For private banking clients, the experience is beyond their expectations.
You may have noticed a link on your bank’s website or a sign for private banking and wondered what that was. Also called concierge or boutique banking, private banking is a specialized type of banking offering more than the usual retail banking services.
Simply put, private banking provides personalized attention and specialized services to higher net worth individuals—customized strategies to simplify one’s financial life.
A primary feature of private banking is the highly personalized relationship established between the client and an experienced, personal private banker. This individual relationship manager is the primary point of contact for all banking and other related services—everything from ordering checks to investing money. This simplifies the client’s banking business by handling it through a single designated person. Private banking professionals are subject to more stringent licensing requirements, given their expanded role.
Despite the focus on a single point of contact, additional members of the bank staff, executive leaders and even the bank CEO may become involved as their help and expertise are needed by the client.
Private banking divisions and services are offered by many area banks you’re familiar with. Your bank’s website will show if private banking services are offered there.
Specialized Financial Products & Services
Private banking generally offers a wider variety of customized financial products and services than retail banks and credit unions. Services may include such things as estate planning, financial advice, investment management, even bill paying, mail forwarding and maintaining a residence. These services are designed to help clients save, invest, spend, borrow and protect their money with trust and confidence.
Private bankers may act as advisors and financial coaches committed to responsible finance, creating economic value, and working for their clients’ best interests using tailored solutions. By taking the time to fully understand the clients’ needs, private bankers can develop a strategy for immediate and long-term goals while continuing to build and preserve wealth.
A larger variety of conventional and alternative investments are available through private banking, including proprietary solutions not available to retail banking clients. New products are constantly being developed to meet private banking clients’ evolving needs.
Other advantages—beyond never having to stand in line for a teller—include more competitive rates and relationship-based pricing. These benefits range from exclusive mortgage rates, high interest deposit accounts, discounted consumer credit and unsecured lines of credit, to things like special credit cards and reduced banking fees.
Larger banks have the capacity to add even more products including alternative investments, concierge services, art and collectible valuation, specialty financing for yachts and airplanes, and real estate advising.
Priority service is another common benefit. Clients may meet in a private setting or transact their banking business by email or phone. Some private banks may offer 24-hour concierge service.
Deposit Minimum and Fees
How do you become a client at a private bank? A bank may offer invitations to high net worth individuals the bank already works with, while other clients may seek out the bank for its reputation or services.
The minimum of investable assets needed to qualify for private banking varies widely—from around $250,000 to several million dollars held at the bank itself or at other institutions.
And, of course, the services are not free. Fees charged also vary and may be based on the amount invested. Fees may also be based on the number of transactions, the services used or a percentage of the account amount.
Today’s banking clients want an efficient process for conducting their business when and how they want. The goal of private banking is to allow them to access most, if not all of their financial needs through a single point of contact at the bank. The hope is that the relationship lasts through generations and builds value for all.
Anthony C. Weagley has been CEO and President of Malvern Bancorp, Inc. and its subsidiary Malvern Federal since 2014. He’s recognized as a leader in the financial services industry with over 35 years of experience. He’s served as CEO and President of both Center Bancorp, Inc. and Union Center National Bank, Inc., a subsidiary of ConnectOne Bancorp. MalvernFederal.com.
Why Credit Unions Are Growing in Popularity and How They’re Different from Banks
Credit union membership has been on the rise, with more than 49,000 credit unions operating in 97 countries. In the U.S. there are about 6,500 federally insured credit unions serving 100 million members.
Much of this appeal comes from credit union members being part owners of their financial institutions. And credit unions are governed by a board of owners—not stockholders—so profits go back to the members through higher savings dividends and lower loan rates. As consumers become aware of the benefits, many are gravitating toward the more personalized experience offered by credit unions.
Serving People, Not Profit
The not-for-profit credit union approach to providing financial services is based on a philosophy of “People Helping People.”
The concept dates back to Germany in the mid-1800s when townspeople pooled their savings to provide loans to farmers hurt by a poor growing season. This cooperative approach helped farmers avoid paying high rates being charged by less scrupulous lenders. Today, credit unions continue to offer low-cost financial services that rival those of banks.
The Consumer Advantage
The Consumer Federation of America (CFA) recommends that consumers check into credit unions for good loans and savings rates, noting that compared to credit unions, banks pay lower rates on savings accounts and CDs, but charge higher rates for consumer loans.
“The reason credit unions offer better rates is that they are non-profit, member-owned, cooperative institutions that work for the benefit of their members,” says CFA Executive Director Steve Brobeck. “Credit unions don’t have to pay dividends to stockholders or directors, and operating expenses are considerably lower than the operating expenses of banks.”
In addition to basic share accounts and personal loans, many credit unions offer share draft services (checking), credit cards, ATM and debit cards, IRAs, account insurance, savings club accounts, student loans, mortgages, auto loans and financial planning services.
While some banks may have more brick and mortar locations, credit unions have formed an extensive network so members can conduct transactions at more than 5000 branches and 2000 self-service kiosks nationwide. And with today’s technology, members can make transactions with their mobile devices from just about anywhere.
