Many people confuse Wealth Management with Private Banking. After the financial crisis around the world, there was a relation between these two activities, which has even raised now with the activities of the Family Offices.
However, Moshe Strugano (Attorney – Strugano & Co.) shares some key differences between Private Banking and Asset Management here:
Selection of services
Even though they have core-business asset management, however, Private Banking provides banking services, wealth management, and brokerage/tax consulting services. The Asset Manager offers consulting services to different sectors, for instance, family arbitrage, real estate, asset allocation/structuring, tax planning, pensions, etc.
Difference in Approach
Private Banking works on the one-to-one model, accessible bank packages for high-net-worth customers. The Asset Manager offers higher importance to financial advice and concern in the collection, upholding, protection, reinforcement, and transfer of wealth. They draw up a financial plan with the client that meets the necessity of their family and execute them properly.
One Choice vs. Multiple Choices
Private Banking offers only the products for which they work. While being an independent firm, Asset Manager, can employ a customized service and offer the products of various institutions, helping the client to pick the ones that suit them best.
Investment Strategy
Asset Management has an advantage of flexibility and reactivity to act only for the benefit of their customers since they are also independent in the selection of the fundamental assets, which generally form the portfolio of the client. On the contrary, Private Banking offers little slow and heavy processes, not completely independent and transparent i.e. fundamental assets selection for the portfolios, sometimes creates interest conflict.
Relationship Building
In Asset Management, the whole thing started by realizing the truth and concerns of the customers, and then plan and implement their strategies too attain their goals – always aimed at guaranteeing a secure and passive life for him and his family. During the progression, the customer is questioned and imitates on susceptible concerns that often go unnoticed. In this manner, a trusting bond is made for long years of collaboration between the Asset Manager, the client, and their family. While in Private Banking, the services offered need less time, less participation and skills of the client, since everything is offered in “packages” which have to be adapted to the greater or lesser risk appetite and the number of the client’s assets.
Difference in Costs
In Asset Management the customers can optimize the costs as they have a wide range of services and providers such as banks, insurance companies, etc. without going to meet with any entities. It also advantages from the consulting power of the asset manager together that being an individual customer does not have.
Even though the starting point of both the activities are common, however, the thing that distinguishes the most and which is transversal to the facts mentioned above is certainly the independence in the services offered by the Asset Manager. In the future, we have to see how both the activities will position themselves according to the main challenge going on in the financial sector.