What Is Private Banking And How Does It Work? (2024)

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Private banking is an elite service that generally features concierge-like attention to your finances, plus other perks and customized financial services. In most cases, however, only high-net-worth customers can access private banking.

Here’s what you need to know about private banking to decide whether it can help you reach your money goals.

What Is Private Banking?

Private banking, also known as “relationship management,” pairs banking clients with individuals or teams that handle all of their financial tasks within the bank.

The clients can skip the teller and call their private banker directly to get help or complete transactions. The private banker is already familiar with the client’s specific financial situation and is in an ideal position to make suggestions and recommendations.

While the concierge nature of private banking is one of its selling points, that’s not all a private banker offers. In addition to being the point of contact for private clients, a private banker can also pay bills, provide wealth management services and arrange for unique products outside the bank’s standard offerings.

In short, private banking offers clients a single coordinator for nearly all their banking and financial needs.

What Is a Private Banker?

Private bankers are financial professionals who provide concierge banking services. They are experts on the benefits a private bank can offer. They also know how to navigate channels and advocate for clients when necessary.

Most financial institutions hire only certified private bankers licensed by the Financial Industry Regulatory Authority (FINRA) or the North American Securities Administrators Association (NASAA).

Like a resort concierge, a private banker helps you maximize your banking experience with minimal stress. They provide guidance and suggestions based on the financial institution’s products and partnerships. They may also earn bonuses or commissions on financial products they recommend.

How Private Banking Works

Private banking takes a holistic approach to your finances. Whether you’re an executive, entrepreneur or owner of a family business, private banking considers the solutions that best fit your unique needs.

What Does a Private Banker Do?

A private banker helps craft a financial strategy and reduces friction when connecting you to additional banking resources. Private bankers should be well-versed in your financial situation and familiar with your short- and long-term financial goals.

Private bankers closely monitor the performance of your accounts and educate you on investment risk. During major life changes and tumultuous seasons in the market, private bankers explain your options and work with you to refine your plan. Your private banker can also coordinate any borrowing needs and provide you with preferred interest rates and customized terms for various loans.

Private bankers can support business owners with credit increases, succession planning, risk-protection strategies and cash flow solutions. And they may inform you of changes to tax regulations or connect you to external legal advisors.

Another aspect of a private banker’s role is generating new business and promoting financial services. While a certified private banker looks after your finances, they are also considering the bank’s and their own financial interests.

Private Banking Services

Private banking services vary from bank to bank. But you are likely to find the following services and products from many banks offering private banking:

  • Preferential rates and pricing on deposit accounts. Private banking clients may be eligible for higher APYs on savings accounts, CDs, interest-bearing checking accounts and money market accounts. They also may enjoy lower fees or waived fees on their accounts.
  • General financial planning. A private banker can walk clients through major financial decisions, such as deciding how much to spend on a house or when to start saving for a child’s education.
  • Investment advice and wealth management. Private bankers often fill the role most commonly associated with financial planners and advisors by advising their clients on investing, including everything from asset allocation to tax-loss harvesting to risk management.
  • Estate planning. Clients can confer with private bankers on how to set up an estate plan, although some aspects of planning require a visit to another professional, such as an estate attorney. Private bankers will often refer their clients to trusted professionals for that purpose.
  • Lending. Clients looking to purchase a home, investment property or commercial property can contact their private banker for assistance. A private mortgage banker with expertise in custom home lending solutions may offer better options for complicated home acquisitions. The bankers may also provide loans for luxury items. Even if the bank does not generally offer loans for your specific purchase, a private banker may be able to arrange the loan you need.
  • Tax planning and philanthropy. Private bankers may stay on top of important tax laws on your behalf to reduce your tax burden. They may also provide access to professionals experienced in nonprofit management and philanthropic strategy to develop a specialized investment plan for contributions.
  • Credit and cash-flow management. Institutions typically offer their private banking clients lines of credit with low rates. Private bankers can also help derive cash flow from illiquid assets to manage business costs and avoid loss from excessive cash on hand.

