Private Banking at Family Offices vs. Bulge Bracket Banks: Got Offshore Accounts and Multimillionaire Clients?
It seems like private banking never gets any respect – whether on this site, in random stories you read online, or even in interviews for other jobs.
But as one commenter last time around rightly pointed out, there are a lot of interesting groups and offices operating in the space… IF you look in the right places.
While it will never be as analytical as, say, a quant hedge fund role, private banking can still offer you rewarding work that requires thought and creativity.
The only catch is that you’ll probably have to join a family office to get that kind of exposure.
Our interviewee today knows all about private banking at both large banks and family offices, and he’s going to break it down and tell you all about the trade-offs of both environments.
He also made the most unusual career transition we’ve featured on the site, moving into finance from a professional soccer (OK, “football” if you’re outside North America) background.
Here’s how he did it, and what private banking is like at family offices vs. bulge bracket banks:
Breaking In: How to Set a Stop Loss in Your Personal Life
Q: Your story. Let’s hear it.
A: Sure. Back in university, I was torn between going into finance and making a run at becoming a professional soccer player.
I didn’t know exactly what I wanted to do within finance, so I ended up taking a 3-month long PB / PWM internship that turned into a 9-month internship (which lasted until I graduated).
The firm really wanted me to come back, but I didn’t want to give up on being a professional athlete at that stage.
So I moved to South America and lived and worked there for over 2 years, making money by playing soccer and then working part-time in PB / PWM roles at various banks, mostly in Argentina.
I set a “stop loss” for myself and decided that I wouldn’t stick around unless I could see a path to turning pro within 3 years.
That didn’t happen, so I returned back to Miami after my adventure in South America, immediately contacted my old firm, and they hired me back the next day.
I got really lucky because someone had just quit the week before, so I walked in and took advantage of an open position.
Q: They must have really liked you if you pulled that off after a 3-year absence.
What can you tell us about the finance scene in Miami?
A: It’s almost entirely private banking / private wealth management and it has relatively little investment banking.
There are a few hedge funds in West Palm Beach, but not nearly as many as you see in other major cities.
Lots of students here attend the University of Miami or Florida International University, neither of which is a “target school.”
Because of the environment here, plus the fact that I didn’t want the hours and lifestyle that come along with IB, I decided to continue on in private banking.
Private Banking Family Offices vs. Bulge Bracket Banks
Q: You’ve been around the PB scene in Miami for quite some time now – how would you describe the big differences between family offices and bulge bracket banks?
A: The main difference is that large banks have far more clients – 100+ clients per financial advisor is not unusual, and sometimes it’s as high as 300.
Many family offices, by contrast, have 100 clients TOTAL for the entire office – so each client gets far more personal attention.
That happens because large banks require much less money to get started. You can sometimes open PB accounts with as little as $100K USD, whereas some family offices require more like $20 million+ USD.
And there are only a few hundred thousand people (or less) in the US with net worth in that range, whereas tens of millions of people have at least $100K USD to invest.
Some large banks also spend a lot of time selling PB clients on other products and services, such as credit cards, loans, different investment opportunities, and so on, whereas at family offices clients get a customized experience that’s specific to their needs.
The strategies recommended to you are also different – at banks, you see more “traditional” strategies (stocks, bonds, etc.) recommended by the bank’s research department and forwarded to clients.
Smaller family offices, by contrast, have their own dedicated research teams within the office and will cater to exactly what clients are looking for.
Q: Thanks for the overview. How does the recruiting process differ?
I’m assuming that at family offices they care more about analytical rigor and your investment ideas / stock pitches?
A: Yeah, that is one difference. Another is that large banks like to recruit undergraduate interns to help with all the client reporting work that’s required, whereas many family offices barely try to recruit anyone.
That makes it harder to get an “in” at family offices, but it’s arguably easier to advance in the process since the HR person will be closer to the key decision-makers.
At banks, they’re looking for candidates who are really good at speaking with clients and who want to work in a team of other advisers; at family offices, they care less about client relationship skills since you’ll be doing mostly research and analysis when you first start.
Clients at family offices tend to be older than clients at banks, so a lot of the relationship work is left to older, more experienced financial advisors simply because clients take them more seriously.
Finally, licenses are a major difference in recruiting.
Banks care a lot about the Series 7 and Series 66 licenses since you need them to place trades, whereas at a family office it doesn’t matter as much since junior-level roles are research-focused.
It also depends on your location: many clients in a place like Miami will be foreign, so domestic trading restrictions may not apply (as much).
Clients, Clients, and More Clients
Q: You’ve been describing how clients differ at both firm types – what else can you tell us about that?
A: Since family offices are more specialized, you end up doing everything from legal research to tax preparation to estate planning for clients. At a bank, the work is more focused on investment recommendations.
Clients at family offices also tend to be much more conservative because they’ve amassed their fortunes through decades of work, often operating their own businesses. So they care more about avoiding losses and preserving capital rather than earning high returns.
That’s even more pronounced in Miami since many families are from Latin America, which always seems to have currency/economic crises and political instability.
It’s also a matter of net worth: someone worth $20 million USD will care much more about preserving his/her savings, whereas someone worth $100K USD will care more about growing it aggressively.
Q: Do clients pay different fees depending on the private banking group they work with?
A: At most family offices, fees are based on assets under management (AUM) and a 1% flat rate is quite common (Note: This varies, and sometimes larger accounts negotiate the fee down).
So a family office managing $50 million USD for a client might earn $500K in annual fees from that.
