This content is for informational purposes only and is not intended to provide financial advice.
As mentioned earlier, many people equate the concept of private banking with wealth management. However, the two are different concepts.
Wealth management refers to the discussion and execution of activities related to investment. This activity is carried out so that customers can benefit from their investments. Financial institutions that provide this service will usually provide a wide selection of services, ranging from funding to stock investment.
In addition, wealth management services also assist customers or clients in making financial planning (financial planning), managing portfolios, and various other financial services related to customers’ personal financial choices.
Private banking vs. wealth management
Although both offer customers personal financial management, there are fundamental differences between private banking and wealth management. One of them is the provider of the two services. If private banking services are provided by banks, wealth management services are usually provided by non-bank financial institutions or securities companies.
Uniquely, this service can also be provided by an independent financial advisor or multi-licensed portfolio manager who offers special facilities for priority or premium clients.
Some things usually discussed between advisors and clients in wealth management include financial goals, level of comfort and risk of investing, and other conditions that clients must meet when making investments.
From the results of these discussions, the financial advisor will create an investment strategy to assist clients in achieving their investment and financial goals.
Unlike private banking, wealth management advisors cannot provide benefits in the form of exclusive banking services for clients. However, they can advise clients on which bank account is the best for clients to use so they can achieve their financial goals.
Although it looks similar at first glance, there are some basic differences between private banking and wealth management. Viewed from several aspects, this is the difference between the two.
Both private banking and wealth management manage the assets of their clients. However, the specifics of the services provided are different.
Private banking provides banking services, asset management, trading (asset buying and selling, and simple tax consulting. Meanwhile, wealth management offers services for asset allocation, asset structuring, tax planning, land ownership, pensions, charities, family disputes, and business and family relocations). and other matters relating to personal finance.
It is one of the most basic differences between private banking and wealth management. They both offer one-on-one discussions, but the services offered are different. Private banking provides banking packages that already exist for each client without further adjustment to the conditions of each client.
In contrast to wealth management, which emphasizes financial advisors and focuses on collecting, maintaining, conserving, and strengthening client assets. Each client will get different advice, depending on the financial condition and goals that each client wants to achieve. Throughout the use of the service, the wealth manager continues to monitor the client’s condition and make changes if necessary.
- Client Freedom
In private banking, clients do not have much choice because the bank only offers packages that they have made before. In this aspect, wealth management is superior because clients have many choices and can determine which one is the most appropriate for them. Sometimes for security reasons, wealth managers will use more than one bank or other financial institution.
- Investment Strategy
Wealth management can benefit from the flexibility and reactivity to act solely for the client’s benefit. Because clients can make their own decisions, the wealth manager’s workload is not too heavy. In contrast to private banking, the process is slower and less transparent than wealth management.
- Cost Effectiveness
Using wealth management services is certainly more cost-effective. The services wealth managers provide include banking, insurance, investment, asset management, and so on, without special binding requirements. Meanwhile, the services provided by private banking are relatively limited.
The most fundamental difference between private banking and wealth management is the variety of services provided and the freedom of consumers to choose. Even though wealth management has many advantages, it cannot provide exclusive banking services even though clients have large amounts of funds.
Eligibility requirements for private banking
The only way to be included in the bank’s priority service is that a prospective customer must pass several conditions. Each bank has different terms and conditions for this priority program. However, in general terms, a priority customer must meet the terms and conditions described below.
It would be best if you had a Financial Portfolio with a Certain Nominal. The portfolio in question is in the form of investment products, bancassurance, and deposit funds (either in the form of demand deposits, savings, and time deposits). For the nominal, each bank requires a different number.
Have you ever heard of the term priority customer? Yes, lately, there are indeed many banks competing to offer priority customer programs targeting middle and upper-class customers. As the name implies, priority customer service provides special facilities for customers who join as priority customers. Of course, the facilities and services banks provide far more than regular customers.
Advantages of private banking and wealth management
Unlike private banking, financial advisors cannot provide exclusive banking services to clients, nor can they help clients open bank accounts. But they can advise which bank account is best to choose. Private banking officers also have more discussions with their clients. Here are the advantages below:
1. Banking Special Services
Have you ever seen a special customer line while at the bank? One in five tellers is usually dedicated to priority service. That means you don’t have to bother queuing because the bank works faster and is more responsive to serving you.
2. Ability to connect with a network of specialists
Wealth management usually includes discussion and execution of investments for the benefit of the client concerned. Firms that provide this service are sought after by people who want to invest with many options, from funding to stocks. The services provided by wealth management include assisting in financial planning (financial planning), managing client portfolios, and various other financial services related to clients’ personal financial choices.
Large financial institutions personally provide wealth management services. However, these services can also be provided by independent financial advisors or multi-licensed portfolio managers who offer various financial services focused on high-end clients.
3. Perks, freebies, and potentially better pricing
Interest Rate Promo is the advantage of being a private banking customer. The most beneficial benefit of priority service is that customers have the opportunity to get lower interest rates. This low-interest rate applies to various loan schemes, such as People’s Housing Loans, Motor Vehicle Loans, Unsecured Loans, and others.
4. Business benefits
Based on the explanation above, it can be concluded that private/personal banking and wealth management are services that are equally beneficial for managing the assets of customers or priority clients, however, with different directions and planning objectives.
If private banking provides banking services in the form of asset management, trading, and simple tax consulting, then wealth management provides benefits in the form of specific asset management. We are starting from asset allocation and structuring services, tax planning, and asset ownership to other matters related to personal finance.
Disadvantages of Private Banking and Wealth Management
In addition to the service and approach, there is also one aspect that distinguishes private banking services from wealth management. In terms of cost, wealth management services are considered more effective because the services provided include banking, insurance, investment, asset management, and so on, without any special requirements that must be met by the client.
1. You may be losing out on interest
In terms of the freedom to choose financial options, customers in private banking do not have much choice because the bank only provides offers in the form of banking packages that they have previously made. It differs from wealth management, which provides clients with more choices to determine which investment strategies and instruments are the most appropriate.
2. High management fees
In wealth management, advisors and clients will discuss the objectives, level of comfort, risk, and other conditions that must be borne by clients when investing their assets. The financial advisor then develops an investment strategy that links all the information the client provides to help them achieve their goals. It may result in high management fees.
3. Private bankers come and go
Meanwhile, in personal banking, customers must first have assets that are the terms and conditions of the bank. For example, the minimum amount of savings, the number of assets owned by the bank, and others. It may result from private bankers coming and going.