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What is Private Banking?
Published: 08/02/2010
Private banking is a type of monetary service that provides highly personalized attention to a select list of clients. Typically available to those with extensive assets, private banking is meant as a means of managing, investing, and planning the use of large fortunes. Since many wealthy patrons desire a degree of anonymity in their banking transactions, high security and strict confidentiality rules are often an important part of private banking.
Unlike typical banking, a patron with a private account will usually have a dedicated account manager. This manager is acquainted with the funds, plans, and needs of his or her client, and can offer a variety of services tailored to clients' needs. In addition to handling regular transactions, an account manager can serve as a planner for investments, estates, and trusts. All of this is done with a maximum of discretion to protect the client from outside exposure.
Most banks require a certain amount of deposited or managed assets before allowing a customer access to private banking. Although these amounts vary, typically a customer must put the bank in charge of a substantial amount of wealth, more than two million US dollars (USD) in some cases. While this generally makes private banking the province of the very wealthy, the exclusivity is somewhat justified. Private accounts increase the assets of a bank dramatically, which may warrant the best service to keep competitors from stealing wealthy customers away.
Although some institutions operate primarily with this type of banking in mind, most large banks feature a private department for large accounts. For those able to invest in this type of account, consider comparison shopping carefully before choosing a company. The features offered by private banking services are often extensive, and some may be highly personalized to meet any client's needs.
For a variety of reasons, private banking often has a nefarious reputation. Banks involved in this type of banking often place company headquarters in regions with generous or lenient tax laws, in order to help clients avoid higher tax rates in their home country. Switzerland, home of the famous Swiss banks, is notable for controversial policies geared toward protecting clients and their assets. Swiss bankers enjoy confidentiality rights similar to doctors. For many years, tax evasion was treated quite mildly by Swiss law, though a 2009 amendment removed the distinction between evasion and active fraud, changing the climate of private Swiss banking.