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Wealth management and private banking: Understanding the differences

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The financial services industry certainly isn’t the easiest to understand, which is probably why professionals are paid so handsomely. While we could filter through all of the confusing terms that are branded around, today we’re going to take a look at wealth management and private banking and dissect the differences.

Often, these are terms that overlap. Nevertheless, there are some core differences which we will now get into.

The basis of wealth management

Let’s start with a look at wealth management. Firstly, if you’re looking to see an example of a private wealth management group in action, Adam Rosenfeld Merrill Lynch  is one of the established ones you can start with.

At this point it’s probably worth taking a look at the structure of one of these groups and for the sake of simplicity, let’s take a look at the Rosenfeld example again. As the name may suggest, this sits inside Merrill Lynch and is a six-member group who are based in Miami, Florida. This is the sort of structure that most of the big wealth management companies employee; different teams are situated around the country and they are responsible for dealing with clients where their license allows them to. The members at these teams tend to have vast experience; for example, Rosenfeld started out at Morgan Stanley and now has sixteen years’ worth of experience.

Now the introductions are over, what sort of advice to these groups tend to provide? Generally, it is investment related and if a person is looking to channel some of their finance towards funds and stocks, this is the type of professional that will be sought.

The wealth management group will look to manage their portfolio and look to find the best types of investment that will ultimately boost this. They will take into account the level of risk the client wishes to proceed with and the goals of the client before forming a strategy.

The basis of private banking

Private banking is slightly different and is performed by financial institutions. It’s not possible for the Average Joe to turn to such advice; most of the time banks will only entertain cases where the clients have assets which exceed $500,000.

There are some similarities between private banking and wealth management; both are looking to grow the client’s assets. In the case of the former, clients will be provided a unique employee to look after their fund.

As the client will be using the bank to keep most of their assets, they generally get favorable treatment in relation to rates. Additionally, they are provided exceptional service; whether this is having instant access to money (without any queues), or just conducting a lot of tasks via the phone.

From the above, it might sound as though private banking is much more beneficial. However, it should be pointed out that as the banks are offering an “all round” service, they’re not experts in everything and this is why a lot of people turn to private wealth management companies who tend to have greater knowledge of more investment avenues.