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Wealth Management Vs Private Banking
In the financial services sector, while interacting with clients two of the most frequently used terms that we get to hear are wealth management and private banking. Many consider these terms interchangeable for working with affluent clients and businesses. However, there are differences between the two.
Also, to determine which is best for you, it is essential to know the differences between the two.
To get a better understanding of what is the private banking and wealth management and their differences, check out this section.
What Is Wealth Management?
Wealth management is more of an individualised approach and a financial service where clients are advised on how they can manage their assets and investments. This helps them in improving their financial stance and meet their goals.
The services included in wealth management fit into two categories:
1. Investment Management
This is a great option for those who want to manage their own investments. A wealth manager usually considers the client’s overall profile before investing their money in respective investment areas, be it bonds, ETFs (Exchange-Traded Funds), stocks, options, etc.2. Financial Planning
This service is more tailored to the client’s specific requirements. Full-time employees might need help managing their investments. The financial advisor also devises strategies to meet their client’s financial goals.
Let us understand wealth management with an example. Full-time employees might not be able to manage their investments. Therefore they are scattered between numerous brokers. Making a tax saving and future investment strategy may be challenging in these situations.
A wealth manager can combine all investments with one broker for simpler management. They can then specify a financial strategy to address the client's immediate and future demands. Moreover, they will explain the stages of the strategy and how it will evolve to help the client grow their wealth.
What Is Private Banking?
Between wealth management and private banking, the latter is a more direct and enveloped service exclusively reserved for high-net-worth individuals (HNWIs). At its core, this suite of financial services is focused on the bank’s transactional elements like lending, depositing, and various other traditional banking services.
Additionally, clients who opt for private banking are also provided with services, such as:
- Direct assistance from professionals for broader financial needs
- Easy access to preferential terms on loans and unique investment options
- Access to custom product offerings
- A more personalised and tailor-made service
Though private banking meets the client’s specific needs, it does not offer detailed financial advice on long-term investments or financial plans. Clients opting for private banking will have access to specialised services offered by the bank, but they will not have any assistance from a financial advisor.
The ultimate aim of a private banking service is to assist prospective clients in managing, protecting, and maintaining their assets and financial circumstances, keeping in mind their specific goals and requirements.
For example, many banks that offer private banking services in India include IndusInd bank, South Indian bank, Federal bank, Kotak Mahindra bank, Yes bank, RBL bank, HDFC bank, ICICI bank, Axis bank, etc.
Thus, when it comes to private banking vs wealth management, it is essential to know the key differences between the two.
What Are the Differences Between Wealth Management and Private Banking?
Both wealth management and private banking offer convenience and opportunities to clients. But to decide which one will be the best-suited option for you as per your goals and requirements, it is significant to know the difference between private banking and wealth management.
|
Approaches |
Private Banking |
Wealth Management |
|
Range of Services |
It offers asset management, brokerage, and banking services and also provides some simple tax consulting services. |
It offers consulting services in areas like asset structuring, asset allocation, real estate planning, tax planning, family arbitrage, pensions, philanthropy, etc. |
|
Packages vs Tailor-Made |
It proposes a one-to-one model that offers existing bank packages for ultra-high-net-worth individuals (UNHWIs) or high-net-worth-individuals (HNWIs). |
It emphasises offering the right kind of financial advice and concern to help individuals collect, maintain, reinforce, and transfer wealth. |
|
Independence |
It tends to present its clients with only the products that the respective bank offers for which they work. Thus there is a limitation to the selection of products. |
It involves the presentation of several institutions' products tailored to the client’s needs. |
|
Investment Strategies |
When it comes to acting in the clients' best interest, it conveys a generous level of flexibility and reactivity. |
It is a considerably slower and heavier process; thus offering less transparency and less independence. |
|
Conflict of Interest |
Does not arise at all, as advisors are independent in choosing underlying assets that form their client’s portfolios. |
Sometimes arises as their services get influenced by the underlying assets enclosed within the client’s portfolio. |
|
Cost Involved |
This is comparatively less cost optimised as the provider and services are limited. |
This is more cost optimised from the client’s perspective, as it offers a wide range of services and providers. |
|
Relationships |
As it involves long years of collaboration between the client, their families, and the wealth manager, a trustworthy relationship is built. |
As the services involve less knowledge and involvement of clients, the relationship between the manager and the client is not that strong and trustworthy. |
FAQs about Wealth Management and Private Banking
Is wealth management part of private banking?
What are the three essential categories of wealth management firms?
When should I consider a private bank?
Other Important Guides About Wealth Management
Important Articles About Wealth Management
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.