At banks, it might be a flat rate, but it could also be commission-based and linked to the trades you make. You’ll also see more “random” expenses, such as annual account maintenance fees.
Bigger accounts at banks often get a flat rate, whereas smaller ones tend to pay commission-based fees since they trade less frequently.
Q: And what about the different roles at both places?
We’ve discussed the relationship manager (RM) vs. investment professional (IP) roles before, but does it still work the same way at family offices?
A: Yes. The main difference is that the roles are less clearly defined at family offices; you’ll still see research teams, relationship teams, and legal teams, but sometimes there’s also a “middle” role that coordinates everything.
And they still have compliance management roles, operations roles, risk management roles, and everything else.
It can be easier to move into different roles at family offices as well – sometimes advisors will move into risk management roles, sometimes administrative staff moves into investment research, and so on.
Q: You’ve also mentioned how foreign clients tend to be more common at family offices.
What are the main differences between foreign and domestic clients?
A: It’s a different world. I split my time between both client types, and they could not be more different.
With domestic clients, you spend a lot of time on trust and estate planning, retirement, IRAs, 401(k)’s, and so on, so there’s a lot of paperwork and you have to complete quite a few mundane tasks.
“Tax emergencies” each April are also common as high net worth clients realize they need to finish a massive amount of paperwork at the last minute.
International clients, by contrast, are more interested in investment ideas and in coming up with unconventional strategies.
Most foreign clients establish holding companies and put their funds in tax havens, so you rarely see the same issues with filing tax-related paperwork all the time.
In Miami, it’s probably a 70/30 split between foreign and domestic clients – but in other parts of the US it’s more like 95% domestic clients.
So make sure you come to Miami if you want to do private banking!
A Day in the Life on the Beach in Private Banking in Miami
Q: The beaches are great, too. And no state income tax!
I’m pretty much sold on moving there, but let’s continue…
What’s an average day in your life like?
A: Sure. Continuing with this theme of PB at bulge bracket banks vs. family offices, the job is generally a bit easier as an analyst at a large bank because you’re working in a team and your role is well-defined.
During the day, you’ll be busy handling calls and client requests, but your overall work hours are a bit closer to “normal business hours.”
At family offices, the work tends to be much more “random” and you never know what will happen in a given day since it depends on what your clients want.
You’ll often stay later as a junior person because a large client might make a last-minute request late in the day, or they might call you at 4 AM and ask for some analysis (international clients love to ignore time zone differences and call whenever it’s convenient for them – one disadvantage of working with them).
Once you reach the top of the ladder and become a financial advisor (FA), though, your life is generally better at a family office because you have your client list, you’ve worked with them for years, and there’s less turnover (AKA less chasing down new clients) than at large banks.
You’ll see FAs at bulge bracket banks working longer hours and sometimes even working on weekends – part of that is because clients are more tied to you as their specific advisor, whereas at a family office their loyalty is more to the office as a whole.
Q: Let’s talk about money. Where do you make the most?
A: You’ll generally get a slightly higher starting salary at family offices – think $50-60K USD vs. $40-50K USD at a large bank (these are Miami figures and are likely different in other regions).
Keep in mind that Miami is about 50% cheaper than NYC, so it’s perfectly reasonable to live on that salary here.
Your bonus could be much bigger at a large bank since bonuses are awarded on a team-wide basis and aren’t tied as closely to your individual performance.
As you move up and start developing your own client list, it gets a lot more lucrative.
Some financial advisors here make up to $400-500K USD per year and have pretty good work/life balance, working just a bit more than the normal 40-hour workweek and pulling in high incomes due to the 1% fee on clients’ assets.
Q: Miami is sounding better and better.
But isn’t it harder to advance at a family office? You mentioned that clients are tied to that office rather than to a specific advisor, so it must be pretty tough to build your own client list.
A: Yes and no. It’s arguably easier to advance and move around to different firms when you start at a large bank, because clients will follow you wherever you go – it’s like being a free agent in sports.
But as FAs at family offices get older and start thinking about retiring, they often “hand off” their clients to younger FAs who want to take over. After decades of earning a high income, they’re not as motivated to keep servicing the same number of clients once they approach retirement age.
Note, however, that you need to be very lucky with the timing to take advantage of this – and you must already know the FA and the client quite well. This is a gradual process, but as you continue to work at a family office they’ll start introducing you to more and more clients and making sure the clients know who you are.
Also note that this “hand-off process” does happen at large banks as well – but again, timing and your relationship with the FA are both critical.
Finally, sometimes the junior people at family offices get hired because they can bring in clients in the first place – so if you’re in that position it can be easier to win new clients via referrals.
Bottom-line: I wouldn’t say it’s “easier” to advance at one firm type vs. the other, it just depends on what skills you come in with and what you’re looking for.
Q: Awesome, thanks for explaining that.
So far, you’ve made family offices sound like a better option than bulge bracket banks, at least for private banking.
But is that what you’d recommend for everyone interested in the field? Or are some people better off at large banks?
A: It depends. If you’re more interested in research, analysis, and coming up with investment ideas, family offices are better (in my opinion).
But if you’re more of a “people person” and you enjoy the client relationship side, large banks may be a better option.
You also get potentially better exit opportunities at a large bank since you get the brand name on your resume, plus a large network of co-workers.
Going to a family office is more of a “long-term” move where you need to stay for many years to realize the full benefit. You shouldn’t work at one if you’re planning to stick around for only 1-2 years and then leave.
Q: Great! Thanks for your time, this was super-informative.
A: My pleasure! Make sure you check out Miami sometime, too.
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