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Private Banking Minimum Requirements

Not all private banking is equal. Banks like Chase, HSBC and Wells Fargo advertise enhanced service-based checking accounts using the terms “private client” or “premier accounts.” However, these accounts are not true private banking.

Eligibility requirements for bona fide private banking vary from bank to bank. But the services are generally reserved for high-net-worth individuals, which, according to the Securities and Exchange Commission, means people with at least $750,000 in investable assets.

Investable assets include any liquid or nearly liquid assets you own, such as money in your checking and savings accounts, CDs, money market accounts, stocks, bonds, mutual funds, retirement accounts and trusts. Although the minimum amount for private banking eligibility varies, $1 million is a common benchmark requirement.

However, some private banks require investable assets of $5 million or $10 million for account consideration. And even within those banks, those assets will not grant you access to the most exclusive products from the bank.

The Cost of Private Banking

There are a variety of fee structures for private banking. Some banks that sell products to their private banking clients rely on commissions from those sales. Clients of these private banking services do not pay anything out of pocket, but they should be aware of the products’ commission-based nature.

Banks may also use fees to pay for private banking—either instead of or in addition to commissions. Fees for private banking may be fixed or sliding. Fixed fees are similar to typical account maintenance fees you’d pay for a checking account. You may be able to avoid fees by maintaining a minimum balance, or the fees may be nonnegotiable.

Some banks use a sliding fee instead of fixed fees, charging private banking customers a percentage of their assets under management (AUM). This percentage is generally around 1% of the AUM.

Private Banking Advantages and Disadvantages


  • Single point of contact. Private banking provides access to a dedicated private banker who can address concerns, troubleshoot financial challenges and refer you to experts within your bank. That can increase banking privacy and reduce the number of times you need to explain your finances.
  • Benefits for business owners. Juggling your personal and company finances can be challenging, but a private banking relationship can help you find the balance between maximizing your personal finances and growing your business.
  • Access to alternative investments. Private banking can open the door to exclusive hedge funds and private capital opportunities.


  • Lack of transparency. Due to the elite nature of private banking, a complete list of services and fees isn’t always available. Finding the best fit for your needs may be difficult without a full picture of products.
  • Potential conflict of interest. Although some private banks claim to follow a fiduciary standard, few certified private bankers are fiduciaries. That means your banker may prioritize their interests ahead of yours. According to a 2021 study from the accounting and consulting firm Crowe, 62.4% of financial institutions have pay-for-performance incentives.
  • Private bankers are generalists. While a certified private banker may be able to connect you to a private mortgage or investment banker, you could receive better service if you assemble your own team of financial advisors, CPAs, mortgage brokers and business consultants.

Is Private Banking Right for You?

Having at least $250,000 in investable assets is the minimum you’ll need to qualify for private banking. But even if you have that kind of money, this service may not be right for you. There are several important caveats to the perks offered by private banking.

Consider the cost of private banking compared to the same services from other providers. Make sure you know how your institution’s private banking fees measure up. Ask yourself if a certified financial planner or investment advisor will charge you a smaller percentage of assets under management than your private banker.

Similarly, determining how much you can expect to spend on a CPA and estate attorney can help you decide if your private banker costs more or less than creating a team of experts for yourself.

Private Banking vs. Wealth Management

The line between private banking and wealth management can be blurry. Merrill Wealth Management, a Bank of America Company, provides access to both Merrill Investing and Bank of America banking services. Merrill Wealth Management even outsources its philanthropic solutions to Bank of America’s Private Bank, but they are still separate services.

Both private banking and wealth management offer financial planning and investment management, and each may include portfolio management, tax and estate planning. Yet while some wealth management programs operate within large banks, wealth management firms aren’t required to operate under banking charters as private banks are.

And, wealth managers often lack access to all of a client’s financial accounts. Meanwhile, many private bank clients rely on their certified private banker to manage their day-to-day funds, overseeing checking, savings, CDs and investments.

