There are many possible reasons to shop around for a new Private Bank or Wealth Management provider. Maybe you just sold a business, went public with your company, received an inheritance, or would like to change your current financial advisor. When it comes to money, you should not take such fundamental decisions lightly. Below are the most important factors to consider when deciding whom to entrust with managing your proverbial family jewels.
Safety First!
Priority number one when thinking about financial matters is safety. Naturally, if you want to grow your wealth and invest, you will inevitably take risks. However, it is vital to take only calculated risks and on your terms. A Wealth Management firm with questionable practices or a bank with a weak balance sheet is not the kind of risk you want to expose yourself to.
Make sure to research the company and its representatives. Read about its history and tradition, its management continuity, and the context of its mentions in the press. Read through the publications which might appear on the company’s website. Try to get a sense of the respectability, stability, and seriousness of the firm. However, remember that appearances can be misleading. Attributes like antique furniture, exquisite-looking art on the meeting room walls, or a family tree reaching back hundreds of years are sometimes not more than skillful marketing. Today, the Financial Services industry is a modern business, where systems and processes matter at least as much as a rich tradition.
Financials
Another essential matter to consider is the financial stability of the bank taking custody of your assets. If you are looking at a bank, be it a small Private Bank or a division of a large universal bank, ask the salesperson for a set of the latest financial reports. You might want to pay special attention to the balance sheet, particularly the amounts the bank owes relative to its overall balance sheet size. It could also be worthwhile to examine the profitability of the bank and the stability of its earnings.
If you are talking to a large financial institution, ask to see an organization chart and locate the entity acting as the custodian of your wealth.
It is possible that some of the providers you are considering will not have a banking license and will rely on one or several custodian banks to keep your accounts. Ask for detailed information about those banks, whether the Wealth Management provider has preferred custody banks, and whether it makes sense for you to divide your assets between two or more different custodians.
Personality Matters
Having a solid financial institution taking care of your financial assets is a robust foundation for your Wealth Management setup. However, as a client, your experience will be determined by the person or team acting as the face of the organization. Consider that you will be working closely with your client advisor or relationship manager. You might want to share with them details about your private life, your dreams, and your fears. Think about how they may handle eventual conflicts of interest.
The establishment of a trusting relationship is a necessary condition for a fruitful collaboration. Consider your first impression and utilize your knowledge of people to understand whether you can develop mutual trust, understanding, and partnership with your advisor. Avoid being too deferential to their expertise as well as bossy behavior. Consider your interactions as a professional relationship among equals.
Beware of Marketing
A reason for caution is the ability of talented salespeople to adapt their persona to the prospect’s preferences. Examine your intuition whether you are witnessing an artful performance. An essential skill of relationship managers is to wrap a sale into a seemingly friendly piece of advice.
Remember, unless you are negotiating with a boutique of a few people, you will have the possibility to request a different client-advisor if you change your mind in the future.
What Can You Do For Me?
A centuries-old tradition of the house, great chemistry, and blind understanding between you and the relationship manager will be of no use if the bank cannot provide the products and services to help you reach your financial goals.
Ask for a general overview of the capabilities of the institution and various service levels. Articulate as clearly as possible what objectives you are pursuing with the account opening. Allow the salesperson to find the combination of products with the best fit for your situation. However, a healthy dose of skepticism is appropriate, so you should watch out for jargon or marketing. Ask for explanations and examples should anything be unclear.
Don’t be Fooled
Mismatches between your stated requirements and products or services highlighted by the salesperson are possible red flags. For example, if you require hands-off discretionary management of your investment portfolio, the client-advisor should not stress the possibility to day-trade stocks. Such sales tactics can indicate an institution with limited capabilities and an unhealthy sales culture.
First Class Service
Depending on your goals for the new account and how you would like to interact with it and the bank, you should not forget about various quality-of-life aspects. Elements to consider are the e-banking suite, clarity and structure of bank statements, and the ease with which you would be able to reach your client advisor or the team in an emergency.
Ask for a demonstration of the e-banking application paying particular attention to the functions you expect to use most. These could be payments, trading, or downloading reports. Don’t forget about the mobile app for your smartphone!
Let your future client-advisor show you sample bank statements. Make sure you can understand the information therein and easily find the numbers you would most likely need.
Details Matter
From the interactions you have had until now, it might be challenging to discern the level of service you could expect from the team covering your account. Much less so, how it would behave in a situation of stress or eventual disputes. However, high quality often shows in the minor details. How the firm has treated you up to this point can give valuable clues about the level of service you would receive in the future.
Everything Has Its Price
Finally, it is time to think about the cost of a Private Banking or Wealth Management service. Personalized coverage can be pretty expensive compared to a retail banking offering or a commission-free trading app. The level of service will also vary between different banks and their service models, and so will the prices.
Behind layers of marketing and reputation, however, banking is a highly commoditized business. Similar service levels will produce similar experiences and results and should result in similar pricing. Therefore, you might want to watch out for outliers in terms of pricing and question whether a high price tag is indeed justified.
Pricing Models
One important distinction to make, however, is the difference between pricing models. Most banks will offer two or more pricing models. These models differ in the degree to which brokerage fees for transactions or other costs are included in the package price and will range from a more expensive all-in fee to cheaper basic account maintenance and custody charges, where additional fees accrue on top of it. With your client advisor, you can work through concrete examples based on your expected transaction behavior and pick the appropriate option.
Last but not least, be aware that most banks do not expect to charge the listed prices in the fee schedule. Therefore, feel free to ask for discounts and special conditions and to negotiate. As a Private Banking client with custom requirements, you can demand custom pricing too.
Final Thoughts
Finding a Private Banking institution or a Wealth Management firm with the right fit for your specific needs is a complex affair with many moving parts. Consider the firm’s philosophy and stability, the personal fit with your client-advisor, the offering and the service level, as well as the fees of the various contenders. As a sophisticated client with particular requirements, you might want to prioritize the different aspects in a specific way. Take your time to examine carefully the documentation and information provided. Consider the option to maintain more than one account at institutions with different areas of excellence.
With the tips above, you should be well equipped to scrutinize the offers presented to you and pick the one(s) with the best offering to meet your wealth goals.