Private banking refers to a range of banking products and services that are offered to certain clients, typically individuals who have a high or ultra high net worth. When you open a private bank account, you can enjoy certain benefits, including access to a dedicated banker.
Whether private banking is something you need or want, however, can depend on your financial situation, qualifications, and goals. Here, you’ll learn more about private banking and whether it might be right for you, today or in the future.
Key Points
• Private banking can offer personalized services for high net worth individuals including estate planning, business management, and charitable giving.
• Significant assets, often between $100,000 to $10 million, are typically required to qualify.
• Premium features include optimized interest rates, asset management, and dedicated bankers.
• Standard banking offers lower minimum deposits but fewer personalized services.
• Fees may apply, but private banking offers waivers for higher balances.
What Is Private Banking?
Private banking describes a division of retail banking that caters to individuals who have significant assets. Again, that typically means high net worth individuals who have substantial disposable assets.
• The private banking minimum requirements can be quite steep. For instance, you may need anywhere from $100,000 to $10 million to enroll in private banking, depending on the bank.
• Banks, brokerages, and other financial institutions can offer private banking as a concierge service to people whose needs go beyond regular personal banking. As noted, you may need to meet minimum account-opening requirements in order to take advantage of private banking features.
• Private banking is sometimes grouped together with wealth management, though they mean different things. While private banking can encompass a variety of banking services, wealth management deals largely with investing and financial planning.
• A dedicated banker can help with your private bank account while a wealth management advisor might offer advice on retirement planning or estate planning.
How Does Private Banking Work?
The exact details of what’s included with private banking typically depends on the bank. Generally speaking, private banking is designed to provide a more personalized banking experience that’s focused on your financial goals, needs, and situation.
For example, some of the features and services you might have access to include:
• Premium checking, savings, money market, and certificate of deposit (CD) accounts
• Foreign currency exchange services
• Specialized financing
• Real estate lending
• Specialty services for people who work in specific industries
• Interest rate discounts on loans
• Enhanced interest rates on deposit accounts
• Fee waivers
• Investment advice, if your private banking service extends to wealth management
• Estate, trust, and insurance planning
• Business management services
• Charitable giving services
• Personalized customer service
In other words, you’re getting much more than just a checking and savings account when you sign up for private banking. However, all of that added value may come at a higher cost, as banks may charge more for things like monthly maintenance fees if you don’t maintain a certain minimum balance.
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Private Bank vs Public Bank
The term “public bank” can refer to banks that are owned by government entities rather than shareholders. Public banks operate to serve or fulfill a mission that’s designed to benefit the greater good. For example, a public bank might operate in order to generate revenue that could be used to pay for public works projects like new roads or schools.
When you’re talking about private banking and how it compares to other forms of banking, it’s more appropriate to use standard or typical banking as the benchmark. This is the kind of banking you might use everyday. For example, you’re using standard traditional or online banking services when you open a checking account at a bank.
Private banking, as described above, typically offers more personalized service and a suite of offerings in addition to the usual checking and savings accounts.
Who Are They For?
Standard banking and private banking can meet very different needs. In terms of which one is the better option, it depends on your personal situation.
Standard banking is designed for people who:
• Are looking for a safe, secure place to keep their money
• Need basic money management tools, like checking and savings accounts, for their earned and passive income streams
• Want to have access to their money through online and mobile banking, branches, or ATMs
• Don’t necessarily need wealth or asset management services.
Meanwhile, private banking is suited for people who:
• Need more than just a checking or savings account
• Want to work one-on-one with a banker, financial advisor, or team of financial professionals
• Have sufficient assets to qualify for opening a private bank account
• Are interested in comprehensive financial planning services
The biggest distinction is the range of services offered. Private banking tends to be substantially more comprehensive in its approach to money management.
Banking Services
As discussed, private banking can span a much wider range of banking and financial management services. For instance, you might be able to meet with your private banker or wealth manager to open a new checking account, establish a trust, and create a plan for tax-efficient charitable giving.
With standard banking, you’re more often doing basic things like opening new accounts, applying for loans, or depositing funds.
