Until recently, private banking was the realm of the rich. But, with the rise of globalisation, it has broadened its reach.
To the uninitiated, the term "private bank" conjures up images of wood-panelled buildings with snooty staff pandering to the every whim of their equally snooty clients.
UBS headquarters in Zurich
That may have been the case a few decades ago, especially in the rarefied offices of some of the British private banks, but even they have changed with the times. And though they might have dominated the scene in the 1960s and 1970s, global investment banks are now firmly in the driving seat.
UBS, Goldman Sachs and Citigroup dominate the private banking market for ultra-high net worth individuals, that is those with at least US$30m of investable assets.
What does one need to own and what can one expect to receive from a private bank account? The qualifying criteria differ by country and private banks don't usually advertise their financial hurdles, using the old adage that "if you have to ask the price, you probably can't afford it". But it's probably fair to assume that you won't get past the doorman at Pictet & Cie or Coutts unless you have at least $3m in investable assets.
WHAT IT MEANS
 Many institutions now offer the elite service
Preferential transactions are a perk
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The term "investable" excludes lifestyle assets like a primary residence, motor cars or wine, but includes secondary properties, stocks, bonds and artwork.
The private banking divisions of investment banks have segregated their offerings into three main areas: High net worth individuals (HNWI), wealthy and affluent. HNWI would probably start in the $1m - $5m bracket and extend well beyond $50m. Wealthy would be in a niche between $500 000 and $1m, while affluent would be measured more by earnings capacity than wealth as such. Often, affluence is seen as the first rung on the ladder of aspirational private banking and is a sector that private banks nurture as a means of holding onto clients that may one day grow into much wealthier individuals.
In SA, the situation is somewhat different as we do not have much of a culture or heritage of private banking. The old, established trust companies like Syfrets or the Board of Executors (both now part of Nedbank) are effectively wealth management companies that offer their clients bespoke financial advice. In this regard, they are the closest to the original concept of independent private banks.
But in the past few decades, a great number of private banks have sprung up. All of the "big four" commercial banks have private banking operations, as does Investec. Other operations like Citadel, Bidvest Bank and Grindrod Bank regard themselves as private banks, while a few stockbroking firms like BJM are getting in on the act by providing comprehensive wealth management facilities. The lines are becoming blurred. As yet, there are no foreign private banks in SA.
The broad global segregation into HNWI, wealthy and affluent also applies in SA. Roughly speaking, HNWI probably starts at about R50m, with wealthy clients needing at least R10m - R50m. The affluent sector is more income based and here a minimum annual package of between R650 000 and R1m is probably required.
So, having passed the financial test, what kind of services do you get from your private bank? These differ from bank to bank, but in general, it is a mixture of preferential transactional banking, like cheaper mortgages and vehicle and asset finance, combined with a wealth management offering. Some private banks will offer zero commissions on purchasing foreign currency, while others will come to your residence after hours to deliver documents for signing.
The wealth management part is more relevant to the HNWI segment, as it tends to have greater wealth. Some private banks have in-house asset management capabilities, while others outsource it to other parts of the bank or use third parties.
And the further up the ladder you progress, the more you can expect to receive in terms of personalised attention. This presents a dilemma for many private banks, not only in SA but globally. PricewaterhouseCoopers Global Private Banking/Wealth Management Survey 2007 noted the difficulty of managing exceptional growth in the private banking space without compromising excellent client experience.
A global skills shortage has made it increasingly difficult to find staff who can interact with HNWIs on a professional yet relaxed level and also offer the client unparalleled performance.
