Two terms can be used interchangeably: private banking and wealth management. Private banking and wealth management offer different financial services. Wealth management, which is a larger category, involves optimizing a client's portfolio, considering their aversion or comfort level with risk, and then investing financial assets to their plans and goals. Although wealth management can be applied to any portfolio, it is best suited for those with large assets.

Private banking is, in contrast, a solution for high-net-worth individuals. It involves a private or public financial institution that employs staff members to provide personalized management and care to high-net-worth clients.

Private Banking

Private banking is a financial institution that provides financial management services for HNWIs. Although an individual might be eligible for these services in certain cases, assets below $100,000 may not be enough to qualify. Most private banks set a minimum of six figures as the benchmark. Private banking is reserved for clients with substantial cash or other assets that can be deposited into accounts or invested.

Private banking offers investment advice and is designed to address clients' financial issues. Clients often use private banking services to protect and maintain their assets. Designated employees provide individualized financing solutions to assist each client. They also assist clients in planning and saving for retirement and arranging plans to pass accumulated wealth on to the family or other beneficiaries.

Private Banking Perks

• Clients with large accounts receive excellent rates and concierge-like services, guaranteeing immediate access to their employees.
• Private banking clients don't have to wait in lines or use a bank teller to get services.
• Private banking clients can reach the account lead advisor to complete almost any transaction. This includes cashing checks and moving large amounts of money between accounts.

Private Banking Clients

The ultra-wealthy are the most prominent private banking clients. They discuss the elite and specialized treatment they receive along with other wealthy people. These potential clients are also new. These potential clients are often referred to as the private banking divisions of current clients.

Private banking divisions can also find new clients by completing regular lending activities. Banks can also access tax returns and other personal documents to find potential clients. These individuals are often invited to receive invitations, and, in some cases, private banking divisions can acquire clients.

When it comes to potential clients, banks have a limit on who can be pursued by them. This line is different for different institutions. The major target is the mass-affluent, individuals with more than $250,000. Some banks have a higher standard and target only people with investable assets over $250,000.

Private banking clients pay for the specialized services they receive. Wealthy clients can use the bank because they can access a pool of money. This is in the form of their large checking account balances. Rich clients also pay higher interest rates on larger mortgages and business loans. This bank makes money.

Assets Under Management and HNWIs

However, the actual moneymaker for these banks is the percentage gained on AUM, which is often relatively high with HNWIs because of the size of their portfolios. Even charging a relatively modest percentage charge for services with enormous amounts of money may bring in a significant amount of additional revenue for the bank. However, even the specialized treatment private banking divisions provide is not enough to conceal all negatives. The rate of employee turnover in banks is often rather high. A customer may have developed a rapport with an employee who managed his account.

Wealth Management

Private wealth management involves the execution of investments for wealthy clients. These firms are the best sources of clients who want to invest in stocks and funds. Wealth management advisors can also assist clients with financial planning and managing their portfolios. Large financial institutions like Goldman Sachs can offer private wealth management services. However, they can also be provided to clients by independent financial advisors and portfolio managers who are multi-licensed to offer multiple service options and focus on high-net-worth clients.

What Wealth Management Advisors Can and Cannot Do

Each client meets with a wealth management advisor to discuss his goals, risk tolerance, and other restrictions regarding the investment of their assets. To help the client reach his goals, the wealth management advisor creates an investment plan that includes all the information gathered from him. The advisor will continue to manage the client's money and use investment products that match the client's requirements.

Wealth management advisors cannot offer the same concierge-like service as private banks. These financial advisors usually spend a lot of time with clients. They cannot open bank accounts for clients but can help them determine the best type of bank account at the bank.