Money Matters: private banking – a bank within the bank

By Lisa Wood, MBA Senior VP, Medical Industry Specialist IBERIABANK

Like any business looking to better serve its clients and thrive in a challenging economy, banks offer premium services to attract and maintain clients. It goes by many names, Private Banking, Executive & Professional Banking or Private Client − but goal remains the same: encourage loyalty through enhanced programs, services and rates.

Private banking is an increasingly important component in the financial industry that caters to individuals with higher levels of income and/or those with substantial assets. Participants in private banking enjoy more personalized banking, including programs customized for the individual needs of the account holder.It’s a service that’s been available to the affluent for many years, and one that most banks offer in some form or fashion. It’s a good idea to check with your current or prospective bank to see what options are available to you.

It’s important to remember that federal regulations restricts banks and lending institutions from basing financial arrangements on gender, race, ethnicity, zip code or other baseline demographic information. Banks can, however, offer variations to their standard, mass market policies with aclearly defined and strictly enforced set of criteria.

For most banks, the qualifications for access to private banking will involve specific criteria such as: financial liquidity − cash and marketable securities; individual or household income; overall net worth; profession − CPA, physician, attorney, etc., or an executive position within a company − CEO, CFO, etc.

Every bank and financial institution will establish different guidelines, policies and thresholds for admission to and continued participation in its private banking program. Some banks offer tiers of private banking programs for clients with even greater levels of income, assets or influence. It’s a good idea to check with your bank to determine the required qualifications and benefits of such a relationship.

For most, the benefits include more personalized attention than those available in a retail branch office,with private bankrelationship managers being assigned to clients. These representatives assist their preferred clients with a wide range of banking services and help channel additional expertise as needed.

Private banking programs usually offer their clients higher rates on interest bearing accounts as well as interest rate discounts on loans and reduced fees on mortgages. Of course the higher interest rates usually require higher minimum deposit balances. The difference between standard rates and private banking rates may not be significant, but it is a perk that provides tangible benefits over the life of the banking relationship.

Private banking participants often have more flexible financing terms. For example: where a traditional banking customer might be required to put down a 10 percent cash down payment on a car loan, a private banking customer might have the option of 100 percent financing. Some bank fees associated with loans or deposit accounts may be reduced or waived for private banking clients.

Other preferred services available to private banking clients include brokerage services, estate planning, investment strategies and wealth management expertise. Many banks will make available experts within the organization to help their higher profile, well-heeled clients with specific requests and objectives.

Working as a team, the bank provides a specialized roster of services and industry experts to assist private banking clients and their families manage and maintain their assets. These services can range from simple bill paying and securing of Travelers Checksor foreign currency to complex financial services like investment strategies, trusts and asset management.

Many larger financial institutions have either opened or acquired brokerage companies to offer the buying and selling of stocks, mutual funds and other securities through their bank, often for discounted fees. Many employ their own fund managers and offer proprietary funds in addition to standard mutual funds.

Your private banker can facilitate a meeting with a bank investment advisor to evaluate your portfolio and make recommendations. These institutions often publish weekly or monthly newsletters from their capital markets groups that offer recaps of recent market fluctuations, economic forecasts, and investing tips. Check with your relationship manager about getting on the email newsletter list.

Private banking departments can also offer special benefits for those looking to realize the vision of constructing the dream home they have always wanted. Specialized construction or permanent loan packages can be put together with preferential terms based on the borrower’s qualifications for private banking.

As an added service, the private banking group may be able to monitor construction of the dream home and make appropriate payments and advances to the builder as construction progresses toward completion.

Private banking can also assist members with big-ticket purchase transactions that require special knowledge and expertise. Many banks and lending institutions will have senior personnel with experience in specific areas. The banking group will likely understand the specialized requirements associated with acquisition of yachts, coach motorhomes and other major purchases.

Bank officials will be able to assist in creating customized loan agreements for such purchases as well as assist the borrower deal with specialized requirements associated with such acquisitions. For example, purchases of airplanes require processing with the Federal Aviation Administration (FAA). Purchases of yachts and other large marine vessels include specific paperwork for the U.S. Coast Guard.

Having affiliation with private banking provides not only preferential rates and terms associated with the loan agreement, the expertise in the industry in which the purchase is being made. Such services save the borrower both time and money − and avoid potential problems that could prove costly or challenging without professional expertise.

Many private banking groups will also have individuals that specialize in specific bank products for specialized industries, such as healthcare, oil and gas or pharmaceutical. The expertise of these professionals can be of significant benefit in financial planning. It’s often helpful dealing with a banking professional who truly knows and understands the business you are in. Affiliation with private banking is an asset that can be beneficial in a wide range of personal and professional situations and can also be made available to spouses and family members in many situations.

While the concept is hardly new, private banking is becoming increasingly popular for busy entrepreneurs and professionals. Private banking isn’t simply a status symbol for the wealthy, it’s an important and efficient way to conduct an individual’s personal and business financial affairs.

You work hard to achieve success in your professional career. Banks and lending institutions recognize the needs for busy professionals. Take advantage of the opportunities that are available to you.

For more information on how private banking can benefit you in your situation, contact your bank or lending institution.