# Is Private Banking Worth It?



## SUDS (Jan 2, 2011)

I am considering moving my investment portfolio from an investment company to a private bank. With the current investment company I am with, I don't pay any direct fees, but I do pay what I believe is approximately 2.5% to 3% annually in hidden back-end fees (I know this is high, but I only became aware of how high these rates were by calling the funds I am in to find out what their back-end fees were). If I move to private banking, I will no longer be paying these high back-end fees, but I will be paying approximately 1.6% in up-front fees (that would be out-of-pocket and not paid out of my investment portfolio).

Can anyone please let me know if they use (or have any experience with) private banks and this type of fee setup. If so, please let me know if you would recommend moving to private banking.

Thanks.


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## OhGreatGuru (May 24, 2009)

People who use private banking aren't typically users of financial forums like this one.


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## MoneyGal (Apr 24, 2009)

Fees are only part (a big part, admittedly) of the picture. What is that you expect and get from your current arrangement, and what do you expect and think you will get from the potential new arrangement? If the investments would be the same or similar, you should be clear about any differences in service between the status quo and any future arrangements. 

Also, and while this may be seen as a minor distinction, you are (likely) not really describing upfront and back-end fees. 

Based on what you've said, I suspect you have high MER "retail" mutual funds which charge an ongoing fund fee. This is not the same as a "back end" fee which charges you to exit the fund (although you may also have those, and you should check). 

The option you are considering moving to charges you an ongoing fee (likely 1%, from what you've written), but the fee is separate from investment fees. I suspect that the private bank arrangement (again, based on what you've written) uses low-cost ETFs instead of retail mutual funds, or possibly F-class "wholesale" mutual funds. 

Finally, and there are lots of threads on this buried through this forum, if and when you make a change, you should be clear about the total costs associated with moving your money.


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## Larry6417 (Jan 27, 2010)

What you're describing doesn't sound like what most would call "private banking." Generally, private banking is a combination of banking and investment services offered to high net worth individuals. I bank at one of the big 5 and was offered private banking services. I declined because I didn't see enough advantage.

I'd suggest you take a good look at all the fees you're paying and decide whether the fees are worth it. I'm skeptical that any mutual fund (besides a low-cost index fund) is worth paying for.


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## MoneyGal (Apr 24, 2009)

160 bps is a very standard all-in HNW (portfolios of $1M or so) asset management fee: 100 bps for advice, 60 bps for fund and trading fees. I suspect this is the brokerage arm of a bank, i.e., Harbour Group at RBC.


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## John_Michaels (Dec 14, 2009)

Guru - you stated: "People who use private banking aren't typically users of financial forums like this one"

Why not? How do you know? I'm curious about your assumptions on the participants in the forum. Could be a lot of doctors in here who know a lot about the colon but squat about interest rates don't you think? 

I've seen a few similar statements and just curious if there was a sign-up information form that I missed?


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## Square Root (Jan 30, 2010)

I think you would have to be a high net worth individual with no time or experience in managing your portfolio for this type of arrangement. Larger the portfoio the lower the fee % should be. Certainly should not pay more than 1% for a $5-10 million portfolio.


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## MoneyGal (Apr 24, 2009)

Fees should scale down starting at $1.5M.


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## LondonHomes (Dec 29, 2010)

I always though that private banking was just a way to for the banks to make more money from rich people buy dressing up a basic service. Similiar to getting people to buy a first class ticket.

Personally I use an investment advisor (non bank) and we always look at the fee charged on an investment before making it. Typically you can purchase a mutual fund with 3 different fee arrangements.


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## OhGreatGuru (May 24, 2009)

John_Michaels said:


> Guru - you stated: "People who use private banking aren't typically users of financial forums like this one"
> 
> Why not? How do you know? I'm curious about your assumptions on the participants in the forum. Could be a lot of doctors in here who know a lot about the colon but squat about interest rates don't you think?
> 
> I've seen a few similar statements and just curious if there was a sign-up information form that I missed?