Banking Access
Private banking and standard banking may both offer the same degree of access, in terms of depositing or withdrawing money or paying bills. You might be able to manage your accounts online, via mobile banking, at a branch, or an ATM. There may, however, be different limits on how much you can withdraw, spend, or deposit each day with traditional vs. private bank accounts.
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Banking Fees
Both traditional and private banks can charge fees. Some of the most common fees include monthly maintenance fees, overdraft fees, excess withdrawal fees for savings accounts, and returned payment fees. Opting for private banking doesn’t mean you’ll escape those fees, though some banks do offer fee waivers when you meet a higher minimum balance requirement.
Private vs Standard Banking: Pros and Cons
Both standard and private banking have advantages and disadvantages to consider before opening an account. Here are some of the main pros and cons of using private banking vs. standard banking.
| Private Banking | Standard Banking | |
|---|---|---|
| Pros | Comprehensive banking services that can include wealth management, estate planning, and insurance planning
Private banking clients may have access to a dedicated banker, allowing for a more personalized banking experience Private bank accounts can include premium features, such as optimized interest rates, fee waivers, and specialty banking services |
Standard banking can offer a safe, secure way for people to manage the money that they spend and save
Standard banking is easily accessible for most people, with relatively low minimum-deposit requirements in most cases You might be able to unlock added features, such as interest rate discounts for accounts in good standing |
| Cons | Minimum investment requirements may be high
Banks may charge higher monthly maintenance fees if you fail to meet minimum balance requirements |
Standard banking doesn’t offer as many bells and whistles
Standard banking can charge fees, though online banks may have low or no fees, offering a more attractive choice for some people |
Many banks that offer standard banking services also offer private banking services. For example, some of the biggest banks that have both types of banking include:
• Bank of America
• Chase
• Citi
• U.S. Bank
• Wells Fargo
These are all well-known names in the banking industry. While online banks seem not to have yet jumped into the private banking pool, it’s possible that as the online banking industry expands, you may see more premium products and features offered.
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Private Banking Minimum Requirements
As mentioned, private banking is generally available only to people who can meet certain requirements. Financial institutions that offer private banking services may use net worth or liquid assets as the baseline for determining who can open an account. There may be additional minimum deposit requirements you’ll need to meet once you open your account.
Not all private banks state upfront the amount of money needed to be considered a private client. Typically, the figure is around $250,000 in banking assets. However, it can be more or less.
• Chase offers private client banking to those with a daily average of $150,000 in Chase investments and accounts.
• At Citi, Citigold private clients must keep at least $1,000,000 in eligible linked deposit, retirement and investment accounts.
While you can open traditional checking accounts or savings accounts online, that usually isn’t an option for private banking. Instead, you might be directed on the bank’s website to call or send a secure message to request an initial meeting with a private banker to discuss your eligibility. The banker may ask for information about your income, assets, and debt to determine whether you meet the net worth guidelines.
If you get the green light to open a private bank account, you’ll need to fill out the appropriate paperwork, which is no different from opening any other bank account. You’ll also need to make a minimum deposit. Depending on how much money you’re depositing, you may need to obtain an official check from your current bank or brokerage or arrange a wire transfer.
The Takeaway
Private banking isn’t necessarily right for everyone, and if you don’t currently have a high net worth, you may not need these services. However, it’s a good idea to understand what private banking involves if you’re focused on building wealth and eventually want to take your banking to the next level.
FAQ
How does private banking work?
Private banking is geared toward high net worth individuals. By keeping a certain amount of money on deposit or invested with a financial institution, private banking can offer additional products and services, such as wealth management, optimized interest rates, and other perks.
How much money do you need for private banking?
The amount of money you need to access private banking services will depend on a financial institution’s guidelines. For instance, at one bank, you might need $100,000 on deposit or invested; at another, you might need more than $1 million.
What are the downsides of private banking?
The downsides of private banking include needing considerable wealth to qualify, being restricted to using the financial institution’s products and services, and potentially paying high fees and commissions.
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