Private banking was an original method of banking, dating back to the first banks in Venice in the 12th century, which were focused on managing the personal finance of contemporary wealthy families. Private banking became known as “private” as a result of the emergence of retail banking aimed at the new middle class. Private bankers was a family business, and were most credited for working with the families of the wealth and power. Families of great wealth and prestige would usually stay with one private bank/banker family-line for several generations.
In todays world, Private banking is financial services including banking and investment, provided by high-net-worth individuals with high-levels of income and substantial assets. Private banking is not associated with a “private bank”, which are a non-incorporated banking institution.
The word “Private” refers to the level of personal involvement in customer service, as opposed to mass-mart retail banking, usually at the hands of bank advisers.
Until recently, private banking mainly consisted of banking services (deposit taking and payments), discretionary asset management, brokerage, limited tax advisory services and some basic concierge-type services, offered by a single designated relationship manager. It is the case now that private banking forms a more exclusive division of wealth management.
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What do private bankers do?
Private bankers are normally employed with a large financial organisation, while wealth managers and finical advisors work outside the banking environment.
At the heart of what a private banker does is managing their clients’ financial assets and investments. As mentioned previously, there is an importance placed on maintain a strong and close relationship between the banker and the client.
With a client, private bankers first begin by managing and evaluating the clients financial circumstances and current financial position. This is approached by considering the clients total assets such as:
- Business interests
- Bank balances
- Value of investment portfolio
The banker also account for the clients personal debt obligations and financial goals.
The next step for a private banker after gathering and evaluating this information, is to make recommendations based on this information on how the client can successfully and efficiently achieve their objectives.
It is common for those of high-net-worth-income to need to reduce their tax obligations. Further suggestions are made by private bankers regarding short-term and long-term tax efficient investments. Private bankers often suggest their clients consider the finical benefits of philanthropy, usually sourcing charities which ensure donation would in fact provide a deduction in tax.
Typically, to become a private banker you are required to have at least a bachelor’s degree in a subject like finance, business, law or accounting. Often, higher-education at Masters level is preferred for finical institutions with a larger cliental with high-net-worth-income, in the same fields as those listed previously.