How Private Banks Leverage Institutional Networks to Enhance Client Services

• A private bank offers banking and financial services to high-net-worth individuals (HNWIs).
• Private banking clients receive personalized attention and bespoke financial solutions.
• Private banks and prime brokerages collaborate extensively to enhance services offered to clients.

An Introduction to Private Banks

A private bank is a financial institution that offers customized banking services to high-net-worth individuals. The services offered by private bankers are designed to meet the unique needs of wealthy clients, providing them with a comprehensive suite of private banking and, in some cases, wealth management solutions. Private banks focus on delivering high-touch products and services and providing individual attention to each client.

Private banking differs from retail banking, mainly in the services and solutions provided to clients. A private bank will offer its clients personalized products and services and sophisticated solutions, including access to exclusive investment opportunities, such as private equity, venture capital, and hedge funds.

Retail banks do not tend to have minimum thresholds for onboarding clients, and the services and products offered centre around savings accounts and lending facilities based on each client's financial situation. Many banks in the retail banking sector also offer vanilla investment opportunities, such as mutual funds.

Private Banking Clients

Wealthy individuals typically require a minimum amount of investable and liquid assets to qualify for private banking services, with most financial institutions imposing a threshold of around $1 million. Private banking clients receive a more personalized service than retail banking customers. A dedicated private banker is typically assigned to each private banking client, who liaises across the bank's departments to ensure their client gets the best possible product offerings and services.

Private banking services typically cover basic financial needs such as checking and savings accounts, as well as more advanced services like investment advice, trust and estate planning, and customized lending solutions.

The main advantages of private banking include having a dedicated banker or team, discounted pricing, exclusive access to financial products and services, personalized investment advice, and financial planning. However, private banking may not be suitable for everyone due to the associated fees, which are often calculated as a percentage of the assets under management (AUM).

What are Private Banking’s Unique Features?

Private banking’s unique portfolio management services are designed to meet the sophisticated needs of each client's specific financial situation and include:

• A dedicated private banker for private banking customers

• Private banking and investment services

• Estate planning for individuals and families

• Advisory services and wealth planning

• Access to exclusive financial products and services

• Tax services and tax planning

• Specialized insurance products and related services

What is the Role of a Private Banker?

Private bankers are financial professionals who provide personalized financial services and manage the wealth of high-net-worth individuals (HNWIs). They act as a dedicated point of contact, offering a range of services such as investment management, wealth planning, lending, personal finance, and tailored financial advice.

A private banker collaborates closely with clients to identify their financial goals, develop a plan to achieve them, and then implement the plan using suitable investment products. They also manage deposit and cash services, money market accounts, credit and lending services, tax planning, trust services, retirement products, as well as annuities and insurance products for financial planners.

The role of a private banker is to provide a high level of personalized service, ensuring that the client's financial needs are met and their wealth is managed effectively. Most private bankers hold professional qualifications, such as the Chartered Financial Analyst (CFA), the Certified Financial Planner (CFP), the Certified Trust and Fiduciary Advisor (CTFA), and the Series 7 and Series 63 licenses from the Financial Industry Regulatory Authority (FINRA).

What is the difference between a Private Bank and a Wealth Manager?

While the private banking business model is similar to that of a wealth management firm, the difference lies in their scope of services and the clientele they serve.

Private banking is a specialized financial service that caters to high-net-worth individuals (HNWIs). It offers a range of personalized financial services and products, including investment management, wealth planning, and other specialized banking services. A private banking client will receive a more personalized approach compared to regular banking customers, with a private banker assigned to handle all matters. The primary benefits of private banking include access to a dedicated banker or team of bankers, discounted pricing, and exclusive access to financial products and services.

Wealth management, on the other hand, is a broad term that includes various financial services, such as investment management, personal finance and financial planning, tax optimization, risk management, and estate planning. Wealth managers provide a comprehensive strategy covering all aspects of a client's financial life. They cater to affluent clients, offering them sophisticated financial management and investment advisory services, with a focus on preserving, growing, and protecting their wealth over the long term.

Private banking focuses on providing exclusive banking and investment services, while wealth management offers a wider range of services covering various financial aspects. Private banking is typically only available to individuals with a high net worth, whereas wealth management that financial institutions offer is accessible to a broader audience.

Do Private Banks use Prime Brokerages?

While at face value financial institutions, private banks and prime brokerages cater to different clientele, they collaborate extensively. For example, a private bank can leverage a prime brokerages services to optimize its service offerings and operations and to provide specialized services to their clients.

Some of these services include:

• Access to advanced trading and execution services

• Securities lending and borrowing

• Access to leveraged finance

• Capital introduction

• Risk management and hedging

• Custody and clearing

• Market research and intelligence

How Prime Brokers Help Private Banks Provide Trading Products and Services

Private banks use prime brokerages to gain access to advanced trading platforms and trade execution services across multiple asset classes and markets.

StoneX Prime offers sophisticated outsourced trading platforms that a private bank can use to:

• Avoid the costs associated with operating an in-house trading desk

• Remain up-to-date and in line with regulatory changes

• Enhance trading capacity across a full range of asset classes while reducing costs

• Leverage StoneX Prime’s broad market experience, expertise, and advisory team

How Prime Brokers help Private Banks with Securities Lending and Borrowing

Prime brokers help private banks develop additional revenue streams for private clients' investments via securities lending services. Private banking clients can lend out securities in their portfolios via prime brokerages to maximize their investment returns.

Additionally, private banking clients looking to take a short position on a particular stock can do so through their bank's relationship with a prime brokerage, which also operates the necessary securities lending infrastructure.

StoneX Prime is a single-point facilitator that manages the lending process, from connecting lenders and borrowers to arranging for collateral custody and settling fees after the loan term.

How Capital Introductions Connect Private Banks and Prime Brokers

A private bank can leverage a prime brokers' network to connect their clients with other providers and potential investment opportunities. This can prove especially advantageous when dealing with sophisticated clients seeking exposure to the hedge fund and alternative investments sector.

StoneX Prime specializes in capital introductions and matching private banking clients to investment opportunities that match their risk appetites and level of investment sophistication. Any investment decision made follows a high-touch consultation process.

Private Banking Market Intelligence

Private banks typically provide their clients with exclusive research to inform their market knowledge and aid in the investment decision-making process made on their behalf.

StoneX Market Intelligence is a research portal that offers 24/7 global coverage of various asset classes and global macro from our network of experts and analysts across six continents. From boots-on-the-ground analysis of commodity markets to producing research reports on energy prices, capital flows, and global macro, Market Intelligence encompasses the breadth and depth of the global markets.