Depending on your financial needs either private banking or traditional banking will be the best option for you. Many differences exist between the two, which are all important to be aware of prior to deciding which is right for you. We take a look at the main aspects of each type of banking, so that you can compare the two and decide which is right for you, your finances and your circumstances.
What is Private Banking?
Private banking refers to a form of wealth management (the two are different, but their services often intertwine with one another) and a variety of services provided by banks to clients in order to invest the money the client has and therefore to grow wealth. When it comes to investing money wisely, this could be through savings accounts or portfolios, and wealth can also be accumulated by investing the money in specific stock options.
Depending on the bank you choose, there may be a minimum income level requirement in order to be able to access the private banking service, and your application may be considered based on liquid assets you have that you can bring to the bank in question.
You can find out more about eligibility and fees on the website of the bank you are considering before deciding if it is worth applying. If you meet the requirements for private banking services, you will be under the category of either High Net Worth (HNW) and Ultra-High Net Worth (UHNW) individuals.
How Does Private Banking Work?
People who have jobs in private banking are dedicated to providing a personalised expert service for their clients. They help to plan your finances and the best investment opportunities available for you. This may take the form of an individual financial plan, that may include steps so that you can reach your goals and build upon solid, long-term investments.
What are the Benefits of Private Banking?
- Those who want a financial portfolio beyond stocks will benefit from the expertise and knowledge of private banking advisors
- A personalised service is a definite advantage of private banking, and generally receiving greater attention and quicker responses as a customer.
- Your personal advisor can help you with a wide range of matters such as diversifying your portfolio, considering tax liability and strategies for asset allocation. This type of service would be very difficult to get through retail banking due to its extremely specialised nature.
- Private banking can be much more convenient – you will usually be appointed a single person whom to contact regarding all your financial matters
- It can also be better for large investments
- Private bank accounts often come with a series of perks: such as travel and mobile insurance
- You can receive better rates on bank services. This is because as you will be using multiple bank services, they may be more willing to consider fees waivers or lower rates for certain types of loans,
- For some, one of the main benefits of private banking is that these types of services can be much more private and offer anonymity that you wouldn’t otherwise have with commercial or retail banking
What is Traditional Banking?
Traditional banking (or otherwise referred to as commercial banking or retail banking) refers to the types of banking services available to those who may not fit private banking criteria or eligibility. This type of banking is more concerned with checking accounts as well as saving accounts. However, some banks under this category can handle certain aspects that are looked after under private banking, such as handling stocks and portfolios, but this does depend on the bank in question and it is important to check with the bank you are considering.
How Does Traditional Banking Work?
As previously mentioned, traditional banking focuses on checking accounts and looking after saving accounts. Traditional banking also looks after other types of savings, such as interest savings accounts and bonds. They can help provide help on which stocks or bonds to choose, and help you choose the right savings account for you.
Commercial banks will also provide services to business, potentially providing credit to companies as well as managing the accounts and the salaries which are paid into these accounts.
What are the Benefits of Traditional Banking?
- Traditional banking can be an excellent option if you are looking for cheaper fees overall
- It can end up being better for simple financial transactions
- Whilst private banking offer specialised services, retail banking can most likely provide a wider range of services, such as: accepting deposits, providing overdraft options, or if you are a business, providing business loans as well as investments
- If you do not have a large portfolio it can be a much more cost-efficient alternative