Private Banking Versus Wealth Management
Private Banking Versus Wealth Management
By Julia Hawley
Private banking and wealth management are terms that overlap. However, the financial services offered through private banking and through wealth management differ slightly.
Wealth management is a broader category that involves dealing with the optimization of a client's portfolio, taking into account his aversion to, or comfort with, risk, and investing financial assets according to his plans and goals. Wealth management can be practiced on a portfolio of any size (though, as the name implies, it's geared toward the well-off: There must be some money to manage in the first place).
Private banking, by comparison, typically refers to an envelope solution for high-net-worth-individuals (HNWIs) wherein a public or private financial institution employs staff members to offer high-net-worth clients personalized care and management of their finances.
The Primary Difference
The primary difference between private banking and wealth management is that private banking does not always deal with investing. Private bank staff may offer clients guidance on certain investment options, but not all banks will be involved in the actual process of investing assets for their clients. Most clients utilizing private banking services open deposit accounts of one kind or another.
Wealth management employees, including financial advisors, provide advice to clients to help them improve their financial standing and assist clients in investing assets with the goal of generating high returns. In general, private banking can extend to encompass wealth management, but wealth management firms cannot provide clients with private banking facility services.
Private Banking
In general terms, private banking involves financial institutions that provide financial management services to HNWIs. In some instances, an individual may be able to obtain these services with assets less than $100,000, but most private banks (or private bank divisions) set a benchmark of at least six figures.
Private banking tends to be exclusive and is reserved for clients with substantial amounts of cash and other assets to be deposited into accounts and to be invested.
Private banking provides investment-related advice and aims to address the entire financial circumstances of each client. Private banking services typically aid clients in protecting and maintaining their assets.
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