Credit Unions: Safe and Sound
Like savings accounts at banks, savings at credit unions are federally insured to at least $250,000 and backed by the full faith and credit of the federal government. Credit union share accounts are insured by the National Credit Union Share Insurance Fund, administered by the National Credit Union Administration, a federal agency. This fund, separate from but similar to the FDIC, is supported by credit unions, not tax payer dollars. The fund has never had a negative balance and remains extremely healthy with the legal limit being held in reserves.
Credit unions continue to be safe financial service providers that offer consumers alternatives to for-profit financial institutions. Unlike banks, credit unions are limited in their investments to instruments that are issued or guaranteed by the federal government. And for many low-income people who can’t afford the fees and high minimum balances required at some banks, credit unions are the only source for affordable loans and a good return on savings.
Where Everybody Knows Your Name
Typically, credit unions serve a specific employee group; members of a trade, industry or profession; or those living, working, worshiping or attending school in a specific community. And credit unions rank high in satisfaction because of their deep community connections and long-term relationships. It’s not unusual for them to serve multiple generations of the same family as members navigate first cars, college, homes and eventually retirement.
And while there’s no doubt that the list of financial services is impressive, when you get right down to it, it’s refreshing to walk into a financial institution these days where everyone knows your name!
Resource: PA Credit Union Association.
David LaSala is President and CEO of Benchmark Federal Credit Union, headquartered in West Chester, with branches in Great Valley and Collegeville. Celebrating its 75th year of service, Benchmark FCU serves Chester County with the goal of supporting and improving the economic wellbeing of its members throughout their lives. 610-429-1600; BenchmarkFCU.org.
Tax saving tips for more holiday gifts.
As you hurry to make your holiday list, don’t forget your financial planning list, which has only a slightly later deadline. There are many year-end planning techniques you can use to minimize your 2013 federal taxes. Here are four to discuss with your tax advisor before New Year’s Eve.
If you plan to make charitable contributions in 2013, consider donating appreciated assets rather than cash. This may avoid tax on the appreciation of the assets while, in many instances, still allowing you to deduct the full market value.
If you’re 70½ or over, you can also decrease your taxes by making charitable gifts directly from your IRA to qualified charities before December 31. You can exclude up to $100,000 from your annual gross income, and this direct transfer to a charity may also satisfy required IRA minimum distributions for the year.
Finally, to save gift and estate taxes, you can make gifts that are sheltered by the annual gift tax exclusion—currently $14,000 per recipient. As there’s no limit on the number of people to whom you may make gifts, until the end of 2013. You can give up to $14,000 to as many people as you wish, with no tax on gifts or use of your lifetime federal transfer tax credits.
Planning IRA Contributions
Contributions to your traditional IRA before the end of the year decrease your taxable income. The annual limit in 2013 is $5,500, with an additional $1,000 catch-up contribution for taxpayers who are 50 years or older. If you actively participate in an employer pension plan, there are limitations based on your adjusted gross income for making deductible contributions.
More tax savings are possible by converting your traditional IRA to a Roth IRA before 2014. As you may know, the income limit on Roth IRA conversions does not apply for 2013.
Another strategy: If you converted your traditional IRA to a Roth IRA earlier this year and the value of the investments has fallen, you may reverse that conversion. This strategy is beneficial because you can convert again, now, and pay less tax on the conversion because of the decreased value of the investments. The tax on this conversion must be paid in the year of conversion, though.
And remember, if you’re 70½, you must take the required minimum distributions from your IRA or pay a penalty of 50% of the amount not withdrawn.
Adjusting Income and Deductions
Deferring income until 2014 may offer tax savings if you expect to be in a lower tax bracket next year. Similarly, accelerating deductions by prepaying deductible expenses in 2013 can create tax savings by increasing deductions for the 2013 tax year.
A key consideration is the impact the federal alternative minimum tax (AMT) may have on you for 2013. Many tax breaks allowed for purposes of calculating regular taxes are not allowed for AMT purposes or are calculated in a more restrictive way for AMT purposes if you or your spouse is over 65. As a result, in some cases, deductions should not be accelerated. You should obtain professional advice to determine what’s best for you.
Working with your investment and tax advisors, consider realizing losses on stock while preserving your investment position. There are several ways to do this. For example, you can sell the original holding and then buy back the same securities after a proscribed waiting period.
Be aware of the new 3.8% tax on net investment income, however, which is imposed once certain income thresholds are reached ($250,000 for joint filers; $125,000 for a married individual filing a separate return; and, $200,000 in any other case).
A final note: These are just highlights of some available year-end tax planning ideas, and restrictions and rules are required to qualify for the tax benefits. Additional tax-savings techniques may be available to you, but each should be evaluated in the context of your individual situation and in consultation with your tax advisor.
Elizabeth Shevlin Roberts is the Chief Fiduciary Officer of the Wealth Management Division of The Bryn Mawr Trust Company.With over 25 years of experience in estate, trust and charitable gift planning and administration, she serves high net worth clients and coordinates charitable gift planning advice to nonprofit clients and donors with philanthropic interests.