How Private Bankers Keep All the Business to Themselves

Birds do it. Bees do it. Even private bankers do it. In the last case, it’s the unique ability of private bankers to bring a new client onboard, build a wall around them, then dig a moat and keep all the business to themselves.

How do they do it?

Surprisingly, they have a similar business model as most wire house financial advisors. The wire house advisor gets a client interested in doing business, opens an account, gathers assets and attempts to cross sell nontraditional services. The private banker does the same thing, with a major difference. While many wire house advisors are resistant to cross selling banking products, the private banker delights in keeping the business in house. Forget about referring business elsewhere. Pull up that drawbridge instead! Lesson #1:Private bankers have a major advantage: Many of their leads come from the branch banking system of the parent company. You’ve sold your business. Congratulations. You can now step up into the rarified world of our private bank. Just go through that oak paneled door with the brass sign. Lesson #2:Private bankers often have one of two jobs. Relationship Managers develop a close connection. You’ve heard the jokes about private bankers walking client’s dogs. They transcend the service provider role and become friends and confidants. The other major role is the business development manager. In addition to finding new clients, they bring the resources of the firm into the client’s living room. This often includes services out of bounds for traditional financial advisors, like legal advice and tax advice. These services lead to more accounts being opened, assets transferred in and loans being made. They are considered “hunters” and “harvesters.” Lesson #3:How is the client relationship manager forging such a tight bond? First, let’s assume they have far fewer clients than the wire house advisor and the asset levels are significantly higher. Let’s also assume there’s a business development budget out there which is funding lunches, evenings at the theater and sports tickets. All this is done with the private banker in the next seat. After time, they know the client inside and out. Lesson #4:The bankers promote a stickiness to the relationship. As one banker explained, “The more you do, the cheaper it gets.” Between the close bond with the relationship manager and the web of products with bundled pricing, it would be very difficult to extract even a part of the relationship. A small chunk perhaps, but not the serious money.Related: Where Do Advisors Make the Most Money? Lesson #5:A major client benefit of keeping the relationship inside the moat and castle walls is information sharing. Has your doctor ever sent you to see another doctor? Before you see them, there’s a clipboard of information to fill out. The private bank is a confidential environment, yet departments can share client data. When they send you to a specialist, that person already understand your needs. This is important because very wealthy people often have complex problems. Lesson #6:The private banker is part of your life. It’s not unusual for private bankers to be expected to serve on boards of non-profit organizations. There’s usually a foundation in the background making key charitable contributions. Your private banker is a familiar face at charity galas. Lesson #7:Exclusivity sells. The client is asked for introductions and referrals. The positioning is the friend of the client is being offered the chance to take a step up when they become a private banking client.Does this sound expensive? Yes. However, they usually have the entire relationship sewn up. It’s usually a financial planning and managed money relationship. The minimum asset thresholds are in the multiple millions. There’s banking business too. There’s a wall and a moat, so they can think long term.Related: Where Do Advisors Make the Most Money? Can I Do That?There are several ways you can try replicating the private banking business model.
  • Your bank owns a private bank. Where do the bankers come from? Can you transition from your part of the firm into theirs?
  • The RIA model. Wire houses have lots of rules. The firms providing structure for Registered Investment Advisors and financial planners do too, but there’s probably more latitude. Some of these firms have relationships with providers of legal and accounting advice in their local market.
  • The wire house model. Your firm is owned by a bank. You have access to lending products, possibly insurance and other services. You develop a personal relationship with someone in each specialty area. When you help a client, you are pretty confident the ball won’t get dropped. You are accountable to your client.
  • Private bankers have a business model that works for them. It could work for you too.