Private Banking: Make Bank without Selling Your Soul or Imprisoning Yourself in a Cubicle 80 Hours per Week?

“I’ll miss you a lot, but it’s a good call to move to private banking – that’s the best way to meet rich guys.”

I was about to leave the institutional sales department at my old bank, and my supervisor was giving me the proper send-off.

Girls in finance might have the gold-digger reputation, but I didn’t get into private banking because I wanted to meet rich guys – I got in because I was in the right place at the right time.

Little did I know what I had gotten myself into…

Private Banking: What You Do

I had received a 3-month notice at my old bank when I refused to transfer to a division that the department head wanted me to transfer to – so I had to find something else quickly or leave.

I interviewed across all departments and even different banks, and landed an offer as a relationship manager at a private bank.

I ended up not staying too long, but learned enough to tell you all about private banking – from what you do to the different roles to how to break in to how much you get paid.

What is Private Banking (PB)?

The private banking division at an investment bank manages assets for high net worth (HNW) individuals. You can read that as, “You’re rich but have no time to invest your money – let us make investment decisions for you, and we’ll collect a fee for those services.”

Usually these HNW individuals are worth over $5 million USD at the bulge bracket banks, but sometimes lower net worth individuals can also sign up depending on the group.

Teams are usually split into those that manage regular HNW clients and ones that manage ultra HNW clients – no, the “ultra” ones don’t have superpowers, but they do have financial assets of more than $30 million USD.

As you might imagine, the ultra HNW clients tend to be more demanding and banks devote more resources to wining, dining, and advising them. The minimum account size for PB clients is around $2 million USD, while the minimum account size for ultra HNW clients might be around $10 million USD.

Private Banking / Private Wealth Management vs. Asset Management

In PB / PWM, the money comes from wealthy individuals, while in asset management (AM) it comes from institutions – the likes of Fidelity, pension funds, insurance companies, sovereign wealth funds, and so on.

Roles in Private Banking

The two main roles are investment professionals and relationship managers (RM) – investment professionals manage clients’ money and recommend products, while RMs manage the relationships, respond to clients’ requests, and also sell products to clients.

It’s similar to the split between execution and relationship management in investment banking, or the industry vs. product group distinction.

RMs and investment professionals usually attend client meetings together and support one another when answering clients’ questions.

How Do Private Banks Make Money?

As you might expect, private bankers make money from fees charged to clients – but there’s more to it than that.

First off, they sell managed accounts (also known as controlled or discretionary accounts), which are professionally managed and can be personalized to cater to clients’ needs – banks charge a fee for this depending on the size of the account and get recurring revenue since the fees are collected each month or each quarter.

Private banking clients also have brokerage accounts, which allow the bank to earn money by selling products such as IPOs and secondary offerings – so if a PB client wanted to buy shares of LinkedIn’s IPO, private bankers would coordinate with the equity capital markets team to ensure that the client received a fair allocation.

Then there are other services like estate planning, income tax planning, and philanthropic planning – so the fee parade never halts.

Private Banking vs. Investment Banking

One common, yet incorrect line of thought is that private banking and investment banking are completely separate – nothing could be further from the truth.

There’s a ton of overlap because many HNW clients want direct access to the investment bank’s products – IPOs, secondary offerings, bond issuances, and even access to the most exclusive hedge funds and private equity funds. So private bankers must work with investment bankers to ensure that their clients can invest in all of those.

And PB clients – many of whom are business owners – might also want advice on restructuring or selling their businesses and may contact investment bankers to get their advice.

There’s even more overlap in Asia because family businesses dominate the IPO market – so private bankers work closely with investment bankers to make sure that their banks win new IPO mandates.

Breaking Into Private Banking

So now you know something about what you do in private banking, how you make money, and the difference between private banking, investment banking, and asset management.

Now, how do you break in?

My Own Story

I broke into private banking by building contacts throughout the investment bank – I only had 3 months, so I focused on places with specific positions available.

I was lucky because private banks were expanding when I started looking for positions, and because many private bankers were impressed by people with investment banking backgrounds and top schools on their resumes.

You don’t see degrees from places like Harvard as much outside the US, and those types of schools are especially well-regarded in Asia.

Plus, my boss was looking for someone smart, efficient, good-looking, and charming, and I fit the bill perfectly. :)

I’ve found that it’s easier to get into private banking than investment banking – the prestige and pay are both lower, so there’s less competition and you don’t see as many of the OCD overachiever types spending months preparing for interviews.

If you want to work in private banking in Asia, you should know a local language such as Mandarin or Cantonese so you can talk to clients – you also need to understand the local culture, speak fluent English, and come from a well-known university. PBs like MBAs, but you don’t need the degree to break in.

Private Banking Interviews

Most of the interview questions were variations on “Why do you want to do private banking?”

I had worked with clients in equity sales before this, so I could sell my experience working with institutional clients and use that to convince them that I could also work with HNW clients.

That strategy doesn’t always work because it depends on the institutional clients and HNW clients in your region – in some places they can be very different in terms of personality and culture.

