In term of definition, wealth management is a higher-levelprofessional service that includes financial and investment advice, accountingand tax services, retirement planning and legal or estate planning for only oneset fee.
While private banking is just a personalised financial and bankingservices that are offered high net worth individuals. However, there are slight differences between the servicesprovided by wealth management and private banking. Wealth management is a widercategory compared to private banking as it consists of making client’sportfolio to be as perfect as possible, considering what the client’s opposedto, or comfortable with, the amount/type of risk the client can take, andinvest client’s assets according to the client’s financial goals and plans thatthey want to achieve in the future. For private banking of a financialinstitution either private or government, it provides only one solution andonly requires one staff to provide personalised care and help manage high networth individuals’ finances. The Differences:Firstly, the approach.
Wealth manager people working inwealth management focus more on financial advice and concern in the depositingand withdrawal of funds, maintaining client’s asset for the client, conservingpart of client’s asset, strengthening of portfolio and transfer of wealth tothe future/next generation. He will discuss with the clients and begin to drawup a financial plan accordingly that will meet the needs of client family andthe required specialists for the plan to be achievable. Furthermore, wealthmanager will observe and check the progress of the client financial planfrequently with the clients to make the required adjustments to the plan.Private banking offers high net worth individuals with existing bank packagesthat only one staff in the financial institution will be involved.
Secondly, multiple choices versus one choice. Wealth managerbeing a company alone without being control by the government, able to offera customized service for its client and promote the different products fromdifferent institutions that meet the clients’ needs. Thus, the client will beable to make a decision on the different products that most suited theircurrent situation and needs. For security reason, it is often that client usesproducts from multiple institutions. While for private banking, the bank onlyoffers one product which they are working with.
Hence, for wealth management,the client will have more options to choose and decide for their needs but forprivate banking, clients do not have other option but the one offered by thebank.Thirdly, the investment strategy. Since wealth management isan independent company, it has more benefits of flexibility, reactivity andloyalty compared to private banking as it is governed by the government. Wealthmanagement only acts for the best interest of its client since they areindependent in the choice of the underlying assets such as stocks, futures, acommodity, a currency or an index on which derivative’s price is based thatare part of the client portfolio. Whereas private banking has lesser independentand transparency due to slower and heavier process. As the bank has rules andregulation from the government to follow. Furthermore,relationships with the clients.
For wealth management, it starts off withunderstanding the reality and the worries of the client to carry out the designand execute the plan that will accomplish client’s goals. Wealth manager willalways be focused on ensuring safety and peaceful life for the client and hisfamily. During the procedure, wealth manager will question and reflectsensitive issues to the clients that they are normally unaware of. Thisprocedure enhances the relationship between the clients and wealth managerforming a trusting relationship after long years of collaborations. As forprivate banking, the service that the bank offer, require lesser connection andunderstanding between the client and the staff and take up lesser time. Sincethe service are ‘packages’ that are adjusted to the level of risks the clientis willing to take either greater or lesser and the number of client’sassets.
In addition, the cost of the services. In wealth management,the client can modify the cost as he/she has a wider range of service andproviders such as banks, insurance companies and other more without having theworries of meeting up several entities. Since the wealth manager will representthe clients to meet up several entities that will help to achieve the client’sgoal. The clients need to choose from a range of products from differentfinancial institutions since the cost of the product from different financialinstitutions differ. The client will be able to choose a service or productthat he/she is affordable and comfortable with.
Furthermore, the client couldenjoy the service that is provided by the asset manager that helps to discusssettlement, while for private banking it doesn’t. For the client in privatebanking, they are not able to optimize the cost of services as they are onlyoffered with one service. Finally, the main difference between wealth management andprivate banking is that private banking does not always offer the services ofinvesting client’s asset while wealth management does. Wealth management staffincludes financial advisors that will help the client to improve their financialposition by giving advice/suggestions.
Furthermore, financial advisors alsohelp the client in investing assets that will be able to generate high returns.While private banking can guide the client to some possible investment options.However, not all banks involved in helping the client to invest their assets.Those high net worth individuals that use private banking normally open adeposit account or others.
In conclusion, wealth management does not always offer thesame services provided by the private banking such as opening a bank accountfor the client. However, the wealth manager can advise which kind of bankaccounts to be open at the bank that is suitable for the client. Furthermore,wealth management spends more time with the client to discuss client’s worriesand plan on his assets. While private banking only helps the client inprotecting and helping client’s increasing assets and save and plan forretirement and passing wealth to the future generation. In addition, not allindividuals can enjoy the services for private banking, they must have $50,000or less in investable assets or some exclusive bank that only accepts theclient that have at least $500,000 worth of investable assets.