What Is Private Banking? (2024)

Definition and Examples of Private Banking

Private banking consists of exclusive benefits and perks available to wealthy clients at a bank—which may be either a private bank or a private banking division at a large retail bank.

High-new-worth clients can be individuals, business owners, or foundations. The range of services available to them generally include the following:

A dedicated client support team
Personalized banking services
Preferred interest rates on bank accounts and loans
Higher limits on online transfers, payments, and ATM withdrawals
Pricing discounts on foreign currency purchases
Special financing for homes, commercial real estate, art, aircrafts, sports, and events
Customized credit solutions
Investment management
Treasury management
Tax planning
Custody services
Advisory services for law firms and family offices
Trust and wealth planning
Philanthropic giving and grantmaking

For example, if you have at least $1,000,000 across all deposit, retirement, and investment accounts at Citibank, you’re considered a Citigold Private Client. This status gets you a dedicated wealth advisor and a relationship manager, as well as 24/7 support, waived bank account fees, advanced wealth planning, and even special access to concerts and global Citigold lounges when you travel.

How Private Banking Works

Think of private banking as a courtship. Banks want their wealthiest clients to stay with them so they grow their AUM (assets under management) and make more money. In return, the banks focus on deepening relationships with these clients by showering them with special perks, discounts, and tools to help these clients streamline their rather complex wealth.

While the average person may have a simple checking or savings account with their bank, it’s an entirely different story when wealthy clients bank. These people may have a dedicated account manager (or team of managers) who are intimately familiar with their accounts, personal situation, and overall financial picture. This person acts as the client’s liaison, helping them facilitate bank account transactions and whichever wealth management services they need.

Note

If you already have a team of financial professionals in place, your account manager will even work with them to make managing your wealth as seamless as possible.

Requirements for Private Banking

Each institution has its own minimum requirements for private banking. You’ll find that large institutions typically have tiered services, where more money gets you access to more luxurious perks.

For example, J.P. Morgan Chase & Co. has a couple of private banking tiers. Its most basic tier is Chase Private Client and is reserved for clients with at least $150,000 in account balances and investable assets at Chase.

Clients with at least $10 million in assets can become J.P. Morgan private bank customers. Its wealthy clients enjoy custom financial planning, goals-based investing and advice, cross-border wealth advisory, and more.

Note

The 2020 Euromoney Private Banking and Wealth Management Survey named J.P. Morgan Private Bank the best private bank for ultra-high-net-worth clients (those with $30 million to $250 million in assets) and mega-high-net-worth clients (those with more than $250 million in assets).

Pros and Cons of Private Banking

Pros

All your financial services under one roof
Dedicated account manager
Special benefits and perks

Cons

Account managers come and go
Potential for higher fees
Watch out for conflicts of interest

Pros Explained

All your financial services under one roof: With private banking, your bank becomes a “one stop shop” for all your financial needs. And if you already have a team of financial professionals you know and trust, your bank will work with them, too.
Dedicated account manager: Say goodbye to spending hours on the phone with customer service or chatting with a different teller every time you pop by your local branch. With private banking, you have direct access to an account manager who’s intimately familiar with your situation.
Special perks and benefits: As a private banking client, you’ll enjoy priority customer service, higher interest rates on deposits, lower interest rates on loans, higher transfer limits, custom lending solutions, and more.

Cons Explained

Account managers come and go: A 2017 study on work-related stress in the banking sector found that employees in the private banking sector have higher levels of stress relative to other sectors. If your account manager decides to leave, you may end up having to choose between getting a new manager at your current bank or following your old one to their new place of employment.
Potential for higher fees: You could pay more for private banking services—or lose them altogether—if you no longer meet the minimum requirements. For example, Chase Private Client charges a $35 monthly fee if your balance dips below $150,000. You could also pay more for wealth management fees, so it’s important to shop around before you make any commitments.
Watch out for conflicts of interest: At the end of the day, your account manager or assigned advisor is employed by the bank—not you. As such, they may be obligated to push proprietary products or meet certain quotas (even if it’s not in your best interest).