I didn’t go all-out with interview prep, but one friend of mine did his homework to break in: he studied for and passed the CFA to prove his literacy in finance and read all sorts of annual reports and filings to learn about the bank’s culture. The interviewers asked him very few finance questions and focused on his personality instead.

The top questions my friend and I both received in PB interviews:

1. Why do you want to do private banking? / Why do you want to work for us?
2. How can your previous experience add value to PB?
3. Tell me more about your interpersonal relationship and analytical skills.
4. What do you think about the markets?

Most of these are self-explanatory if you read the interview guides on this site; for the first question, you want to point out how you enjoy working with people and investing in the markets and that you see private banking as a perfect blend between the client-centric nature of IB and the public markets investing you would do in trading.

For #2, focus on previous experiences where you worked with clients – especially demanding or difficult ones – and show how you resolved problems and accomplished your mission anyway.

The Private Banking Culture and What You Do Day-to-Day

The pace is slower than IB and the culture tends to be more political / bureaucratic because everything is relationship-driven and merit doesn’t always count for much.

Since there are more girls in PB than in IB, people can be catty at times (and yes, I’m female so I’m allowed to say this).

As the relationship manager, I attended a lot of client meetings and took notes on what the client liked doing for fun, what his/her kids did, where their kids planned to go for college, and so on – all that is fine if you like getting to know people, but overall my learning curve in institutional sales was much steeper than it was in private banking.

My average day usually began with the morning meeting where bankers discussed what was happening in the markets, and I would help my boss prepare investment analysis and anything else she had to present. I worked closely with the investment professionals to talk about specific clients and figure out what products might be good for everyone.

The RM role is much fuzzier than the investment professional role – that’s more for the quantitative and analytical type. If you do that, you’ll act more like a trader’s assistant by preparing account statements and sales pitches for personal investments – you don’t get to see clients, but you do work closely with the RMs.

Hours are roughly 8:30 AM to 7:30 PM – with 2-hour lunch breaks, so life is not exactly difficult. That might not be enough to become Don Draper, but you could probably still squeeze in at least one affair at lunch each day.

Show Me the Money!

As you might expect, pay is significantly lower since the lifestyle is so good and since the work itself is lower-stakes and not as stressful.

The analyst base salary is around $70K, with bonuses ranging from $18K – 35K depending on the economy.

Those are good numbers for your first job out of school, but bonuses will always be less than what you’d earn in investment banking since the fees are lower and overhead is higher.

Got Exit Opps?

The most common exit is to go to another private bank, or another PB division at a large bank.

Some people do get into private equity firms and hedge funds, but they’re mostly in roles such as investor relations or fundraising – without transaction experience, your chances of getting to work on actual investments aren’t great.

Some investment professionals also move into research or help funds analyze investment products and market trends.

Overall, your exit opportunities are definitely more limited than in investment banking since you don’t get deal experience and since the accounting and finance involved are much simpler.

Why I Left Private Banking

So, back to my story in the beginning: why did I decide to leave early on after I got into PB?

The short answer: another bank gave me an offer in their ECM department, and I was more interested in capital markets than private banking. I felt that it would be easier to go back into private banking whenever I wanted, but that IB would be much tougher to get into.

If you can deal with bureaucracy and you want stability, a balanced life, and decent pay, private banking could be a good option for you – I preferred the work environment of IB, so it wasn’t a good fit for me.

The Guy Made a Million Dollars!

Don’t hold your breath if you want to make millions in private banking – it’s much harder than it sounds to bring in ultra HNW clients and to win their trust.

If you already have loads of rich contacts, you might catch a lucky break and rise to the top quickly. Otherwise, you’re better off working for a relationship manager who can share his/her accounts with you.

If you’re smooth and good with office politics, private banking might be great for you – but if not, you’d make money faster in hedge funds, private equity, and investment banking since bonuses in all of those are much higher.

If you can bring in a lot of new assets as a relationship manager you can earn good money, but a rolodex of clients takes a long time to build – and building trust takes even longer than that.

As a senior RM you might have a good life wining and dining HNW clients and hanging out in high-end golf clubs and restaurants – but then you also have the stress of hitting “targets” (assets under management) set by banks.

If you decide to leave private banking, you could leverage your contacts and help them manage their businesses in exchange for equity, or even start your own firm to help them manage and invest their money.

The Best Way to Meet Rich Guys?

I never met the quality rich guys that my supervisor in institutional sales promised – but then I didn’t stick around long enough to go after all the fish in the sea.

But if you don’t mind playing the office politics game, you’re OK with lower pay in exchange for a more stable and balanced life, and you don’t like super-technical work, private banking might be right for you.

And hopefully you’ll meet more rich guys than I ever did.

Nicole Lee has worked in institutional sales, private banking, and investment banking in Hong Kong. When she’s not working, she enjoys kiteboarding at exotic beaches, jumping off planes and bridges, and shark-diving.

Break Into Investment Banking