Private banking refers to a suite of services offered by a bank to high net worth individuals, designed mainly to attract investments, tax management, and maintenance of their wealth for a fee. 

Unlike mass-market retail banking, private banking focuses on providing more personalized financial services to its clients by assigning a relationship manager specifically dedicated to providing individual assistance.

Banks provide their private banking clients with proprietary products that they keep confidential to prevent competitors from selling similar products.

A bank may also offer discounted services to high net worth individuals as a reward for the large volume of business they bring to the Bank.

Banks often allocate their best-performing personnel to their private banking division.

Typically, thresholds of private banking services are based on the number of assets under management.

Private Banking also services need-based specific products or services like real estate management, closely held company oversight, and money management. The fees charged are ordinarily based on asset thresholds and the use of specific products and services.

Private banking refers to a suite of services offered by a bank to high net worth individuals, designed mainly to attract investments, tax management, and maintenance of their wealth for a fee. 

Unlike mass-market retail banking, private banking focuses on providing more personalized financial services to its clients by assigning a relationship manager specifically dedicated to providing individual assistance.

Banks provide their private banking clients with proprietary products that they keep confidential to prevent competitors from selling similar products.

A bank may also offer discounted services to high net worth individuals as a reward for the large volume of business they bring to the Bank.

Banks often allocate their best-performing personnel to their private banking division.

Typically, thresholds of private banking services are based on the number of assets under management.

Private Banking also services need-based specific products or services like real estate management, closely held company oversight, and money management. The fees charged are ordinarily based on asset thresholds and the use of specific products and services.

Private Banking Products and Services

Let's go further and list some products and services offered in a private banking relationship. 

1. Cash Management Services 

 - checking accounts, overdraft privileges, cash sweeps, and bill-paying services. 

2. Funds transfers or wire transfer services.

3. Asset management services. 

 - trust, investment advisory, investment management, and custodial and brokerage services. 

4. The facilitation of shell companies and offshore entity services.

 - Private Investment Companies, International business corporations, and trusts. 

5. Lending services

- mortgage loans, credit cards, personal loans, and letters of credit.

6. Financial planning services, including tax and estate planning.

7. Custody services. 

Going ahead, let us now understand the fee structure of Private Banking. 

Different banks charge their clients in different ways. 

Individual banks depend on the commissions they get by distributing third-party products. Other banks charge a fixed fee for certain products and an advisory fee for the rest. 

Some of the other banks are advisory-driven and charge the clients a percentage of Assets Under Management or A.U.M.

In the case of Custody Services, a Private Bank may charge 5% of the entire A.U.M.

Private Banking Customers Eligibility

For most banks, the minimum amount starts with $1 million. 

However, individual global banks require an average daily balance of $250,000 or more to be maintained in their accounts with the Bank. 

You should and must know that Complex corporate structures such as Private investment companies and other vehicles exist in private banking accounts. 

Hence, Financial institutions have to place stringent policies and procedures for additional CDD for such structures. 

Handling customer requests of private banking is another challenge faced by financial institutions. Financial institutions must establish the authenticity of all private banking customer instructions before acting on them.

Authentication should be performed by parties independent of the front office against the institution's official records. Financial institutions' authentication procedures typically entail the verification of customers' signatures by independent parties.

Call-back procedures are also generally performed by parties independent of the front office, using customers' contact numbers maintained in the financial institution's official records. 

Money Laundering Risks of Private Banking

 1. The customized services provided via private banking include high-value transactions, use of sophisticated products (such as structured products), services that help to conduct business across different jurisdictions, especially offshore and overseas companies, trusts, creation of personal investment vehicles, etc., are all conceived to be mediums of money laundering. 

2. International banking services have spread across even to jurisdictions with weak money laundering controls; hence, the origins of wealthy clients are challenging to verify, giving ample opportunities to money-launderers in a way. 

3. The close relationship that private banks aim to have with their clients enables criminals to launder money themselves by understanding the financial system's loopholes. 

4. Since Private banking services are privatized in nature, the banks may lack means of monitoring customer transactions, including a robust independent process for querying and investigating unusual activity on accounts leading to more money laundering. 

