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Private Banking Vs. Wealth Management: 5 Differences In Canada


Most Canadians think these terms are similar. They can use them interchangeably. That is not the case as Private banking differs from Wealth Management. There are several differences between them. Be it the meaning or the practical working, everything differs. So, let us expand our knowledge base and know everything through this article. 

Private Banking vs. Wealth Management

Source: Pexels

 What Do You Mean by Wealth Management in Simple Language?  

Let us begin with understanding what the term “wealth” means.  

“Wealth” represents a group of valuable possessions/ assets in which you have invested your money with the intention that it will grow in the coming years.  

When you associate the term “management” with wealth, you try to manage your valuable possessions to maximize your overall returns from these assets.  

Hence, we can conclude that “Wealth management” is a process using which you constantly assess and scrutinize your portfolio so that:  

  • Maximize overall return from the individual asset  
  • Change your asset mix in a way that it aligns with your risk appetite. 
  • Tap the additional sources or avenues of investment to diversify your portfolio and achieve your financial goals  

The term “Wealth management” can suggest managing portfolios that run-in millions of dollars. However, this is not true, and you can apply this process to portfolios of any size, comprising as low as two investible assets.  

What Is Private Banking in Simple Language?  

Private banking refers to the specific services offered by the banking companies to their clients, who usually fit into their profile.  

For example, your bank might extend you a personal banking service only if you have a net worth which is not less than eight figures. However, one can relax this criterion for your family members, who can also enjoy personal baking even though they do not satisfy the minimums.  

When we talk about private banking, the ball lies with your bank, with whom you have an active bank account. It remains restricted to the banking officials. You can avail yourself of the several benefits of private banking only if you are a high net-worth individual (HNIs) and meet the threshold criteria set by your bank.  

The various advantages offered under the private banking are:  

  • Access to invite-only banking and financial products, such as customized credit cards, stock trading discounts, less brokerage, discounted locker fees, etc.  
  • Provision of dedicated concierge service allowing you to save your valuable time by not standing and waiting in the queues  
  • Access to the cheaper line of credits, advances, and other types of loans  
  • Perks, freebies, and discounts. For example, you can get a safe-deposit box at no additional cost or a credit card with a waived annual/ monthly fee.  
  • Assignment of a personal relationship manager who can help in your banking needs and requirements  
  • Personalized, privileged, and dedicated care, allowing you to enjoy your banking services  

What Are the Two Different Arms or Categories of Wealth Management?  

The wealth management scope is extensive. You can apply wealth management to several scenarios, financial goals, and events. However, we can single out two primary categories of wealth management that are necessary for you to know. These are:  

1. Investment Management  

You are too busy with your job or business. And you do not have spare time to analyze and evaluate the overall performance of your portfolio.  

Cover all such situations and portfolio owners with specialized services by “investment management.” 

The service providers are qualified investment managers skilled enough to manage your portfolio for an annual fee, calculated based on a fixed percentage applied to the client’s total assets under management (AUM).  

For example:  

  • Your investment manager charges 1% in annual fee  
  • You have allowed him to manage your total assets worth $800,000  

In such a case, the investment manager will charge an annual fee of $8,000 ($800,000 x 1%) from you for managing your portfolio.  

Role of an Investment Manager  

An investment manager decides where your money is going. Hence, the primary role of the investment manager is to:  

  • Search for the latest investment avenues and lucrative market opportunities and can offer high returns. 
  • Consistently change the portfolio asset mix after considering the overall risk appetite and expectations. 

 For example:  

  • If you are a conservative investor, an investment manager will invest your money in stable assets such as Exchange-Traded Funds, Secured Debentures, Gilt Funds, etc.  
  • If you are a risky investor, you will see your money getting invested in the individual listed stocks, derivatives (options, futures, forward contracts), or in the equity of a start-up (venture capital funding).  
  • Meet the diversification targets of the client and assess the potential of every investment opportunity before making an investment  
Source: Freepik

2. Financial Planning  

This service is more suited and inclined towards the individual investors who wish to accumulate a corpus of funds in a definite time to meet some specific goals.  

For example:  

  • You are 28, a salaried professional, and are living with your two kids.  
  • You aspire to retire at 55 and want to accumulate enough money for the two college-level educations.  
  • In such a case, you will approach a financial advisor who will guide you about the strategies and investment techniques using which you can achieve your financial goals.  
  • The advisor might also suggest a few changes you can incorporate into your spending habits.  

What Are the Top Five Differences Between Private Banking and Wealth Management?  

As mentioned earlier, both these terms are different and work differently in the financial space. Let us now have a look at the five differences between them: 

S. No. Parameters of Difference Private Banking Wealth Management 
1 Does it provide financial advice and portfolio planning? No, private banking commits to enhancing your banking experience Yes, wealth management inclines towards: 
1. Managing your portfolio 
2. Giving you financial advice 
3. Enhancing your overall portfolio returns as per your needs and requirements 
2 Who provides these services? The officials of the bank with which you have a bank account Investment managers and Financial planners/ advisors 
3 Who is covered? Only high-net-worth individuals meet the minimum requirements set by the bank Any investor who wants the portfolio to be managed professionally 
4 Does it offer perquisites, benefits, and discounts? You tend to get privileged banking services and several offers, discounts, and perquisites. May or may not, as it aims to manage your portfolio and assets. However, you can get annual fee discounts and freebies if you have allowed them to manage a large AUM.  
5.  Is there a default risk? Yes, there is always a possibility of a bank going bankrupt, and in such a case, you might lose a substantial portion of your deposits  May or may not, as it entirely depends upon the asset you have invested money in. 
For example, You might lose money if you have invested in individual stocks, while that is not the case with Gilt funds.  

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