The World of Billionaires
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What is a Private Bank?  What is Private Banking?  

If you have $3 million, $10 million, $100 million or $1 billion, what do you do with your money?  Do you buy a collection of real estate, invest in stocks & bonds, private equity, hedge funds or direct business deals?  Or do what many wealthy clients doOpen a private bank account to gain access to a vast range of wealth management & investment services, and have a dedicated private banker and team of wealth & investment experts to help you manage your assets.  And not forgetting the invites to special events including investment conferences, luncheons, dinners, the occasional champagne and parties. 

But what exactly is a private bank?  What services does a private bank provide?  What is the minimum sum to setup a private bank account?  How long does it take to open a private bank account?  What are the most common services for private banking clients?  What are the new products or products in-demand in private banking?  What are the common misconceptions of private banking for HNW clients?  Can you trust a private bank with your millions to billions of assets?  Learn more about private banks and private banking below.

 

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” what exactly is a private bank?  What services does a private bank provide? “

 

What is a Private Bank?  What is Private Banking?

The World of Billionaires

A private bank is a bank that provides banking & financial services to high net worth (HNW) individuals and professional entities including asset managers, corporate entities, endowments, charities & family offices. 

Private Bank Services: Private banks typically provide a broad range of services to meet the needs of HNW clients, including banking, loans, wealth management, investment services, insurance, succession planning, trust administration, estate administration, tax & accounting, family office & philanthropy.   The same services are provided to professional entities including asset managers, corporate entities, endowments, charities & family offices.

  • Banking, loans, wealth management, investment services, insurance, succession planning, trust administration, estate administration, tax & accounting, family office & philanthropy
  • Investment banking services (fund-raising, sale of business or stake, M&A)
  • Private markets investments (Private Equity, Venture Capital, Business Investments, Distressed Assets)
  • Platform for entrepreneurs, business owners to connect
  • More services include concierge services, private jet, yacht, medical, property management services

Some private banks also provide investment banking services (fund-raising, sale of business or stake, M&A), access to private markets investments (Private Equity, Venture Capital, Business Investments, Distressed Assets), and platform for entrepreneurs, business owners to connect. 

Other services private banks may provide include concierge services, private jet, yacht, medical, property management services, some of which may be provided by service partners (external service providers).  

Private banks are licensed (regulated) bank.  But there is no specific regulatory license for a private bank license.  Private bank is a “marketing name.” Example: Boutique Bank, Investment Bank, Corporate Bank, Commercial Bank.

” banking & financial services to high net worth (HNW) individuals and professional entities including asset managers, corporate entities, endowments, charities & family offices “

 

Who can setup a Private Bank account?

Monaco | A country known for the rich and famous, with the highest GDP in the world and every 1 in 3 is a millionaire

Private banks target at high net worth (HNW) clients, typically with $2 million & above (USD).  Some private banks have a higher minimum sum including $5 million or $10 million, while some have a lower minimum sum of $1 million.  Some private banks qualify clients by net worth, such as $50 million or $100 million or by investible assets (excluding first residential property).  

Some private banks qualify clients by accredited or professional investor status.  In Hong Kong, a professional investor is qualified by investible assets of HKD 8 million ($1 million).  In Singapore, an accredited investor is qualified by either income of SGD 300,000 ($213,000) or net financial asset of SGD 1 million ($710,000, excluding first residential property). 

Do you know: A wealthy client with $30 million may be travelling around the world, doing business or making investments, and having a private banking service that can support them on both financial matters and personal matters is not only a huge convenience but also help them to make better financial decisions.  If a client with $30 million can grow his / her wealth by 10%, 20% to 50% a year, with the support of the private bank or private banker, the wealth growth will be $3 million, $6 million or $15 million. On the contrary, if the private bank or private banker provides the wrong advice, or on the backdrop of a decline in investments, the wealthy client will also be losing as much, or more.

