So you’re interested in working in finance, but you’re not sure about investment banking or sales & trading…
While the money and prestige sound amazing, the hours and stress sound nothing short of ridiculous.
I mean, seriously, 16-hour days? It was already hard enough to wake up for your 11 AM classes in school.
If you can’t take the hours, IB is out, and if you can’t take the stress, S&T and most public markets roles are out.
And while it may seem like you have no options aside from working in the cesspools of the back office, that isn’t quite true.
Just say hello to private banking.
If there were ever a finance job where you could earn decent money talking ‘business’ and schmoozing with clients, but which still allowed you to have some semblance of a life, private banking would be it.
The only problem is that breaking in is tougher than you’d think, unless you already have a Rolodex of wealthy friends and family… or you actually want to continue on in that 2nd year PWM internship you had.
If not, keep reading to learn the 3 most common ways to break in and how to advance up the hierarchy:
What is Private Banking Again?
Nicole already laid out a brief summary of the private wealth management / private banking industry previously, but here’s a quick refresher:
Private banking is a specialized banking service offered to wealthy individuals and families.
These wealthy sorts usually have different needs from normal people, and private banks cater to their needs by offering them a full suite of customized banking services, such as discretionary portfolio management, estate and trust planning, investment advice and wealth structuring.
Whereas asset management is about managing institutions’ money, in private banking or private wealth management you manage individuals’ funds instead.
These “individuals” consist of High-Net-Worth (HNW) clients, and private bankers help them to invest their money; definitions of HNW vary, but the minimum account size is usually $2 million USD, with an average account of $5 million USD.
As a private banker, you’re judged based on a variety of factors – but most of them do not matter next to the one whopper of a KPI: your assets under management (AUM).
AUM is directly linked to the total fees you charge, and so your salary is also directly proportional to both of those.
To stick around in the job over the long haul, private bankers have to service their existing clients well while continuing to bring in new client money year after year.
The Long and Winding Road into Private Banking
If you’re already rubbing your hands in eager anticipation over how you’re planning to get good ol’ eccentric Aunt Betsy to invest with you, it’s probably a smart move to step back a little and analyze the industry.
More so than in investment banking or trading, connections and a strong ability to schmooze are especially important for private banking careers – even at the junior levels (at least on the Relationship Manager (RM) side – for Investment Professionals it’s a bit different).
Private banking is quite the anomaly in finance, in the sense that a ‘rookie’ private banker with a strong network can easily rise and earn much more than someone with a lot more experience within their first few years.
I used to hear countless stories about newly minted private bankers fresh out of school pulling in ridiculous salaries simply by managing their parents’ wealth.
In fact, private banks tend to actively ‘woo’ the progeny of Ultra-High-Net-Worth clients in the hopes of solidifying the relationship between the bank and these UHNW individuals (worth at least $10 million USD).
But if you haven’t been born into the family of the Sultan of Brunei, what are the odds of getting a job as a private banker and how can you make it happen?
If you’re starting from scratch with no clientele, you probably won’t be able to enter the industry as a private banker at anything above the lowest rung on the ladder (on the RM side).
Some private banking groups do bring in “regular” fresh graduates as management associates to groom them for the job, but the more traditional routes to becoming a private banker are less glamorous.
We’ll look at the top 3 most common methods of breaking in here (Note: The focus is on Relationship Management roles, not Investment Professional roles):
Route #1: Move Up Through the Private Wealth Management Hierarchy
If you can’t bring the high-net-worth money, then you have to start from the bottom.
In the world of wealth management, this is usually called:
Otherwise known as mass-market or consumer banking, it’s considerably easier to get a job in this segment of private wealth management.
The pay usually starts off a fair bit lower and attrition rates are high, so banks tend to hire more people knowing that most will eventually leave of their own accord.
Personal bankers cater to the average retail client with a banking account.
In Asia, personal bankers are usually stationed at individual bank branches and when a retail client expresses a wish to invest money, they’re referred to the personal banker who gives them advice on how to invest their money.
More or less anyone can be a retail client, so the deals tend to be much smaller and the suite of products offered to these retail clients tend to be less sophisticated.
If you’re absolutely determined to become a private banker, personal banking is one way of getting your feet wet while learning the ropes of advising clients on what to do with their money.
If you’re able to put in the hours and not burn out spending most of your working day telling nice old ladies to put their life savings in municipal bonds, you just might be able to build a decent enough portfolio to move up the ladder to…
This is usually a catch-all for the intersection between personal and private banking.
Names for this segment vary from bank to bank, but clients are usually required to have a minimum account size of $200,000 USD up to as high as $1-2 million USD.
Privilege bankers are able to offer their clients most of the products available to private banking clients.
Truth be told, aside from not being able to offer access to the more exclusive hedge funds and private equity funds, privilege bankers and private bankers have very similar day-to-day jobs.
While the natural move from privilege banking is to go into private banking, sometimes the bankers in this segment would rather stay and service their existing clients.
While there’s some overlap between the clients in both segments, an experienced privilege banker would have a sizable portfolio of clients and a fair number of these clients might not be able to qualify for a private banking account.
Rather than starting from scratch, a privilege banker might simply choose to stay in this segment and continue to grow his/her customer base – ironically, moving up to private banking might result in a loss of income if few clients qualify for that tier.
