There is arguably far more to professional wealth planning and asset management than a private bank can and should provide.
What’s important for senior international professionals from one country and living in another, is that some local retail banks have set up ‘private banking’ divisions. These are typically staffed by young, inexperienced salespeople, employed to sell certain products (often structured) that earn them bonuses, and maximise their companies profits. This misalignment of incentive means the client experience and outcome is therefore a second priority – if even a priority at all.
A wealth-owning family typically needs a trusted adviser/steward that is not only able to take charge of asset management in relation to liquid assets, but who is able to help the family with investments in property and anything else the family is interested in.
There may also be a family business in the picture and certainly asset protection, succession planning, and tax minimisation will be topics of interest to the family. But the structure of a private bank typically means the salespeople (given they are typically less qualified than professional advisers) are entirely incentivised by the private bank to focus on income in terms of funds under management, sales of structured products, discretionary management services and loans. For an insider’s look into the life of a private banker and how they make money, read this story in The Guardian.
Not only do the products of Dubai based private banks often match up poorly against those offered from the wider marketplace, but they may confine advice to products rather than the family’s entire balance sheet/holistic position.
What clients of private banks really need before committing to a relationship is a trusted family adviser, and continuity in relationships that avoids the family having to re-educate relationship managers given the turnover and staff suffered (or encouraged) by the industry today (50% of private bankers quit within 21 months).
Wealth owners need to understand how parts of the banking industry often works (mercenary private bankers incentivised by numerous other private banks to flip their client relationships and churn their accounts for golden payouts) and the inability of those within private banking to align their businesses with the interests of their clients.
You only have to Google ‘private-banking scandals’ to find 93.3 million results.
There are certainly some private banks and trust companies that do get it right though, and to find them, wealth owners have to know what they’re looking for and ask the right questions.
The repeated high-profile failings of private banks have led to the creation of an asset management profession and both the multi-and single-family office, as ways for those with significant wealth (and awareness) to attempt to obtain better long-term outcomes.