Private Banking Fees / Revenue:

  • For a client with $300 million, a private bank can earn fees of 0.5% to 2% a year, which is around $1.5 million to $6 million.  
  • For a client with $30 million, a private bank earn fees of $150,000 or $600,000 a year.  
  • For a client with $3 million, a private bank earn fees of $15,000 or $60,000 a year.  
  • However, with increasing competition & cost of client acquisition, private bank can be losing money or earning fees as low as 0.25% to 0.5% a year.  

” Private banks target at high net worth (HNW) clients, typically with $2 million & above (USD) “

 

What is the minimum sum to setup a private bank account?

The World of Billionaires

For most private banks, the minimum sum to setup a private bank account is between $2 million to $5 million.

Increasingly, private banks are setting higher minimum sum requirement.  Before 2010, $1 million (USD) is typically enough to setup a private bank account.  With massive wealth growth and increasing population with $1 million to $10 million, private banks are not able to offer the same private bank services to High Net Worth (HNW) clients with $1 million, alongside the time required to develop private bankers. 

” minimum sum to setup a private bank account is between $2 million to $5 million “

 

How many clients does a Private Banker manage?  What is the book size of a Private Banker?

On average, a private banker manages 20 to 30 clients with junior private bankers managing 30 to 50 clients.  The top private bankers manage 1 to 10 clients, with some of their clients with personal assets of $300 million, $1 billion, $10 billion or more.

Private bankers typically manage $100 million to $300 million. Junior private bankers manage book size of $50 million to $100 million.  Senior private bankers manage $300 million to $1 billion.  The top private bankers manage $500 million to $10 billion or more.

  • Private bankers manage $100 million to $300 million.
  • Junior private bankers manage $50 million to $100 million.
  • Senior private bankers manage $300 million to $1 billion.
  • Top private bankers manage $500 million to $10 billion or more.

Book size is the total assets of all clients managed by a private banker.  This term is also commonly used alongside portfolio size or AUM (Assets under Management). 

The quality of assets in important in the book for a private bank / private banker.  If a client places all $500 million in a deposit in the private bank and does not use any wealth or investment service, then the private banker or private bank will have little-value add to client, and thus generate low fees (revenue).  The fees generated by the private bank will then be the deposit-spread between deposits and loans (Eg. 3% deposit rate for 1 year, 3.5% loan rate for 1 year – Revenue generated is 0.5% if the transaction is in-house within private bank.  If trading desk is a separate unit, the 0.5% fee will be reduced as the trading desk takes a cut of the spread.  If the deposit is loaned out of the private bank in the interbank market, then the fee may be further reduced.  This also depends on the demand / supply, and thus the bid/offer spread.

So if you are a client only placing $5 million deposits, the private bank will be earning less fees.  But if you are an influential client who brings profile to the private bank, provide business opportunities to the private bank, or is a commercial client of a different business unit in the banking group, you are / may still be important to the private banker or private bank.

” Private bankers typically manage $100 million to $300 million “

 

How long does it take to open a private bank account?

It typically takes 2 – 3 weeks to open a private bank account if you are a local (Hong Kong, Singapore), and takes longer if you are a foreigner.  It also can take longer from 4 – 6 weeks, and in some cases, it can take a few months to more than 1 year.

The main reasons for the long timeline required to open a private bank account (despite technology advancement) is due to increased in private banking account opening volume (surge in wealth, internal processes & approval required, (additional) documents to be provided by clients, and background assessment (Know-Your-Client, verifying source of funds, beneficial owners, lawsuits, negative public relations, fraud, politically-exposed-personnel, related families & entities, compliance with global regulations).  As HNW clients are very busy and the volume of new account private banks have to handle, the process & timeline are often extended. 

  • Increased in private banking account opening volume
  • Documents to be provided by clients
  • Background Assessment

Do you know: Every year, most private banks conduct an annual review on the account to determine if the account can continue in the private bank.  This can be due to business or regulatory reasons, and are often undisclosed to clients.  Failure to conduct checks on private bank accounts and clients can also result in breaching of regulatory requirements, resulting in warning or fines.

Do you know: Goldman Sachs

Booking Centre: Some private banks allow clients to select booking centre, for example in Hong Kong, Singapore, Zurich, Dubai, London & New York or the private bank home country.  Booking centre provides secrecy to account holders, and for legal or tax reasons.

