PRIVATE BANKING

Early professional planning for your assets is essential

Opening an account with a private bank seems like a natural consequence of making money and accumulating wealth either suddenly or over time. Aou quickly find out it requires a minimum amount of cash and assets. Private-banking entry is like a club membership. It opens up a much wider and deeper level of financial advice and execution than you can receive anywhere else – more choices and global investment services. Yet, according to banks, most private assets still remain outside of private-banking coverage. So, is there a right time in your life to explore a relationship with a private bank?

In Asia, the earliest encounter by most high- and ultra-high-net-worth investors with any kind of financial advisory service has traditionally been through stockbrokers. While stock and real-estate speculation is not the basis of long-term investment planning, it can be the starting point to engage in a discussion about wealth management between clients and the relationship managers of private banks.

The long-term goal is to start a multi-generational advisory relationship to protect and grow wealth. The concept of working with a financial adviser over multiple generations is still relatively new to Asian and mainland Chinese clients. It’s common practice in the west, but the explosion of successful technology start-ups and IPOs have created problems associated with new

Begin professional planning as early as possible in order to meet anticipated and unanticipated life and investment events affecting your wealth, writes PETER GUY

wealth. But a mutually beneficial relationship emphasises long-term capital preservation rather than selling trendy financial products. Disabusing unhealthy, short-term speculative trading habits from a pure brokerage account relationship is often one of the first goals when you switch to a private bank.

Look for a private banker as soon as you accumulate wealth. Begin professional planning as early as possible in order to meet anticipated and unanticipated life and investment events. More wealth usually translates into more responsibilities, obligations and liabilities over time. Prospective clients need to select their private banker carefully, because each institution concentrates on delivering different services and products in their own way. And a client’s choice is determined by what they value in a financial relationship.

The amount of wealth needed to start and sustain a banking relationship is dependent upon each bank’s strategy and policies. Banks will tell you their minimum account sizes, such as US$2 million, to start in the high-net-worth category, $50 million and more for ultra-high-net-worth and upwards of $500 million for a family office. But these account standards are flexible as private banks are equally concerned with cultivating and establishing certain types of client relationships.

Your relationship manager will try to determine if the client is too trading oriented, speculative and product driven. They want to decide if the client can be reformed or educated into following a diversified, long-term investment strategy. Some banks prefer to serve entrepreneurs – new, rather than “old money”. Entrepreneurs rapidly advance through the luxury-lifestyle phase of their wealth experience and into charity and philanthropy.

Today’s financial regulations require all financial institutions to operate and fulfil Know Your Klient ("KYC") and Anti-Money Laundry ("AML") standards before onboarding a new client. Politically Exposed Persons ("PEP") are people who are vulnerable to potential bribery or corruption due to their position. Understanding your background – where your money comes – from is a vital step.

Today, the very nature and source of wealth has altered how, why and when clients bring private banking into their financial lives. 5any people who have made wealth in technology have never walked into a traditional bank. Rather, their entire bank-service experience is through a computer or smartphone. Developing a personal, banking relationship with them will therefore require a different approach.

Eventually, even entrepreneurs recognise they encounter changing priorities at each stage of life and

ultimately need to protect wealth from volatile events. So, they realise they need to involve a private banker at an early stage to begin planning. In Asia, 41 percent of ultra-high-net-worth individuals are younger than 47 years old compared to the world average of 17 percent, according to private banks.

Key attributes sought by clients include: a relationship manager who thoroughly understands customer needs; professional product and service specialists; integrated investment solutions; and a wide range of research and information.

This new type of client requires bankers who understand how multiple financial disciplines work together, such as private equity, venture capital, mergers and acquisitions, as well as debt and equity products. Private bankers are ultimately supposed to achieve portfolio returns while providing and planning for future generations.

Today’s high-net-worth clients generate wealth from global businesses and require international services ranging from investment management to succession planning and trust services. Increased financial regulations over the last decade has made it more complicated for clients to navigate local and transnational requirements.

Cross-border investments and wealth planning across multiple jurisdictions can be overwhelming for clients, so global teams of private wealth advisors work together to provide integrated and comprehensive solutions. Under this complicated environment, clients increasingly understand the need and value of having their wealth properly structured and protected to achieve their goals. And these plans and portfolios are regularly reviewed and updated.

Today’s investors can access a wide array of data and information at any time through a variety of devices, such as smartphones. However, the prospect of dealing with too much data can actually be overwhelming rather than empowering. Clients value the choice of being able to deal with a personal advisor as they encounter too much data. A personal relationship remains vital to building trust.

Understanding your background – where your money comes from – is a vital step