I realize I am making a generalization, and there will be exceptions. But forums like these are dominated by DIY investors of moderate means who would not qualify as private banking clients. Those who are not of moderate means are likely to be either:
a) people who have already learned a lot about investing and enjoy sharing their knowledge with others. As such they probably have little use for private banking themselves becaeu they prefer to manage their own money; or,
b) neophytes looking for help, who would not have any useful advice for the OP.

"private banking" clients by definition are high net worth, and are likely to be people who lack either the knowledge, interest or time to manage their money themselves.

I suspect responses to the OP will mostly be along the lines of 
- what are you paying for this money management?
- why not do it yourself for less?

I don't think there will be too many replies saying " I am very satisfied having my wealth looked after by XYZ Inc, and recommend you do the same."


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## Square Root (Jan 30, 2010)

Agree with OGG. I would personally be in the first group.


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## HaroldCrump (Jun 10, 2009)

I have worked in the private banking industry in a past life (at a tax haven country), and from what I recall, the profile of a typical client does not fit most (if not all) folks on this forum.
The general client profile that I recall is _someone that makes much more money per hour than it would cost to manage the assets during that hour_.
These folks are not your typical HNW individuals, of which we have several on this forum as evidenced by the NetWorthIQ links.
These folks had complex assets, including businesses, partnerships, stakes in various companies, stakes in brands, patents, etc.
These assets and investments cannot be managed by a "couch potato portfolio".
The firm provided complex tax planning ("avoidance/evasion"), legal, investing, accounting, real estate, and other services.

I don't recall the "entry level" net worth, but it was a lot more than $1M.

Most retail banks, incl. Canadian ones like Royal and TD, these days offer personalized services that they club under "private banking", but that's not been the traditional meaning of private banking.
Receiving personalized "service" from an account manager at the local TD bank is not private banking.


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## MoneyGal (Apr 24, 2009)

Absolutely, HC. However, the phrase "private wealth" and, to some extent, the phrase "private banking" are now used for marketing purposes by banks to cover their investment management services for HNW clients (typically defined as $1M+ in investable assets). 

I think the banks like to "borrow" the prestige associated with the term "private banking" even though, as you point out, "private" wealth management services do not really encompass what was originally meant by the term private banking.


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## John_Michaels (Dec 14, 2009)

Guru/HC/MG - thanks for the response. I think HC's description of Private Banking aligns to more what I think Private Banking should be. I sounds like SUDS might be receiving slightly more personal attention at a higher price than DIY..agreed, curious if it's worth it.


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## Berubeland (Sep 6, 2009)

My parents were with a Scotia McLeod advisor and it cost them about 100K before they fired them and did it themselves. 

What they found especially charming was that even after losing them tons of money they were still charged on the original portfolio amount. 

This was not in 2008 either... the market was going up.


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## kcowan (Jul 1, 2010)

Berubeland said:


> My parents were with a Scotia McLeod advisor and it cost them about 100K before they fired them and did it themselves...


My inlaws were in asimilar position until I offered to take it over for them. Scotia was charging them $1350 a year just to hold their accounts over and above the manager fees. And the portfolio was nearly all governent bonds (and some corporates) and there were only 8-10 transactions per year.


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## fraser (May 15, 2010)

We actually found ourselves looking for a new finanical advisor early last year. It took us about 4 months to find the right person. Ultimately we went with a large regional firm know for managing pension funds. They offered the services that we wanted and the fees were in line with the market and with our expectations. This was part of a financial tune up for pre retirement and my disposition of some options. 

We had been using two groups prior to this-our bank and a second bank stock brockerage house. At the bank, I was supposed to be a special client...you know the usual hoo haw. All we got was a meeting every six months or so with a new person, wet behind the ears each time, who did not deliver what we needed-results or otherwise. This was becoming more clear to as we marched towards an early retirement date. Oh, we were offered a shiney calendar every December. On three seperate occasions we put them on notice that we were not happy. The response was always the same..talk talk talk but NO listening. I think the bank counts on Canadians acting like Canadians...docile and accepting. On the brokerage side, the broker clearly started as he wanted to continue-churn baby churn......let's churn this account. You know that drill.