5. The significant amount of money that Relationship Managers earn due to maintenance of the high net worth individual's investment's commission, it is quite likely that they will report any wrongdoing of their clients knowing that they are also part of the crime and indirectly laundering money for their clients.

6. During initial due diligence or periodic review of Private Bank clients, usually some essential aspects of questions either get missed or mislead by Relationship Managers or an exception is approved because the client is bringing huge investments hence, encouraging Money Laundering indirectly. 

7. Private banking takes reliance on introductions, such as clients who were introduced to the Bank by known professional advisors in that country. Complete enhanced due diligence is likely either missed, or the clientele relationship itself is either considered medium or low.

8. Relationship Managers usually justify all the clientele' transactions knowing the Bank's loopholes, resulting in low volumes or nil suspicious activity reports being reported encouraging money laundering. 

One of the best ways to describe a private banker's job is that they service wealthy clients and suggest creative ways they can make more money. 

How and when to establish a private banking relationship?

Private banking is wealth management. 

The two terms, private banking and wealth management, are used interchangeably.

Typically, this means an account with at least $250,000 deposited, with the desire for more personalized service.

This can include a dedicated account manager, advisory services, asset management, and much more.

In other words, the client's money is invested and managed by the Bank, depending on where you bank and how much money you have.

A private bank account can also include more customized solutions, such as financing for real estate, aircraft, or yachts tax planning services and estate planning to manage your generational wealth.

If you want a premium account at a retail bank, you'll need to deposit a minimum of anywhere from $100,000 to $200,000.

How to open a private bank account.

There are three main questions that you need to answer:

- how much are you planning to deposit?

- what private banking services do you want?

- are there any specific goals that you want to achieve?

After you have your answers sorted out, then you need to identify which banks match your requirements and which ones will accept you.

To do this, you'll need to spend time reviewing each Bank's product and service offerings, detailed fee structures, talk to bankers to find out what account opening requirements and nuances are.

Closely listen for what is negotiable and what is not, and through it, all try to find an experienced banker that you can trust.

You'll also need to pay attention out to crazy fees, harmful products, and account limitations. 

After you have all that figured out, then you're ready to pull the trigger and open a private bank account.

Dokalink's Private Banking category provides you access to over 100 banks that offer private banking; these include banks from traditional private banking hubs like Switzerland, Lichtenstein, and Austria, more accessible but still respectable private banking hubs like Andorra, plus you can find world-class private banks in places like the UAE and Singapore.

If you're looking to open a private bank account, you probably don't want to waste time traveling to open the account. Lucky for you, there are plenty of remote account opening options available for private banking.

You need to know where to look and have the right information. Even a bank insists that you must have an in-person meeting.

Individual banks will travel to the sea, so long as you deposit enough money, usually around a few million. 

How much you're going to deposit today?

Most private banks expect their clients to deposit at least 250,000 or the equivalent in the local currency, but this would still be considered an entry-level deposit. This is much lower than what the exclusive top-tier private banks will require, is often $2,000,000 and up.

As mentioned, our Private Banking category showcases over 100 private banks with deposit ranges from $100,000 to $10,000,000.

Remember, $100,000 doesn't get you what it used to; in fact, a hundred-thousand-dollar deposit is more likely to get you a Premier Account, which is more like a Private Banking Light Account; It includes a lot of fancy marketing and a few special perks with a real substance you might not even have your banker.

At the other end of the spectrum, opening with more than $1,000,000 is a different story. You could expect personalized service, a dedicated account manager, wealth management services, and more at that level.

Recap

If you want to access the private banking world, expect to deposit at least $100,000, but if you can stretch that to about $250,000, you'll have way more options.

If you want to access larger private banks, you'll likely need to increase your deposit to

about $500,000 or $1,000,000, but regardless of how much you want to deposit or where you want to open, there are other considerations you should review as well.

Each private Bank will have different investment options, platforms, and fee structures. 

You'll have to sort through each and make sure they're a good fit.

What you want and need will depend on why you open the account in the first place.

So, make sure to do the necessary due-diligence beforehand.

The goal of private banking is to make you more money, not drown you in fees; 

Ready to take the next step?

Please browse through our Private Banks Category, take a look over their profile and websites, and reach out.