” Private bank account opening can take longer from 4 – 6 weeks, and in some cases, it can take a few months to more than 1 year “

 

What are the most common services for private banking clients?

Private Banker on the Phone

The most common services for private banking clients are a private banking account, a dedicated private banker, investment services (deposits, stocks, bonds, funds, foreign exchange, structured products), access to wealth & investment expertise, and a custodian account which means the private banking can hold (in custody / trust) your stocks, bonds & funds worldwide without you needing to setup a securities account in every jurisdiction. 

  • Private banking account
  • Dedicated private banker
  • Investment services (deposits, stocks, bonds, funds, foreign exchange, structured products)
  • Access to wealth & investment expertise
  • Custodian account (in custody or trust of your stocks, bonds & funds worldwide
  • Integrated portfolio management
  • Loans (properties, unsecured loans at near-market pricing),
  • Wealth & insurance planning (cashflow, liquidity, estate, tax, legal, risks including business or key-man)
  • Offshore company setup

The investment services & custodian account naturally forms an integrated portfolio management, in which you can also setup a discretionary portfolio (Eg. assign $5 million, $10 million or $100 million to the private bank) for the private bank to manage for you without you needing to make any investment decisions (delegation).  Many private banks also provide investment services near-to 24/7 access (European, American trading hours), risk management or trading instruments including options, futures & structured products, and new bond issues or pre-IPO (Initial Public Offerings)

Other common private banking services including loans (properties, unsecured loans at near-market pricing), wealth & insurance planning (cashflow, liquidity, estate, tax, legal, risks including business or key-man), offshore company setup (investment holding company, eg. BVI, Cayman).  

” private banking account, a dedicated private banker, investment services, access to wealth & investment expertise, and a custodian account “

 

What are the new products or products in-demand in private banking?

The new & in-demand products & topics are Private Markets & Alternatives, Family Offices, EAM / IAM / MFO, Success Planning, Estate Planning, Next-Generation. More hot private banking products & topics are Philanthropy, Endowment, Charity & Foundations, ESG & Sustainable Investments, Property / Real Estate, Tax & Legal.

  • Private Markets & Alternatives
  • Family Offices
  • EAM / IAM / MFO
  • Success Planning, Estate Planning, Next-Generation
  • Philanthropy
  • Endowment, Charity & Foundations
  • ESG & Sustainable Investments
  • Property / Real Estate
  • Tax & Legal

” Private Markets & Alternatives, Family Offices, EAM / IAM / MFO, Success Planning, Estate Planning, Next-Generation “

A) Private Markets & Alternatives are getting popular as investors are attracted to the next Google, Facebook, Alibaba, Spotify, Tesla.   With more sophisticated private banking clients, private banks are offering private market investments.  Private markets investments include Private Equity, Venture Capital, Private Credit, Business Investments, Direct Deals, Distressed Assets – all these formed part of Alternatives (non-traditional asset class), including Hedge Funds, Real Estate & more.  As Private Markets & Alternatives are often quoted as having less or zero correlation to public markets, and can generate returns of 10%, 20%, 30% or higher, this is appealing to HNW clients, who can invest in the minimum ticket size.  Common minimum ticket size are $100k, $250k, $500k, $1 million, $5 million or $10 million.  Selected private banks are also offering digital assets.  

B) Family Office is a fast growing segment, for billionaires and UHNW clients. With increasing population size of UHNWs & sophisticated clients, clients are also setting up family office earlier with $20 million to $100 million.  Before 2010, a family office needs to have $300 million or more to be categorised as a single family office.   Traditionally, institutional investments also require a minimum ticket size of $10 million and holding period of 7 to 10 years or more.  Only large family offices have the deployment ability ($10 million) and can hold the investment for more than 7 to 10 years.  There were also fewer family office professionals alongside expensive family office professional services, with the operating cost of a small family office estimated at around $2 million to $5 million a year (AUM $300 million).  

