Most people are reasonably familiar with both retail banking and commercial banking, but private banking remains an unclear concept to many.
Private banking, quite simply, is personalized banking and financial management services for professionals and high net-worth individuals. Private banking involves more than just customized asset management; it aims to address a client’s entire financial picture. Private banking includes specialized financing features and other products and services designed to help clients achieve their individual and professional financial goals.
The extremely personalized service, with instant access to advisers, is also enhanced by a strong tradition of privacy and confidentiality. The benefits enjoyed by private banking clients include access to a wider variety of investments, favorable loan rates, and many other perks.
Upping their game
Sophisticated private banking services aren’t the exclusive domain of European private banks or the private banking divisions of large national banks that may be limited to minimum thresholds. Community banks are transforming their offerings to up their game and stay competitive.
When community banks first entered the private banking business, their services were often more or less limited to offering loans to current wealth management clients—usually doctors, who, for example, might need loans for new office buildings or perhaps vacation homes. Today, the portfolio of services is much more comprehensive.
The financial planning advice that private bankers provide ties everything together. Private bankers look at both sides of the balance sheet—assets and liabilities—and create a unique wealth-building plan for each client, taking into account personal and business needs and how the two intersect.
Here at Washington Trust, for example, the majority of our private banking clients are busy professionals—doctors, dentists, lawyers, and so forth—and business owners who are looking for an expert to help them navigate the multitude of personal and commercial banking products. Our clients appreciate having a single point of contact for home loans, banking services, building loans, equipment loans, practice loans, commercial loans, and other financial services.
Not just for the super rich
While it is true that private banking is beneficial for those who have achieved a certain level of financial success, the service isn’t just for the richest of the rich. Historically, private banking catered to individuals with at least several million dollars in investable assets; today, that threshold is lower. Every financial institution defines its ideal clientele differently, but many private banking groups now target the mass-affluent market as well as the truly wealthy.
As an example, our team also serves many emerging professionals, such as new physicians, associate attorneys, associate CPAs, and not-quite-C-suite executives. For example, we might work with a new physician with significant loan debt who doesn’t yet have a particularly high net worth but who wants to buy into a practice. The financial products and services she needs are quite different from those we would provide to her more established colleagues, and we must thus develop creative, customized solutions that are appropriate to her situation.
One of the primary goals of private banking is to save time and eliminate hassle by providing concierge-level service: offering guidance, making every banking process easier and reducing the number of people clients need to work with. In the example of the new physician above, the client might normally need to speak with three different people, but with private banking, she provides the information once and her private banker coordinates everything else. The private banker thus serves as the single point of contact and takes on the responsibility for orchestrating the details of the entire loan process as well as providing broader guidance relevant to the client’s overall financial picture.
In many ways, community banks are a natural fit for a service that relies so heavily on personal relationships and understanding individuals’ unique needs. If community banks continue to embrace new tools and technologies, expand their scope of services, and enhance their ability to combine products to create individualized strategies, they will be able to attract and retain private banking clients who are looking to gain a holistic picture of their financial situation and save time dealing with complex financial issues.
Nancy Hake is vice president of Washington Trust Bank. She has nearly 2 1/2 decades of experience in private and commercial banking and has worked with clients in a range of industries, including health care, commercial real estate, manufacturing, and other sectors.
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