Merrill Lynch reports that the 3.1 million high net worth individuals in the United States make up 28.6% of the global high net worth individuals across the world.
This gives the US one of the largest private banking systems on Earth.
But what is private banking? Read on for the ins and outs of this sector.
What Is Private Banking?
A private bank looks after the finances of the wealthy.
The bank used by the individual ordinarily assigns a private banker who caters to that individual’s monetary needs.
The customer has a checking and/or a savings account with the private bank in question. These cater to the sizeable wealth of the account holder by offering higher banking limits.
This suits the account holder, who has a high level of income or who owns sizable assets. Often these individuals contribute greatly to the mass affluent market as well.
If you are a customer of a private bank, you are likely in the more elite sector of those with a higher degree of wealth.
The service is known as ‘private’ banking thanks to its exclusivity. The relationship with a private banker is more personal and tailored than, say, wealth management, which focuses more on portfolios, investments, tax and insurance matters, trusts, and estates.
Private banking looks more at overall banking services, brokerage, and concierge-type services.
The top private banks will even be eligible for banking awards.
How Do You Know if You’re Eligible for Private Banking?
The starting point as to whether you can become a private banking customer is usually whether you have an adequate opening balance for a checking or savings account.
Whether this is the monetary deposit required to open an account or a certain level of investments, retirement arrangements, or investable assets, this will be a prerequisite to a private bank.
The minimum amount often starts at $1 million, but this varies. It may be less if you are investing with other assets on top of money.
Some private banks may also make an exception if they see growth potential within an applicant.
If, for example, High Net Worth Individuals want to open up a private banking account for their children, the bank will likely allow them to do so, despite it not being the child’s money.
Banks look to the future of the money being handled and will want to keep themselves in a firm position to manage that family’s money going forward. The child will therefore likely remain with that institution when they become adults themselves.
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