Family Office with $20 million to $100 million – Today, with more trained family office professionals, lower cost of operating a family office, and more family office services available, family offices can setup with $20 million to $100 million.  The minimum ticket size for private market investments (eg. private equity) has changed to $500k, $1 million or $5 million for some investments, and clients are able to buy & sell private market investments in the growing secondaries market and may no longer need to hold for 7 to 10 years or more.   

Private banks are also targeting at entrepreneurs, senior executives and next-generation who may only have $20 million today to setup family office, but may receive $100 million or $1 billion in the future.  As one key basic foundation of a family office is trust & relationship, private banks wants to build trust & relationship with the client early, and support them in their wealth, investment &/or business journey. 

 

C) EAM / IAM / MFO – External Asset Manager (EAM), Independent Asset Management (IAM), Multi-Family Office (MFO) is a fast growing segment, with ex-investment bankers, ex-fund managers, ex-private bankers, wealth managers and even family offices setting up or evolving into EAM, IAM, MFO.  EAM, IAM & MFO uses external platforms including private banking platform (eg. as a custodian bank, investment or wealth services) to manage assets for clients.  Instead of using only 1 private bank to manage assets, they can utilise a few private banks and integrate relevant services to manage the assets or advise their clients.  This approach is allows EAM / IAM / MFO to select the appropriate services most relevant to clients.  Similarly, private banks also integrate investments & wealth services from external providers, and select the appropriate services most relevant to clients.

Typically, clients in EAM, IAM or MFO follows the private banker or advisor to join the EAM, IAM or MFO, as these are lesser known names or brands.  Existing trust & relationship is a key reason why they would setup the account with the EAM, IAM or MFO.

 

D) Success Planning, Estate Planning, Next-Generation – In Asia, with much of the 1st large & sizeable population of HNWs entering into their 60s, 70s & 80s, the wealth transfer has began with not just properties, investment portfolio, valuable assets & businesses, but also the wisdom of managing wealth.

Succession Planning, Estate Planning for Next-Generation have become important issues for the growing HNW population with access to vast amount of wealth & investment opportunities, and including opportunities through social media (get-rich-scheme, investment fraud, ill-advise, businesses).  There are also common wealth issues including family conflicts, divorce, remarriage, no-descendants & lawsuits.  Many of the largest fraud comes from the HNW network, and often from their most trusted friends or advisors.  In Asia, the saying goes: “Wealth does not last 3 generation.”

More Hot Private Banking Topics / Products:

  • Philanthropy
  • Endowment, Charity & Foundations
  • ESG & Sustainable Investments
  • Property / Real Estate
  • Tax & Legal

” Many of the largest fraud comes from the HNW network, and often from their most trusted friends or advisors “

 

What are the common misconceptions of private banking for HNW clients?

Private Jet

Can you fully entrust your assets and rely on Private Banks? Can Private Banks help you to avoid tax, hide money, launder-money?  Are Private Banks owned by governments?  Do you get better pricing through private banks?  Do you get superior returns?  Can you trust your private banks? Is private banking for every HNW client? Wee

The Top 20 Common Misconceptions of Private Banking for HNW Clients:

  1. Private Banks provide access to Basic & Premium banking services
  2. Private Banks only serve HNW clients
  3. All Private Banks provide Concierge services
  4. Private Banks are Government owned-banks
  5. Private Banks are owned by banking group
  6. Private Banks are Independent of politics
  7. Private Banks can help you to avoid tax, hide money, launder-money
  8. Private Banks provide 24/7 Access
  9. Private Banks gives better pricing
  10. Private Banks gives you Priority access (Wealth, Importance, Revenue)
  11. Private Banks manage your wealth for generations
  12. Private Banks are loyal to you
  13. Your relationship is important to the Private bank
  14. Your relationship is important to the Private banker
  15. Private Banks Advice are accurate
  16. Private Banks provide Superior returns
  17. Your investment return is their KPI
  18. Private Banks will reimburse for errors, investment losses, fraud
  19. All HNW clients have Private Banks
  20. Private Banks can be trusted

 

More:

List of Private Banks in Singapore:

 




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