But if they choose to take the chance, they’ll make the move to…
The holy grail of private wealth management. You’re dealing with the big kahunas, much larger expense accounts and, by this time, if you’ve slowly climbed up the rungs, you should also be earning a pretty decent-sized paycheck while maintaining a relatively cushy lifestyle (at the senior levels).
It’s not uncommon for experienced private bankers to spend their days playing golf with their clients, seal a deal or two, and then knock off for the day at around 4:30 – 5:00 PM.
If you have strong client relationships and solid AUM growth, the bank doesn’t really care what you do with your time – it’s just like how MDs in investment banking are judged almost 100% on the fees they generate.
Think of this entire process as analogous to the career of a poker professional: you’re starting off with a tiny bankroll, playing at the small-stakes tables while honing your craft.
As you get better, you move ‘up’ to the mid-stakes tables and if you’re talented / hard-working enough, then you’ll eventually grow your bankroll to the size where you can start playing in the big leagues.
Route #2: Start Out as a Private Banker’s Assistant
A less-trodden path to becoming a private banker involves starting out as a private banker’s assistant.
The private banker’s assistant fulfills all the administrative needs of a private banker or a small team of private bankers.
You’ll be dealing with settlements, documentation, and making sure that the bankers don’t mess up their schedules.
You’ll occasionally get the chance to speak to clients, but there usually won’t be much chance for meaningful interaction.
The chances of making the switch from assistant to banker are unlikely, at best, and it’s akin to making the move from the back office into the front office.
With that said, I’ve personally seen two friends make the transition so it’s not impossible.
There are usually two ways to do it:
- The private banker or team of bankers you’re working with like you and throw you a bone by giving you a small selection of the clients they’ve outgrown. From there, it’s sink or swim.
- A private banker leaves or retires. The department decides to restructure and the boss decides to throw you a bone. Depending on how well-liked you are, you could end up with a substantial portfolio of clients from the get-go.
Unfortunately, the odds of this happening are low at best.
You don’t develop much of an “investment skill set” as a private banker’s assistant and you can’t offer much outside of being a really, really nice person to be around.
That’s a great mantra to live your life by, but you can’t exactly rely on that to land your dream job.
Route #3: Move In From Another Area in Finance / Start Out as an Intern and Continue
Everyone seems to do the standard PWM internship at Merrill at some point, so that is an option – though full-time hiring rates vary greatly, and you’d be coming in at a more junior role than if you had progressed through the personal –> privileged –> private banking hierarchy.
Sometimes, depending on the bank and region, it’s also possible to move in from a different area of the bank, such as investment banking.
You will not see MDs or senior-level bankers doing this because the skill sets are just too different – but sometimes analysts and even associates may move around if the bank is firing in one area and hiring in another (you can read one story of that here).
It can be much, much easier to move into private banking in a relationship manager or investment professional role if you’re coming from something like IB and have brand-name credentials and education.
The interview process tends to be much “fuzzier” and revolves around fit and why you want to do PB rather than advanced technical questions.
The downside, of course, is that you’ll be moving into a junior role without your own client list – whereas someone who moved up the hierarchy in private banking might be able to take some of his clients with him along the way.
The bottom-line: If you don’t mind starting out at the very bottom of the ladder, it’s easiest to use graduate recruitment / internships to get into private banking.
After that, the personal banking –> privilege banking –> private banking move is the most logical method. And being a private banking assistant comes in last place.
There are, of course, other paths into the private banking industry.
As one example, sometimes successful real estate agents or luxury car salesmen have a network of HNW clients and they could leverage those connections to break in.
If that’s your background, you’d probably stand a much higher chance of doing well in private banking compared to professionals breaking in from other areas of finance – sales is sales, after all, and junior-level bankers and traders won’t have much practice with the sales process.
A Dream Finance Career?
Pop quiz time: if private banking offers you the double whammy of decent, if not pretty darn good pay, plus regular working hours, why does everyone still want to be an investment banker or trader?
While a career in private banking offers the rare option of sane working hours and decent pay, most private bankers have to spend their time cultivating relationships as opposed to analyzing investments… and these “soft skills” are not very transferable.
Yes, you also spend time developing relationships as an MD in investment banking, but you do that with CEOs and CFOs of large companies as opposed to HNW/UNHW individuals, many of whom are small business owners.
And a small business owner is not exactly going to take his company public at a multi-billion dollar valuation, so these relationships carry less value on the investment banking side.
So your main exit options are:
- A) Bring your network of clients with you to another private bank; or
- B) You could possibly work in an executive capacity for one of your client’s businesses, but these opportunities are rarer than you’d think.
There’s also a lot less “glamour” in the job than you’d imagine, and HNW clients are known to make ridiculous demands of their bankers.
If one client contributes 30% of your AUM and insists that you walk his dog in a pink tutu, well, you’d better get started shopping for ballet shoes.
But as C-level executives at large corporations they tend to be more professional than HNW/UHNW individuals, some of whom amassed their wealth in “less conventional ways.”
With that said, a career in private banking is still an attractive option for anyone willing to overlook the limitations of the job.
Whether the economy is on fire, in a recession, or just mediocre, one thing’s for certain: the rich are always getting richer.
And so they’ll always need more private bankers to manage their wealth.
So even if you’re not from the Sultan of Brunei’s family, you just might get to manage part of his wealth one day – or at the very least, shop for ballet shoes for his dog.