give you good short-term returns. But there’s no guarantee how useful it will be for you in the long run and whether it will even help you with your life goals and targets.

At Pillar Wealth Management, we don’t bother with risk and returns. We focus on our clients’ life goals and aspirations, and we try to understand what they really want. Then, based on that, we design customized financial solutions that will help them achieve all their targets in the most efficient manner. Learn how else you can maximize your portfolio performance to get closer to your goals from our extensive guide.

Expertise

Just because a certain institution is offering a service does not mean that they are necessarily experienced and experts in that service. While banks do offer investment management, estate planning, and other wealth management services, they are not necessarily experts in them. Their expertise lies in banking services such as CD accounts and paying bills online, etc.

So, when you have $5 million to $500 million in liquid assets, you definitely want someone who knows what they are doing and has the most experience and knowledge about it. Consequently, you will only find this expertise and high level of skills at wealth management firms, such as Pillar Wealth Management.

Discover the other factors you need to remember to protect and grow your assets from our book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million.

Clientele

Following up on the expertise, private banks also lack the expertise in dealing with high-net-worth clients exclusively. As mentioned earlier, their cut-off for clients is usually $100,000. In comparison, wealth management firms only take clients who have a net-worth of at least $1 million.

As a result, they are more experienced in handling the specific challenges that only high-net-worth families face. Since private banks have a diverse clientele, they are not always focused or familiar with the intricacies involved in wealth management for ultra-high-net-worth individuals.

Active Vs. Passive Management

When it comes to your investment strategy, private banks tend to lean more towards active management, which can seem great in the beginning. However, in the long run, it can turn out to be quite expensive with high tax bills, transaction charges, and management fees.

Wealth management firms and the best financial advisors know that you always need to have a balanced approach when it comes to management styles. That’s why at Pillar Wealth Management, we utilize an optimal combination of active and passive management so that our clients can benefit from high returns, low risks, and low costs.

There are also other shifts you can make to boost your portfolio growth, which you can read about here.

Standard of Care

This is another major point of concern. Whenever you go for any financial services, you always want to go for a fiduciary financial advisor or manager as only they can provide services that are always in your best interests. The best financial advisors don’t suffer from any conflicts of interest, and therefore, they can always act in your best interests.

On the other hand, non-fiduciary advisors, such as those at private banks, aren’t always looking out for your best interests. In the case of private banks, your advisor or manager will be more concerned about the bank and its shareholders.

Therefore, they will be focusing on the bank’s interests rather than solely yours. Learn more about how you can find the best fiduciary financial advisor for yourself from our handy guide for investors worth $10 million and more.

Dedicated Advisor

As a high-net-worth individual or even an ultra-high-net-worth family, you need a dedicated financial advisor who can assist you with all your financial needs and matters. The financial advisor you choose will probably stick with you for the rest of your life or even after that.

As a result, this relationship will require trust and commitment, which can only come when you have a dedicated advisor. This is usually not possible in private banks.

Due to their high turnover, your advisor could leave the bank for another institution, which leads to the bank assigning you a new advisor each time.Get in touch with Pillar Wealth Management to speak to your dedicated advisor today.

What Should You Do Instead?

Hopefully, by now, you have determined that private banks aren’t a good fit for high-net-worth individuals and their needs. However, this begs the question, who is a good fit then? That’s easy. For wealth management services, there’s no one better than private wealth management firms.

But, how do you choose one? Choosing the right wealth management firm is a difficult business. As mentioned earlier, the firm and advisor that you choose will stick with you for the rest of your life. That’s why you need to make a wise decision to save yourself from financial losses and trouble in the future.

While it is hard to find the best financial advisor or wealth management firm, there are a few factors you can evaluate them on to narrow down your search and find the right advisor for yourself. Consider the following factors:

– Experience and Credentials

– Fiduciary Services

– Customized Solutions

– Clientele

– Services

You can also directly refer to our comprehensive guide on finding financial advisors to learn how to choose the right one.

Final Thoughts

If you are a high-net-worth investor with $5 million to $500 million in liquid assets, you probably don’t have the time or skills to effectively manage your wealth, protect your assets and work towards your financial and life goals. That is why it’s so important to partner with the right organization that can help you do all of those things and even more.

However, if you have been considering private banks for your wealth management needs, think again. While they are good for banking services specifically, they lack the expertise and dedication required to formulate and execute entire wealth management and comprehensive financial plans. You will be much better off with a wealth management firm instead, such as Pillar Wealth Management.

Pillar Wealth Management is a 100% fee-only wealth management firm that exclusively serves high and ultra-high-net-worth individuals and families. Our experienced wealth managers and financial advisors are entirely dedicated to helping our affluent clients meet all their financial goals and live the life they desire through sound strategies. We develop customized financial solutions that are based on each client’s unique financial circumstances, needs, and market conditions. Schedule a chat with Pillar Wealth Management today if you are in need of wealth management services.

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