Private Banking Wealth Managment – Benefits and Limits

Private Banking Benefits and Limits It Provides

The effective management of the economic resources available and the search for profitability are the main objectives of anyone who has a capital that allows them to carry out various operations.

Deciding correctly is essential for the economic operation to bring benefits, and the intervention of private banks can be very valuable to achieve the objectives.

What is private banking?

Private banking consists of personalized financial products and services offered to individual high net worth clients of a retail bank or other financial institution.

It includes a wide range of wealth management services, all provided under one roof. Services include investment and portfolio management, tax services, insurance, and trust and estate planning.

Private banking is made up of a series of financial agents that carry out a function of intermediaries between clients, companies and the State itself.

Its mission is to offer a professionalized management service for the patrimony of the user who hires its services .

This is the most outstanding work they perform in private banking

Advice, in certain operations such as investments or wealth management, in addition to informing about all the tax regulations that its clients must adhere to.

The work process of private banking is marked by the previous analysis they carry out of the economic situation of their client, from this study they will obtain data such as their liquidity, the type of investor they are or the risks they can assume.

One of the obligations of private banking is to offer a personalized service, for this reason it will ask the client for all possible information about their financial situation.

The five tips of Private banking:

  1. Private banking consists of personalized financial and investment products and services.
  2. Private Banking is a High Net Worth Individual Client (HNWI) offering at a financial institution.
  3. Private banking clients generally receive discounts or preferential prices on financial products.
  4. An assigned “personal banker” coordinates all of the client’s financial activities.
  5. The range of investment products and expertise offered by a private bank may be limited or less advantageous than ‘external’ options.

Two types of private banking

Generally, the actions of private banking are focused on making the most of the client’s investments. The financial advisor usually takes the user’s capital as an asset from which a return can be obtained that also benefits the entity and himself.

The way a bank acts is identical to that of a conventional company, for this reason it seeks to differentiate itself from the competition and increase its offer with the aim of increasing its client portfolio.

This context has led to the creation of a new type of private banking called product banking.

The purpose of this service is to place profitable products focusing on the state of the financial market and commercial campaigns that may arise, leaving aside personalized treatment and customer interests.

Different styles for a counseling service

The type of culture that predominates in certain continents and countries influences the economic management carried out by its inhabitants.

This is also evident in the services offered by private banking, which vary depending on the client’s profile and their objectives.

The first way of operating is called the American style and is characterized by being more focused on the corporate user.

In other words, a client who has significant financial resources and who manages a medium or large company that moves significant amounts of capital and has built a track record that has earned it great prestige in its sector.

The US economy generates this type of clientele for private banks.

The most important cities of the country are full of great businessmen who are aware of the possibilities offered by the capitalist system and seek the best advice to increase their wealth.

The other style is Swiss-Spanish . In this modality, private banking offers a more measured and conservative advisory service seeking to reduce the level of risk of its clients as much as possible.

The goal is to satisfy your financial needs and grow your wealth while maintaining the premise that losing has to be the last option.

As is the case in the United States, the clients of the private banks that operate in Europe are people with high purchasing power.

The difference between one and the other is in the way of managing money. Although the capitalist system also prevails in Europe, the culture of the old continent is more conservative and this means that the user does not see with good eyes taking certain risks.

How private banking works

The ways in which private banks provide their services in each country are very similar, although there are features that differentiate them.

Its main characteristic is that it acts as if it were a personal bank, focusing on reinforcing the exclusivity factor.

Another feature of private banking is that the design and layout of the offices that offer this type of service are different from that of a conventional bank branch.

The objective is that the client of a certain bank or potential users can clearly distinguish them and know that in that place they will be provided a preferential and personalized service.

The purpose of private banking is to offer a product adapted to your needs.

This is the basis of the work process that begins when a person’s banking entity observes that their purchasing power has increased considerably, at this time it offers the private banking service through a first contact in which the bases of this new personalized service.

Once the client agrees to use the services of private banking, an advisor is assigned to carry out a study of their financial situation.

From here a direct and continuous contact is established

That the user informs about his objectives and preferences and the bank worker informs him about the real possibilities that he has to achieve them.

