"The rich are different," F. Scott Fitzgerald wrote in his famous novel "The Great
Gatsby," about the fabulously rich of Long Island in the 1920s.
The banks think so, too. That's why the banks have special
services called private banking for their wealthier customers.
With the general increase in wealth, more and more people are becoming
millionaires and affluent enough to be of interest to the private
banks, whose number has grown significantly in recent years.
Many of the high street banks have established private banking arms to
cater for wealthy customers, referred to them by their retail
banking arms.
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There are at least 50 private banks in London. They include
divisions of high street names, and many others that most people
would never have heard of. All the high street banks offer private
banking facilities. Perhaps the best known of them is Coutts, now
part of Royal Bank of Scotland/NatWest group. RBS also owns the
private banks Adam & Co and Child Co. In addition, there are
numerous other banks, such as C. Hoare & Co, Duncan Lawrie, EFG
and Arbuthnot Latham, whose names you will never see over a branch
door in a provincial town centre. C. Hoare & Co. is the sole
survivor of the private deposit banks established in the 17th and
18th centuries.
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Normally you will need a minimum of £50,000 in disposable cash
to benefit from private banking. Some will ask for more to accept
you as a client. CitiGold Wealth Management is available to
customers who maintain a minimum average monthly balance of £50,000
(or currency equivalent) with Citibank, hold an investment with
Citibank, or an account with Citibank International Personal Bank.
Alternatively, CitiGold Wealth Management is available to
customers, regardless of balance, for a monthly fee of £25.
Kleinwort Benson Private Bank offers its deposit services to
private clients with more than £100,000 to invest. It also offers
investment management and access to structured products suitable
for the sophisticated investor, such as structured single property
investment projects. Owners of their own businesses can benefit
from the bank's Entrepreneurs Forums, which give clients the
opportunity to meet and share knowledge with fellow entrepreneurs,
and learn more about the issues that affect their businesses.
Barclays Private Bank requires a minimum of £500,000 (or
currency equivalent), deposited with the bank for management. In
return, in addition to normal services such as investment
management, it offers wealth structuring, including wealth
preservation services, fiduciary services, the establishment of
structures effective across different legal jurisdictions, the
setting up of trusts and foundations, and mortgages for property
purchase at home and overseas. At the other end of the scale, J. P.
Morgan Private Bank, which boasts that it advises more than 40 per
cent of the individuals on the Forbes Billionaires list and the
Forbes 400 Wealthiest Americans, serves people with at least £10m
in assets to invest, or a net worth of £25m. In short, if you need
to ask how much ready cash you need to become a private banking
client, then the service is possibly not for you.
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The words ?private banking? are redolent of old aristocratic
families discussing their inheritance with pinstriped bankers in
oak-panelled offices. In fact, today's private bank clients are
just as likely to be city whizz-kids banking their bonuses,
internet entrepreneurs, pop stars and footballers, as the scions of
wealthy families. Some private banks forge links with other
professional services companies, so they can offer mutually
beneficial services to clients. For instance, Cater Allen Private
Bank has a number of such arrangements, with accountants Grant
Thornton. Clients get attractive rate of interest, as well as easy
access to credit. They can also make purchases on a Visa deferred
debit card, which means they can earn up to 30 days' extra interest
on their money, with all purchases being debited on the same day
once a month.
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The main service is advice and wealth management. The days are
long gone when you could phone your high street bank manager for a
chat about your investments. Nowadays, you are more likely to be
routed to an overseas call centre, but as a private bank customer
you will normally be given an adviser, who can help you or find you
someone to give you a specialist who can.
This could include investment advice, particularly on overseas
investments, and help with setting up offshore accounts for
overseas transactions, or for tax benefits where they apply.
Private banks also provide access to specialist investments such as
private equity, hedge funds, currency funds and derivatives -
normally the reserve of institutional and sophisticated investors.
You will also obtain advice on compliance with international law,
such as money laundering and currency export regulations, where
these apply. In order to set themselves apart, some private banks,
such as Butterfield, offer you advice on esoteric investments, such
as racehorses, works of art, antiques, wine, bullion commodities
and foreign property purchase in exotic locations.
You will also be able to get advice on loans and mortgages,
including those on overseas property, and even boats and aircraft.
Having a relationship with a private bank will provide you with a
route to transactions that need approval from an overseas
regulatory authority &emdash; for instance, large transfers of
cash or artworks &emdash; which the bank should be able to
arrange for you. It should also be able to help with providing you
with credit references, for instance when raising credit in a
country where you have no previous credit history, or assist you
with other routes to raising cash that you need for a particular
transaction.
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While the popular image of private banking is off secretive
Swiss banks, modern compliance, tax and money laundering rules mean
that you can't be totally anonymous. However, you should receive a
significantly more personal standard of service, with a greater
degree of discretion than with a standard banking relationship.
Your dealings with your private banker should remain just that
&emdash; private.
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Find a name you trust &emdash; either because it is part of
a big international group with a reputation to lose if anything
goes wrong, or one recommended to you by someone whose opinion you
respect. You may do most of your transactions on the phone, but it
does make sense for your bank to occupy premises that you will be
able to visit easily, if need be. Have an initial meeting with the
person who will be your private banker, and test out the chemistry
&emdash; this is going to be a frequent and intimate
relationship. You need someone you get on with, trust, and who is
sympathetic to your needs and concerns. Naturally, review the
bank's range of services and its expertise. Does it offer a good
service in the areas you will want to use? Have a look at some of
its research and see if its investment record is successful.
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Expect to pay for the service you get. Private banks are
unsurprisingly not cheap, although you will find that the more
services you use with a private bank, the cheaper the service will
be, as discounts will apply if you use more than one service. Check
carefully how fees will be charged and if they will be cost
effective for you. Make sure that everything is included, and
satisfy yourself that you will be paying a fair price for the
services you are asking for. A spokesman for Royal Bank of Canada
Global Private Banking says: "For investment assets managed on a
discretionary basis, we charge fees based on the size of the
assets, while on an advisory basis, the fees are linked to
transactions."
"For trusts, charges are time-based, while on loans we would
charge a margin." When choosing a private bank, make sure you are
not paying for services you don't need. The advantage of a private
bank is that its wide range of services should be saving you money,
not costing you. If you don't need a full service, go for a bank
that lets you choose from a menu when calculating your fees.
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Last Edited March 2007