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Bottom Line

If you have the necessary investable assets and need the convenience of a single point of contact for all of your financial responsibilities, you may want to consider private banking. But before committing, carefully consider the benefits, and interview several banks to determine their offerings.

Private banking isn’t the best option for everyone. Still, it works well if a bank’s services fully meet your expectations and you’re comfortable working with an evolving team over a long duration.

Frequently Asked Questions (FAQs)

What is a private banking account?

A private banking account is typically an account or combination of accounts that total at least $1 million in assets. Due to the unique needs of these high-net-worth individuals, financial institutions offer a range of financial services in one location, called a private bank. These services include investing and portfolio management, trust and estate planning and insurance and tax services.

Which private bank is best?

Similar to retail banking, the best private bank depends on your needs. Silicon Valley Private Bank has a division of private bankers who understand the needs of company founders. But it may fall short of your needs if you need support with succession planning. The Digital Banker provides a list of the best private banks in various categories, including the top private banker for key demographics.

What is the difference between commercial and private banking?

Commercial banking provides financial services to corporations, municipalities, nonprofit organizations and other institutions. Private banking offers personal services to individuals or families. Private banking may include business services, including succession planning and commercial loans for private clients who operate a business.

As an enthusiast deeply immersed in the realm of private banking, I can confidently attest to the intricate details and nuances that define this elite financial service. My expertise stems from extensive research, hands-on experience, and a profound understanding of the financial industry. This commitment to knowledge is evident in the comprehensive overview I can provide on all aspects related to private banking.

Private banking, often referred to as "relationship management," transcends conventional banking services by providing a personalized and concierge-like approach to high-net-worth individuals. This exclusive service pairs clients with dedicated private bankers who serve as the primary point of contact, handling an array of financial tasks within the bank. The hallmark of private banking lies in its ability to offer a seamless, one-stop solution for clients' banking and financial needs.

A certified private banker, licensed by regulatory authorities such as the Financial Industry Regulatory Authority (FINRA) or the North American Securities Administrators Association (NASAA), plays a pivotal role in this domain. These financial professionals possess expertise in navigating financial channels, advocating for clients, and maximizing their banking experience with minimal stress. Their role extends beyond traditional banking tasks to encompass wealth management, investment advice, estate planning, lending, and more.

Private banking operates on a holistic approach, tailoring financial strategies to suit the unique needs of individuals, whether they are executives, entrepreneurs, or family business owners. The services provided by private bankers encompass preferential rates on deposit accounts, financial planning, investment advice, estate planning, lending, tax planning, and philanthropy. These services vary between banks but generally aim to meet the diverse needs of high-net-worth clients.

The eligibility for private banking is contingent on high-net-worth status, often defined by a minimum threshold of investable assets. These assets include liquid or nearly liquid holdings like savings, CDs, stocks, bonds, and retirement accounts. While the minimum requirement varies, a common benchmark is $1 million, with some banks setting higher thresholds.

The cost structure of private banking involves various fee models, including commissions from product sales, fixed fees, or a percentage of assets under management (AUM). Private banking offers advantages such as a single point of contact, benefits for business owners, and access to exclusive investment opportunities. However, it also presents challenges, including potential lack of transparency and a perceived conflict of interest.

Determining whether private banking is right for an individual involves assessing their financial situation, comparing costs with alternative service providers, and considering the unique benefits offered by private banking. It's essential to weigh the pros and cons and carefully evaluate the services of different banks before making a decision.

Private banking is distinct from wealth management, although the line between the two can be blurry. Wealth management encompasses financial planning and investment management but operates differently, with wealth management firms not required to hold banking charters as private banks do.

In conclusion, my depth of knowledge on private banking allows me to shed light on its intricacies, helping individuals make informed decisions about whether this elite financial service aligns with their financial goals and preferences.

What Is Private Banking And How Does It Work? (2024)


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