If the client’s ideas are feasible, he is advised on the steps to follow to obtain profitability, and if the advisor detects that the user’s strategy is not the most appropriate, he offers different alternatives that lead him to reduce risks and get closer to profits.

Contact and control are present in all parts of the process, in fact the client can call or write to his advisor at any time during working hours.

In addition, banks usually organize meetings from time to time to assess the state of the user’s finances and modify the strategy outlined if it is observed that there may be a setback.

Entities are always looking to make a profit.

For this reason, the operations carried out with clients’ capital are focused on investing in stocks and funds.

In addition, it is not strange that they offer the user to invest in products offered by the bank itself, in this way the money circulates within the entity itself, having a positive impact on the bank.

Although generally it is the entity that approaches the client, any user can request the services of private banking, although it will be the bank itself that after the financial analysis that it performs, decides whether to offer this service or recommend other options that are adapted to your purchasing power.

Reasons for hiring these services

If the client who is made with the services of the private bank meets the requirements established by the entity, he can enjoy important advantages.

Personal treatment and continuous advice reduce the risks of any capital movement they carry out, and they have access to exclusive information that other users do not enjoy. In addition, all the actions carried out by the bank are focused on obtaining profitability.

Although investing in the bank’s own products is an option that mainly interests the entity, the client also obtains a benefit by playing with one of the risk factors that the bank acquires, which is the possibility of losing them.

If a client invests in a bank deposit and it does not provide the expected benefit, the user is likely to seek explanations or change the entity, so the information provided will be accurate and detailed.

Another advantage that private banking provides is a credit card without commissions.

If a regular customer makes a purchase for a value greater than the funds they have in their account, they will be charged a series of fees for using the card credit.

The user of private banking can be very calm in this regard, although it is recommended that they contact the bank to clarify the conditions associated with their credit card.

Banks usually grant private banking users a treatment of privileged clients, this consideration is seen by offering better conditions in granting loans, discounts on some purchases or medical insurance or access to products completely free of charge.

Disadvantages of private banking

Private banking is still a service offered by a financial institution, and as with all, it also provides a series of disadvantages that should be evaluated.

In this case, the analysis on their contracting does not need to be very deep, since the bank assumes a certain risk when offering this option and will only carry it out if it considers that the client can face all the conditions that this implies.

Not all users can access private banking, the advantages it provides will only be enjoyed by users who have a minimum capital of 30,000 euros.

This makes private banking only available to solvent clients who have been part of the entity for several years.

Another negative aspect is the commissions that must be faced to benefit from this service, although these are not usually very high and generally stand at 1% per quarter.

This percentage is made on the total amount available to the client.

Normally, before being a beneficiary of private banking, the bank usually agrees on commissions that are adapted to the customer’s purchasing power.

The payment of these commissions is directly linked to the use of this service, although the bank can offer it free of charge and only charge for the investments that are carried out .

This procedure is not usually common and will only be done with clients who meet a certain profile.

Association of Private Banking

Private banking has been operating for several decades. The advance of the times and the political and social changes that were experienced in the country motivated the creation of the Association of Private Banking (AEB).

Any foreign bank can be part of this company, which has the objective of defending the interests of the entities that will later have an impact on the aspirations of its clients.

This association emerged in 1977 under the precepts of Law 19/1977, which was based on the regulation of the right of union association.

The AEB has not stopped growing during its 42 years of existence to the point that it is currently made up of 80 private banks.

Functions of this society

To defend the interests of its associates, the AEB carries out a series of actions based on dialogue with Spanish companies and administrations.

In addition to having contact with politicians and high levels of the state, it also has the ability to prepare reports and position itself regarding regulations and decisions of the government that may affect the banking sector.

Another of its functions is to provide the best service to its associates, informing them at all times of the direction taken by public bodies such as the Bank of Spain or the Public Administration.

They also have the capacity to influence the collective agreements that regulate the conditions of bank workers.


The legal area is one of the most valued in the association since it is in charge of studying all matters that may affect the interests of the members of the company.

The communication office is also of great value, which periodically publishes relevant communications on the country’s financial activity.

One of the reasons that leads the associates to be part of the AEB, is their work of representation in the Banking Federation of the European Union (FBE), taking sides in its decisions and being part of the different working groups that are integrated in her. In addition to this, he also performs teaching tasks in banking matters.

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