Managing Uncertainty – Private Banking and Market Volatility

In an uncertain economic climate, can private banking help to cope with market volatility?

Uncertainty seems to be the keynote of the current economic climate. With the coronavirus pandemic wreaking havoc with economies worldwide, Brexit sounding an unsettling note and political instability in America causing further confusion, it’s hard to know where to look for a steadying influence. The transition away from formerly reliable markets such as oil towards relative unknowns like sustainable energy makes it harder to predict the future. New economic tools such as carbon footprinting are emerging to show the potential risk lurking in investment portfolios. But for high net worth individuals, private banking and wealth management remain attractive options.

What is it about these services that can help investors find reliable long-term investment strategies that can prepare for the challenges of the future? While many consumer banks have private banking divisions, in most cases, a private bank will set a minimum cash figure for a deposit in order to retain its services. These can include investment advice, taking into account the entire financial circumstances of the client, and aimed at protecting and maintaining these valuable assets. Individualised financial solutions can include saving and planning for retirement and putting in place structures for passing on accumulated wealth to beneficiaries.

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The advantages of offering private service to the banks are obvious – they can make a profit on assets under management, charge generously for services such as loans and mortgages, and acquire desirable clientele through the recommendations and regular business transactions of their HNWI clients. Private banking clients can normally rely on a ‘concierge-like’ service, with contact with named experts and no delays in regular forms of financial transaction such as fund transfers.

A wealth management advisor can discuss goals and risk levels with a client and can compose an investment strategy including the types of bank account used, but cannot normally open bank accounts or offer the same individualised services that private banks do.

Of course, private banking, as its name suggest, has the advantage of offering a high degree of privacy, up to the point of anonymity; and private customers are commonly offered discounted or preferential pricing on products and services such as mortgages, specialised loans, or lines of credit.

Savings or money market accounts might generate higher interest rates and be free of fees and overdraft charges, and customers operating import-export businesses may receive more favourable foreign exchange rates on their transactions.

For all these reasons, private banking offers a level of certainly which can sound a reassuring note in an uncertain economic environment. 

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