Private banking guide
"The rich are different," F. Scott Fitzgerald wrote in his famous novel "The Great Gatsby," about the fabulously rich of Long Island in the 1920s.
The banks think so, too. That's why the banks have special services called private banking for their wealthier customers.
With the general increase in wealth, more and more people are becoming millionaires and affluent enough to be of interest to the private banks, whose number has grown significantly in recent years.
Many of the high street banks have established private banking arms to cater for wealthy customers, referred to them by their retail banking arms.
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Where can I find a private bank?
There are at least 50 private banks in London. They include divisions of high street names, and many others that most people would never have heard of. All the high street banks offer private banking facilities. Perhaps the best known of them is Coutts, now part of Royal Bank of Scotland/NatWest group. RBS also owns the private banks Adam & Co and Child Co. In addition, there are numerous other banks, such as C. Hoare & Co, Duncan Lawrie, EFG and Arbuthnot Latham, whose names you will never see over a branch door in a provincial town centre. C. Hoare & Co. is the sole survivor of the private deposit banks established in the 17th and 18th centuries.
How much money do I need to be eligible for private banking?
Normally you will need a minimum of £50,000 in disposable cash to benefit from private banking. Some will ask for more to accept you as a client. CitiGold Wealth Management is available to customers who maintain a minimum average monthly balance of £50,000 (or currency equivalent) with Citibank, hold an investment with Citibank, or an account with Citibank International Personal Bank. Alternatively, CitiGold Wealth Management is available to customers, regardless of balance, for a monthly fee of £25.
Kleinwort Benson Private Bank offers its deposit services to private clients with more than £100,000 to invest. It also offers investment management and access to structured products suitable for the sophisticated investor, such as structured single property investment projects. Owners of their own businesses can benefit from the bank's Entrepreneurs Forums, which give clients the opportunity to meet and share knowledge with fellow entrepreneurs, and learn more about the issues that affect their businesses.
Barclays Private Bank requires a minimum of £500,000 (or currency equivalent), deposited with the bank for management. In return, in addition to normal services such as investment management, it offers wealth structuring, including wealth preservation services, fiduciary services, the establishment of structures effective across different legal jurisdictions, the setting up of trusts and foundations, and mortgages for property purchase at home and overseas. At the other end of the scale, J. P. Morgan Private Bank, which boasts that it advises more than 40 per cent of the individuals on the Forbes Billionaires list and the Forbes 400 Wealthiest Americans, serves people with at least £10m in assets to invest, or a net worth of £25m. In short, if you need to ask how much ready cash you need to become a private banking client, then the service is possibly not for you.
Who can use private banking?
The words ?private banking? are redolent of old aristocratic families discussing their inheritance with pinstriped bankers in oak-panelled offices. In fact, today's private bank clients are just as likely to be city whizz-kids banking their bonuses, internet entrepreneurs, pop stars and footballers, as the scions of wealthy families. Some private banks forge links with other professional services companies, so they can offer mutually beneficial services to clients. For instance, Cater Allen Private Bank has a number of such arrangements, with accountants Grant Thornton. Clients get attractive rate of interest, as well as easy access to credit. They can also make purchases on a Visa deferred debit card, which means they can earn up to 30 days' extra interest on their money, with all purchases being debited on the same day once a month.
What services are offered?
The main service is advice and wealth management. The days are long gone when you could phone your high street bank manager for a chat about your investments. Nowadays, you are more likely to be routed to an overseas call centre, but as a private bank customer you will normally be given an adviser, who can help you or find you someone to give you a specialist who can.
This could include investment advice, particularly on overseas investments, and help with setting up offshore accounts for overseas transactions, or for tax benefits where they apply. Private banks also provide access to specialist investments such as private equity, hedge funds, currency funds and derivatives - normally the reserve of institutional and sophisticated investors. You will also obtain advice on compliance with international law, such as money laundering and currency export regulations, where these apply. In order to set themselves apart, some private banks, such as Butterfield, offer you advice on esoteric investments, such as racehorses, works of art, antiques, wine, bullion commodities and foreign property purchase in exotic locations.
You will also be able to get advice on loans and mortgages, including those on overseas property, and even boats and aircraft. Having a relationship with a private bank will provide you with a route to transactions that need approval from an overseas regulatory authority &emdash; for instance, large transfers of cash or artworks &emdash; which the bank should be able to arrange for you. It should also be able to help with providing you with credit references, for instance when raising credit in a country where you have no previous credit history, or assist you with other routes to raising cash that you need for a particular transaction.
Is it really private?
While the popular image of private banking is off secretive Swiss banks, modern compliance, tax and money laundering rules mean that you can't be totally anonymous. However, you should receive a significantly more personal standard of service, with a greater degree of discretion than with a standard banking relationship. Your dealings with your private banker should remain just that &emdash; private.
How do you choose a private bank?
Find a name you trust &emdash; either because it is part of a big international group with a reputation to lose if anything goes wrong, or one recommended to you by someone whose opinion you respect. You may do most of your transactions on the phone, but it does make sense for your bank to occupy premises that you will be able to visit easily, if need be. Have an initial meeting with the person who will be your private banker, and test out the chemistry &emdash; this is going to be a frequent and intimate relationship. You need someone you get on with, trust, and who is sympathetic to your needs and concerns. Naturally, review the bank's range of services and its expertise. Does it offer a good service in the areas you will want to use? Have a look at some of its research and see if its investment record is successful.
Cost of private banking
Expect to pay for the service you get. Private banks are unsurprisingly not cheap, although you will find that the more services you use with a private bank, the cheaper the service will be, as discounts will apply if you use more than one service. Check carefully how fees will be charged and if they will be cost effective for you. Make sure that everything is included, and satisfy yourself that you will be paying a fair price for the services you are asking for. A spokesman for Royal Bank of Canada Global Private Banking says: "For investment assets managed on a discretionary basis, we charge fees based on the size of the assets, while on an advisory basis, the fees are linked to transactions."
"For trusts, charges are time-based, while on loans we would charge a margin." When choosing a private bank, make sure you are not paying for services you don't need. The advantage of a private bank is that its wide range of services should be saving you money, not costing you. If you don't need a full service, go for a bank that lets you choose from a menu when calculating your fees.