PRIVATE BANKING

AM | @MackinlayEuruni

. Definitions & assets. Ultra high net worth individuals: more than €30 million; high net worth individuals: €1 to €30 million; affluent: between €100,000 and € 1 million; retail: less than €100,000. HNWIs are assigned a Relationship Manager or private banker who develops a personal relationship with the client. See one of the ads in the USB "You and Us" campaign from 2005-6:

. HNWI & Family Offices. Private banking or wealth management usually refers to tailored wealth management services to clients with investable assets of more than €1 million. Personal banking usually refers to the €100,000 to €1 million range (mostly invested in funds). Wealth Management teams usually offer investment vehicles covering the entire asset spectrum — including cash, fixed income and equities, as well as a range of alternative offerings such as private equity and hedge funds. Discretionary management: the bank's experts manage investment portfolios. Advisory mandate: clients receive advice, but take their own investment decisions [see].

. Family Office. A Family Office normally arises from a liquidity event: the sale of a family business, a significant inheritance or —as in the case of Lionel Messi—, a new and astronomic contract. A Family Office is a private entity of dedicated professionals exclusively devoted to the investment legacy and personal needs of wealthy families. Services provided by the private bank include financial, estate and tax planning; investment consulting, manager selection, asset allocation, tax compliance monitoring; charitable consulting and family counselling. In the US, a “family office” has to meet each of the following criteria: 1) Its only clients are “family clients” (family members and certain alter-ego entities formed for tax, charitable, or estate planning purposes); 2) It is wholly owned by family clients and controlled by family members; 3) It does not hold itself out to the public as an investment adviser.

. Where's the juice? Let us go through the Services for High Net Worth Individuals and Family Offices page at Credit Suisse, and let us try to identify teh following sources of revenue: a) transaction-based commission revenue; b) recurrent fee revenue; c) non-recurrent fee revenue (like sales charges); d) interest income. Private banks also offer a range of payment services: traditional check writing, debit and credit cards to on-line services such as bill pay, etc. Lending capabilities range from the conventional to the creative and include residential mortgages, unsecured loans and loans secured by marketable securities, commercial real estate and private jets, yachts, vineyards, ranches and art collections.
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