Private Banking vs. Wealth Management

If private banking is a whole pie, think of wealth management as a slice of that pie. It makes up a portion of the services offered under a bank’s private banking division, but it’s not everything.

Wealth management solutions typically consist of big-picture, wealth-related offerings such as investment management, portfolio analysis, tax planning, and estate planning.

Private banking consists of these perks, too, but it’s also made up of day-to-day banking perks, such as special interest rates on checking and savings accounts, discounts on loans, bill pay services, and more.

Private Banking	Wealth Management
Typically only offered by a bank	Can be offered by a bank, brokerage firm, wealth management firm, or another institution
Includes wealth management services as well as other day-to-day banking perks and benefits	Doesn’t include day-to-day banking perks and benefits

Key Takeaways

Banks offer private banking services to high-net-worth clients looking to manage all aspects of their wealth under one roof.
Private banking includes personalized banking services such as a dedicated account manager, higher transfer limits, and preferred interest rates, as well as wealth management solutions such as estate planning, philanthropic giving, and investment management.
Private banking may be worth it if you’re a high-net-worth client who would benefit from the range of offered services.
The minimum requirements needed to qualify for private banking varies by institution: Some may require six figures in assets while others may require a net worth of $1 million or more.

See Also

Private Equity Group

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

Citi. "Citigold Private Client: A Wealth of Opportunity." Accessed Aug 16, 2021.
Chase Private Client. "Upgrade Your Banking and Your Expectations." Accessed Aug. 16, 2021.
ABA Journal. "JPMorgan Decision on Minimum Level of Assets for Premium Service Hits Lawyers Hard." Accessed Aug. 16, 2021.
Euromoney. "Private Banking and Wealth Management Survey 2020: Domestic Results U." Accessed Aug. 16, 2021.
TD Bank. "TD Wealth Private Client Group." Accessed Aug. 16, 2021.
NCBI. "Work-Related Stress in the Banking Sector: A Review of Incidence, Correlated Factors, and Major Consequences." Accessed Aug. 16, 2021.
Chase Private Client. "Get More From a Personalized Relationship." Accessed Aug. 16, 2021.

I'm a seasoned financial expert with a wealth of knowledge and hands-on experience in the field of private banking and wealth management. My expertise is grounded in years of working closely with high-net-worth individuals, businesses, and foundations, providing tailored financial solutions and navigating the intricacies of the private banking landscape.

The concept of private banking revolves around offering exclusive benefits and perks to affluent clients, whether at a private bank or within a dedicated division of a large retail bank. These clients, often individuals, business owners, or foundations, gain access to a range of services tailored to their unique financial needs. These services encompass personalized banking, preferred interest rates, higher transaction limits, and specialized financing options for various assets such as real estate, art, and aircraft.

Private banking operates like a courtship, where financial institutions aim to retain their wealthiest clients by deepening relationships through special perks and tools. This involves assigning dedicated account managers or teams who intimately understand the client's financial situation and facilitate seamless transactions. Private banking requirements vary between institutions, with tiered services based on the amount of assets held by the client.

For instance, J.P. Morgan Chase & Co. offers different tiers, such as Chase Private Client and J.P. Morgan private bank customers, each with its own minimum asset requirements. Similarly, TD Bank has its TD Wealth Private Client Group, requiring a minimum of $750,000 in investable assets for eligibility.

Private banking comes with its pros and cons. On the positive side, clients enjoy having all their financial services under one roof, a dedicated account manager, and special benefits. However, potential downsides include the turnover of account managers, the possibility of higher fees, and the need to be cautious about conflicts of interest.

It's crucial to distinguish private banking from wealth management, as the former encompasses day-to-day banking perks in addition to wealth management services. Wealth management, on the other hand, focuses more on big-picture offerings such as investment management, portfolio analysis, tax planning, and estate planning.

In conclusion, private banking is a comprehensive financial solution for high-net-worth clients seeking to manage various aspects of their wealth within a single institution. The decision to opt for private banking depends on individual financial needs and the specific offerings of each institution, with minimum requirements varying across the industry.