In some cases, it’s important to a consumer – especially one with a high net worth – to receive special attention, as well as access to special services – one solution is private banking.

What is Private Banking?

Private banking is a personalized form of banking that allows high net worth individuals access to a wide variety of investments, as well as other wealth management solutions.

Private Banking vs. Retail Banking

In regular retail banking, people manage their money themselves, their options for investments are constrained to the conventional. The bank makes money by charging maintenance fees and overdraft fees, and by lending out the money consumers deposit to others at a higher interest rate than what they pay depositors.

With private banking, the institution customizes the solution for the consumer. The bank can essentially manage the assets, choosing investments for the consumer, and making sure that the client has access to the money whenever he or she wants it. Private bankers, make money for their institutions on the fees for this management, and fees from the products used. In many cases private bankers charge a percentage of assets under management.

Private banking is more about the relationship that a bank has with high net worth individuals. A bank might offer private banking services to those whose wealth is so much greater than the “average” person that they need specific solutions, or want access to alternative investments.

Lastly, it’s important to recognize the difference between private banking and a private bank. Often, a private bank is one that is not incorporated. It’s not publicly held; instead, it is owned by an individual, or it’s owned by partners. Private banks may offer private banking services or they may not.

Who Uses Private Banking Services?

For the most part, those that use private banking services are high net worth individuals. Many private banks, and private banking divisions, require that clients have at least $500,000 in investable assets. While there are some private banking divisions that will provide you access to some customized services with as little as $50,000 in investable assets, you may not receive the same attention as their wealthier clients.

Private banking can be ideal when you have a large amount of wealth, but aren’t sure what to do with it. It can help you navigate your options, protect your wealth, and manage your assets. This can be especially helpful if you lack the time to be more involved, or if you are looking for ideas for what to do with your money.