Why high-net-worths choose private banking (2024)

FAQs

Why high-net-worths choose private banking? ›

A private banker offers specialized banking services to high-net-worth individuals. Typical specialized banking services include investments, trusts and loans. Private banking may be a good option for affluent clients who need a range of services but prefer to bank at one institution.

Private Banks

These services are especially appealing as they help the ultra-rich grow and preserve their wealth. Private banks also offer high-value financing for assets like aircrafts, yachts and real estate, with some banks even offering asset and lifestyle management rather than just financial products.

At a private bank, you'll typically have one key contact and access to a team of financial experts who can assist you with specific transactions and services. You want to feel comfortable that this team will effectively work on your behalf and confident that you can fully trust their advice.

The threshold to become a private banking client varies by financial institution. But in most cases, private banking caters to the wealthy—specifically those who have a net worth at least six figures.

Private banking is an enhanced offering for the high-net-worth individual (HNWI) clients of a financial institution. Private banking consists of personalized financial and investment services and products from a dedicated personal banker.

Eligibility requirements for bona fide private banking vary from bank to bank. But the services are generally reserved for high-net-worth individuals, which, according to the Securities and Exchange Commission, means people with at least $750,000 in investable assets.

For example, the Bank of America private bank minimum requirement is $10 million. The minimum requirement to open a private banking account with HSBC in the US is $5 million, while the minimum for banks like JP Morgan is $10 million.

Private banking is designed for high net worth individuals who need a lot of services and personalized attention. If that's you, and you value the convenience and dedicated service of private banking, it could be a good option despite the cost.

A bachelor's degree in a business discipline or another relevant subject is a basic qualification to work as a private banker. However, in most cases, a bachelor's degree must be combined with substantial work experience to qualify for a position in this field.

What is considered high net worth? ›

Key takeaways. A high-net-worth individual is typically defined as someone who has liquid assets of between $1 million and $5 million, although there's no firm definition of the amount as some institutions may define the range differently.

Private Banking: Offered by many of the same financial institutions that provide personal banking, private banking is a specialized form of banking tailored specifically for high net worth individuals.

Requirements for private banking

To open a private banking account, you must meet certain asset requirements, which vary from bank to bank. The starting point is usually $1 million in assets that are connected to the bank.

Fewer fees: Private banking customers typically won't pay ATM fees or monthly service fees on their deposit accounts. Higher returns: You may receive higher APYs on your interest-bearing checking accounts, savings accounts, CDs and money market accounts, along with a better rewards rate on affiliated credit cards.

Millionaires can insure their money by depositing funds in FDIC-insured accounts, NCUA-insured accounts, through IntraFi Network Deposits, or through cash management accounts. They may also allocate some of their cash to low-risk investments, such as Treasury securities or government bonds.

For example, the Bank of America private bank minimum requirement is $10 million. The minimum requirement to open a private banking account with HSBC in the US is $5 million, while the minimum for banks like JP Morgan is $10 million.

Fewer fees: Private banking customers typically won't pay ATM fees or monthly service fees on their deposit accounts. Higher returns: You may receive higher APYs on your interest-bearing checking accounts, savings accounts, CDs and money market accounts, along with a better rewards rate on affiliated credit cards.

Millionaires also have zero-balance accounts with private banks. They leave their money in cash and cash equivalents and they write checks on their zero-balance account. At the end of the business day, the private bank, as custodian of their various accounts, sells off enough liquid assets to settle up for that day.