Private Banking Continues to Change

by | Jul 25, 2015 | Financial Featured


Private bankers provide highly personalized service to wealthy clientele. As such, private financial institutions tend to serve the world’s wealthiest individuals. Recent changes in government regulations have slashed profit-creating fees on debit card and overdraft protection services. Thus, banks with private divisions must now restructure how they generate profit for the institution as a whole. There is greater pressure to generate more revenue with private accounts, which are subject to far less government oversight. Private banks in Hong Kong are expanding their customer base and trying to establish a niche appeal.

The Minimums

Most private banks have three customer tiers:

  • Ultra-high net worth
  • High net worth
  • Mass affluent

Each back has different minimum qualifications. Ultra-high net worth individuals typically have $10 million or more to invest in the bank. More stringent institutions can require a $30 million estate. High net worth clients will generally have about $1 million in liquid assets. In years past, mass affluent customers had at least $100,000 to invest in the institution, but recently, banks have lowered the minimum to as low as $50,000. Conversely, more selective banks ask for $500,000 in liquid assets for mass affluent individuals.

The Services

The main draws of private banking firms are the privacy and financial advising. Private institutions are experts in wealth management, particularly for high net worth clientele. They can coordinate with lawyers, accountants and other advisors to provide customers with tailored information about wealth risks, estate planning, and philanthropic strategy. Additionally, revealing investment information may inform competitors or others about important business developments, which can negatively impact stocks or an enterprise’s value. Private services protect these transactions from unnecessary public scrutiny.

Targeting the Mass Affluent

Because banks are looking for new revenue, private divisions are looking towards the mass affluent to cover the gap. Financial experts tend to talk about the traditional divide between the 99% and 1%. However, private banks are now looking to the wealthiest top 10%, which has experienced significant growth recently. Instead of targeting a few hundred thousand individuals, big banks are focusing on millions of customers. There are an estimated 40 million mass affluent people in the United States. They hold one-third of all retail assets, so banks are looking at young professionals, such as lawyers and doctors.

Appealing to New Demographics

Banks are also trying to appeal to new demographics including African-Americans, women and the LGBT community. It is a common theme that private institutions are developing a niche, such as entrepreneurship, sports, or entertainment clients. In particular, these financial institutions are looking at the demands of minority groups and researching how to best help these demographics. For instance, African-Americans invest more in real estate than personal enterprises. Real estate might double an individuals wealth, but business investments can multiply wealth by three, four or 10 times.

Private banking in Hong Kong is available to more individuals than ever before. Banks are looking to invest in individuals who have promising career paths and are likely to accumulate wealth over time.  Of course, elite banks with only ultra-high net worth clients exist and continue to provide superior service. Mass affluent accounts might not get all of the benefits of bigger private accounts, but they still receive a high degree of personalized service.



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