Dubai: Ever wished of one day having your savings stored at a private bank, all to get the VIP-like treatment that is usually synonymous with the ultra-wealthy? If you felt you were missing out on most perks that private banks offer, you no longer need to be.
With private banks, high or ultra-high net worth individuals were always offered personalised care in money management, and such concierge-like customisations are even kept private to prevent competitors from luring others with similar perks.
However, with the booming demand and growing ease that comes in this digital era of banking, the perks of private banking are no longer catered to just the ultra-wealthy. Those who make regular use of traditional banking services are also getting a piece of the action.
“Aside from services like banking, investment, and advisory, there are multiple tailored perks of banking with private banks,” explained Jose Paul, an Abu Dhabi-based banker with over two decades in the field. “While they come at a price, you can largely avoid them if you go about it on your own now.
“Private bank services like receiving deposits, processing payments, transferring money, and offering loans, are perks your non-private bank offers today too. While you were once expected to show up in-person at the bank, rolling your own private-bank equivalent is easy since you can now do all these online.”
Aren’t private bank customers offered better loan terms?
As your private banker is well aware of the state of your finances, aside from offering a competitive edge on other banking-related services, loans are particularly offered at an economical rate when banking with them.
“Private bankers are often uniquely positioned to be able to immediately approve a loan — either a short-term loan, or a longer-term loan to buy a third home or restructure your business,” explained Anil Pillai, a Dubai-based banking analyst.
“Now every credit card will allow you to take a cash advance at least as large as a prudent banker would allow. A very expensive loan, mind you, but one that'll be approved faster than even a private banker could.”
Additionally, while a private banker in the past helped with banking tasks like depositing cheques, ensuring bill dues are received, get you cash when you need it, and smoothen out any logistical nightmares, nowadays, handling these sorts of affairs is much easier for people to do on their own.
How ease of banking now outweighs private banking perks
With incoming funds now directly deposited to your account, bills set to be automatically paid, with the option of being able to pay them online, or through the bank’s mobile application, and finding currency as close as the nearest ATM, most private banking perks now prove non-existent.
So what do private banks offer their customers now? “They now predominantly focus on providing wealth management services to high or ultra-high net worth individuals. Services include investing and portfolio management, tax services, insurance, and trust and estate planning,” added Paul.
“While private banking is aimed at an exclusive clientele, banks and brokerages with investment options are a dime a dozen nowadays, and so are brokerages offering banking services. They will also manage money for a fraction of the cost, or you can create your own investment portfolio.”
So while private banks have an investment arm who charge a fraction of your investments (the fee drops the more you invest), Paul explained that investing in a low-cost brokerage account could also likely do as well in the market as those whose private banker has a top investment adviser.
Wealth management, on the other hand, generally centers on investments, portfolio management and other specialty financial aspects. Wealth management services can include access to tax, insurance, estate planning specialists, and trust services.
However, there are certain aspects to private banking and wealth management to bear in mind when opting between the two. For instance, it may make sense to reconsider private banking if you need to commit a sizable amount of money to an account with a low rate of return or interest.
Also, compare fees for having your money managed with alternative firms, as fees are about 1 per cent of investments, charged annually. Moreover, if your banker or wealth manager leaves the bank, you’ll have to choose whether to stay with the firm or move your banking elsewhere.
“Banking services, even those catered specifically for high or ultra-high net worth individuals, are now routinely available to those who aren’t as wealthy, and that too at very reasonable prices, thanks to the digital age and high-speed internet,” said Pillai.
“As banks now all own brokerage firms and brokerage firms now all own banks, you can go either way when you pick the firm where you'll roll your own private bank. The advantage of a brokerage firm is that you can use your investments as collateral for a loan.”
The interest rate on such collateral-backed loans is that they are typically lower than what a cash advance on a credit card would cost you, noted Pillai. The advantage of a bank is that they have offices where you can get cash, or even talk to a banker, etc.
“Besides banking services, a private banker connects you with tax accountants, estate planners, investment managers, and so on. If you're flush with cash, it makes sense to group these services. But if you're not, you don't need a private banker, as long as you're doing the leg work,” added Paul.