Wealth Management? Private Banking? What’s the Difference?

Wealth Management planningBoth terms seem to be tossed about randomly, and to some extent, interchangeably. Both in truth and in tradition, they’re a bit different.

Private banking is an exclusive subset of wealth management. At least until recently, it largely consisted of traditional banking services: such as taking deposits and making payments, discretionary asset management, buying and selling of stocks/mutual funds, limited tax advisory services and limited “concierge” services, offered by a single person or private banker. On the whole, most clients trusted their private banking manager to deal with the bulk of their financial decisions, and took a predominately passive approach to their finances. Private banking, in general, targets only the very wealthiest clients… broadly speaking, those with more than around $1 million in investable assets. Everyone else, well… the lobby is downstairs and someone will be able to assist you.

If you’d like to get a Second Opinion about your current financial plan, contact us using our Online Contact Form, or give us a call: (503) 291-1313.

Private banking has been around, to some degree, for about 500 years. It is, however, only really over about the past 15 years that the term wealth management has found its way into common language. It developed with the arrival of mass affluence: more informed clients with more sophisticated needs throughout all financial levels; a desire by these clients to be more actively involved in the management of their money; a recognition within the financial services segment that, for many clients, conventional mass-market retail financial services are inadequate. Wealth management generally applies to clients with assets between $100 000 and $1 million (affluent) as well as high net worth clients. Wealth management is, therefore, a broader area of financial services than private banking.

Just like in private banking, asset management services are at the center of the wealth management industry. Wealth management, however, is so much more than asset management. It focuses on all aspects of the client’s financial life. Wealth management has a greater emphasis on financial advice and is concerned with gathering, maintaining, preserving, enhancing and transference of wealth. It is much more interactive, in an on-going way than private banking. It generally includes the following:

  • Asset management in its broadest sense: discretionary and advisory, financial and nonfinancial assets (such as real estate, commodities, art, or wine), and alternative investments.
  • Advice in all shapes and forms: asset allocation, wealth structuring, tax and trusts, various types of planning (financial estate, philanthropic), family-dispute arbitration and/or counseling and education.
  • Brokerage services.
  • Advice on core banking-type products, such as current accounts, time deposits and liquidity management.
  • Advice on lending products, or access to them: such as margin lending, credit cards, and mortgages.
  • Analysis and advice on insurance and protection products, such as property and health insurance, life insurance and pensions.

Wealth management can mean different things to different people in different places. The US and Europe have traditionally stood on opposite sides of the fence in this regard. In the US, wealth management is more often assumed to be transaction-driven and is typically investment-product related. Many American clients do not differentiate between brokers and advisors… but they should. In Europe, the term is more aligned with traditional private banking, with its greater emphasis on advice, careful ongoing analysis, and exceptional client service.

If you are interested in getting a Second Opinion about your current financial plan, call us at (503) 291-1313, or use our Online Contact Form to schedule a complimentary, no obligation introductory meeting.

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