Sooo, we did move. Not everthing to the new advisor (but everything was withdrawn from our previous advisors) but a very good portion of it. Looking back, after 6 months or so, we are very pleased. So the market is up and we have benefited but we am now getting what we need. Our adviser is a CA (tax) who wants access to our CA so that our combined accounts (me and spouse) are structured in the most tax effective manner in addition to the focus on return and safety. The conversations are at a much higher level and they focus on our retirement plans and our total asset base. We have had three meetings so far and they dovetail very nicely with the advice and guidance from our accountant. One of those meetings was in late November to set out a final tax strategy for 2010. Never happened with the bank, I can assure you. 

And the fee for service....about what we were paying before when bank investment fees, MERS, and brokerage were taken in account. Results, relationship, solid advice, trust are just as important to us as the fee schedule. We are interested in value. What we did not move to the new investment advisor we moved to another banks etrade group after researching the options. Our fees in this area were cut dramatically, I not longer get annoying phone calls from the broker on his slow days and I give myself much better service and advice (thru research) than I got with the stock broker.

I wish that we had done this earlier but better late than never. The bank did call me after we made the decision to move with the usual excuses... we have an even better program for you yata yata yata. It was a day late and a dollar short if you get my drift. The larger issue was lack of trust...they were more interested in themselves than they were in us and they made it very evident by their actions and lack of action.

I would encourage anyone who is not happy to make the change. We should have done it a few years ago but better late than never. And if you can do it yourself so much the better. Just don't pay fees, MERS, etc to the banks without getting the advise and the service that you need...it only encourages them.


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## Square Root (Jan 30, 2010)

Fraser: Congrats on your move. MER's and oher bank/advisor fees can really add up. Much better to consolidate things and pay one transparent fee for what you need. I am in a similar position except that I do everything myself and pay absolutely nothing for advice. I probably have a fool for a client but my background in the industry, qualifications(CA, MBA, CFA) and available time(now retired) mitigate this risk. Our portfolio is low 8 figures so I could certainly afford to pay for advice but don't feel it would be worth it.


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## EEI (Jan 31, 2011)

Hi SUDS,

I was searching through the interest net and came across your question. Did you find the answer if private banking is worth it? I'm looking for the same answer.

Thank you


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## Dave (Apr 5, 2009)

EEI said:


> Hi SUDS,
> 
> I was searching through the interest net and came across your question. Did you find the answer if private banking is worth it? I'm looking for the same answer.
> 
> Thank you



I second on that. Any DIYs here who have prior experience in private wealth management ? Were the returns worth it ? I inquired about this option briefly while consulting an advisor for another service. I was quoted a 1.5% fee for a 500K portfolio, with the fee going down to 1% if you have over 1M. It still makes a whooping 7500$ per year in fees to pay in good times and bad times. They sweeten the deal by saying that at least it is tax deductible. So far, I am comfortable with my low turnover canadian blue chips portfolio, and I wonder if their returns are really that good to justify paying the fees. 

Dave


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## Just a Guy (Mar 27, 2012)

TD has a good program, $100/month gets you a free Visa Gold (usually $99/year fee), Free safety deposit box (around $100/year), no haggle lowest mortgage rate (usually .25-.5% below the best rates you can get with a perfect score at the regular bank), discounted referral services (like Legal), no other fees...plus they can do deals that you couldn't get at the normal bank.

Here's another opinion...

http://www.easysafemoney.com/private-banking-become-a-client-again/


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## marina628 (Dec 14, 2010)

When I settled my accident one of the insurance companies who paid me was RBC insurance and they offered to set me up with some private banking service,the minimum deposit was $500,000 at that time.I have always preferred to be hands on so did not take much time to investigate.


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