What is Private Banking?

You may have heard your friends talking about having a private banker, but do you know what it really means, and more importantly what it doesn’t?

What is traditional private banking?

Private banking as the Europeans and Swiss know it is very different to the service that is provided in Australia by the major Australian banks. This difference has grown further after the Banking Royal Commission and the closure of the advise services that most Australian banks tried to provide.

European private banking can be commonly described through the following services:

Personal financial advice
Financial planning
Investment advice
Securities execution
Multi-currency debt products
General and personal insurance products
Custody and investment administration, and
Tax planning.

Typically only for clients with over $2.5m of invested assets and over $500,000 in annual income.

The typical providers of this are the likes of the international majors such as Bank of Singapore, Credit Suisse, UBS and the more boutique non-banks such as Julius Bear, Coutts and even Cashel House.

Unlike the the majors, Cashel House differs, we are not a bank and as such we procure debt from over 45 different banks to match your needs, we don’t repackage other wealth managers products and add unnecessary fees in the process, and we don’t sell our own in-house insurances, we source the best from a range of providers. Unlike a private bank, Cashel House seeks to add more convenience by providing a project management roll of your external tax and legal advisers.

The similarity between all these private banking services is they aim to create convenience and provide a single point of personalised contact. We all understand our clients are time poor.

What is Australian private banking?

Unlike the European private banks, the Australian major banks all provide a service they call private banking, however since the Banking Royal Commission this has grown further away from the traditional definition of private banking.

These services now typically look like the following:

General advice only
Investment accounts
Debt manufactured by their own bank
Insurance manufactured by their own bank
A relationship manager or a pool of relationship managers.
Typically only for clients with over $1m in lending and $250,000 in annual income.

Since the Banking Royal Commission, the banks have ceased (or are moving) to cease providing personal financial advice and maintain a conflict in that they can only provide products that their banks manufacture. This may mean products are more expensive than what is available in the market.

The typical banks operating in this space include Westpac Private, ANZ Private Bank, NAB Private Bank, and BankWest Private.

In most of these cases, a client needs to engage their own external financial planner, insurance broker, investment adviser, tax adviser, and legal adviser to provide the products being sold to them by the bank.

This does not mean they are not useful. Cashel House partners with a number of these banks to source debt, however at all times we maintain management over the client to ensure that debt and insurance products are bench marked to what is competitive in the market.

Advantages and Disadvantages of Private Banking

The most practical attraction to private banking is that generally your relationship manager should know your personal financial circumstances intimately and be able to therefore advise and provide products that match your needs quickly. Unfortunately, this is not always the case. In the case of mainstream Australian banks relationship managers are often allocated over 100 clients each, and as such don’t have a close working relationship with many. In the case of the European style of private banks, this is often not the case as the relationship managers are generally limited to 50 or less family relationships. Because of this a closer relationship is built and greater services and convenience is provided.

Having a private banker can enable a speedier turnaround time, however, for self-employed clients, it can often be better to have a business banker as their bank contact point, given their training and credit streams support cash flow lending and non-residential lending, which as private banking can be very limited.

Private banking can also come with a cost. In Australia, private banks tend to charge more for the same debt you would receive from the branch. In the case of the European private banks, they will change to manage your wealth plus add additional fees for custody and re-packaged products.

Cashel House was designed on the back of being a client of both the Australian and European private banks. We aim to achieve high levels of personal touch and conveniences without the costs. The costs we pay for custody and administration are the same costs that clients pay, there is no markup. We source debt from the cheapest locations, there is no markup. We don’t charge hours, we charge one all-inclusive management fee that we believe is cheaper than peers but aligns our interests with protecting and growing your wealth.