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“Wealth management” and “private banking” are terms that tend to overlap each other. With that in mind, the financial services received through wealth management and private banking are slightly different.
Private banking is a term that normally refers to a solution for high net worth individuals. Wealth management on the other hand refers to the optimization of a client’s portfolio and investing their financial assets in line with their goals and plans.
What is Private Banking?
Generally, it involves financial institutions which offer financial management services to high net worth individuals (HNWIs). Private banking is typically exclusive and reserved for clientele with large amounts of cash or other assets that can be deposited and invested.
Why Do Banks Offer Private Banking?
All these benefits are part of the banking institution’s plan to benefit financially. Some of the reasons banks pursue wealthy clients are because their business generates large sums of money in profit for the bank, guarantees repeat business and can bring in new business for them.
Pursuing Private Banking Clients
Ultra-wealthy private banking clients sometimes discuss the specialized treatment they receive with other wealthy people making these people new potential clients. When these new potential clients are mentioned to private banking divisions, the banking divisions can send out invitations to potential clients with the goal to acquire their accounts.
Private banking divisions continue to find new clientele through the process of daily lending activities. The banks can access personal documents and tax returns to discover new potential clients using this information. Invitations can be offered to these individuals and often private banking divisions gain clients by doing so.
What Does Wealth Management Involve?
Private wealth management normally involves giving advice and executing investments on behalf of clients. Wealth management advisors also assist with financial planning and perform a wide variety of other financial services in relation to a client’s private financial decisions.
Private wealth management services are offered by larger financial institutions, but they may also be offered by smaller, independent financial advisors that are multi-licensed to offer varying services and who focus on high net worth clients.
What Can and Can’t a Wealth Management Advisor Do?
They can sit down with clients one-on-one and discuss goals, comfort levels with risk and any other restrictions clients might have with the investment of their assets. The wealth management advisor will then create an investment strategy that will incorporate all information from the client to help the client reach their goals.
Wealth management advisors cannot always provide clients the same specialized service that private banking will provide them. In most cases, though, they will spend just as much time with their clients. These advisors also cannot open banking accounts for clients, but they can assist them in choosing the right type of accounts to open.
The Bottom Line
The main difference between wealth management and private banking is that investing is not always involved in private banking. Private bank staff may offer their customers guidance on some investment options, but not all banks are involved in the actual process of investing assets. Most clients that are using private banking services open deposit accounts of one kind or another.
Wealth management employees provide advice to clients to help them improve their financial standing and help customers invest assets with the goal of generating high returns.
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Soutas Financial & Insurance Solutions, Inc. are not affiliated companies.
Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 12/21 – 1143616