by Brian DeChesare

Private Banking: The Full Career Guide

Private Banking

If there’s one group that gets more online hate and insulting comments than any other, it might be private banking.

For some, private banking is an entrepreneurial field where you build a client list, advance based on your own merits, and enjoy high compensation and a great lifestyle at the top.

For others, private banking is where you go if you couldn’t get into investment banking or sales & trading.

As usual, the truth is somewhere in between.

I’ll address both views and reach some conclusions here, but let’s start with the basic definitions first.

What is Private Banking?

Private Banking Definition: Private bankers manage financial assets for high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals and handle other financial matters for them, such as tax, estate, and philanthropic planning, in exchange for fees on the managed assets.

The definitions of “high net worth” and “ultra-high net worth” vary, but as rough guidelines:

  • High Net Worth: An average net worth of $5-10 million USD, with a minimum of $1 million.
  • Ultra-High Net Worth: An average net worth of $20-30 million USD, with a maximum of around $100 million (above that level, you’re in “family office” territory).

Since banks charge fees based on a percentage of assets managed, it’s not worth their time to target people with $200K to invest.

At that level – around $200K to $1 million – individuals fall into the “private client services” or “privilege banking” category, which means premium bank accounts, credit cards, and other services.

They may also qualify for private wealth management (see below), but typically not private banking.

Wait a Minute, Why Do Rich People Pay for Private Banking?

consult
“But wait,” you say, “if someone is worth $10 or $20 million, why do they pay for ‘investment advice’ from bank employees who are worth far less than that?”

I would answer this question with these three points:

  1. Many people with this net worth do not pay for private banking because they don’t need the services. Even the bulge bracket banks have only low-single-digit percentages of this market.
  2. Clients typically use private banking for more than investment management. For example, a real estate mogul might pay for private banking so he can get loans for new properties at below-market interest rates from another division at the bank. There’s also the “taking care of tax/legal paperwork” aspect.
  3. Private banking can also be useful for getting loans against illiquid assets such as rare artwork and for gaining access to products not available on normal exchanges, such as shares in pre-IPO tech startups that the bank is taking public.

In short, clients often pay for private banking not because of the investment management services but because it gives them access to other, higher-value benefits at the bank.

Private Banking vs. Private Wealth Management

These two areas (“PB” and “PWM”) are similar, and at some banks, they are the same group.

The main differences are:

  1. Work Focus – PWM focuses on managing clients’ investment portfolios, while PB has a much broader scope.
  2. Net Worth – PWM is open to a much broader set of clients; the minimum net worth might be a few hundred thousand USD rather than $1-2 million or $5-10 million.

Many students complete internships in PB or PWM to get the brand name of a large bank on their resume and then use the experience to apply for other roles.

At the internship level, the PWM vs. PB distinction means little; the differences become more important in full-time roles.

Private Banking vs. Asset Management (“Mutual Funds”)

Private bankers invest on behalf of individuals, while asset managers invest on behalf of institutions (and large groups of individual investors).

A private banker might review a single client’s portfolio, recommend a different asset allocation, and set up the client with tax and estate planning services.

But an asset manager such as Fidelity would invest the funds of endowments, pensions, and similar institutions and aim to earn a high return for them.

Individual investors can also put their money into the mutual funds offered by these firms, but there’s no “personalized service” as there is with private banking.

Roles in Private Banking

At most firms, professionals in private banking are split into Relationship Managers (RMs) and Investment Professionals (IPs).

Relationship Managers maintain existing client relationships and find new clients, while Investment Professionals manage clients’ portfolios, report on performance, and research and recommend new products.

There is some overlap between these roles, but private banking is primarily a sales job.

If you don’t like interacting with clients and catering to their needs, you should not work in this field.

In addition to the RM vs. IP split, groups are often divided based on the average net worth of clients (HNW vs. UHNW) and specific demographics.

For example, one team might focus on tech startup CEOs, another might focus on mid-level financiers in private equity or hedge funds, and another group might work with small-business owners.

The Top Firms for Private Banking

ws
You can roughly divide the market like this:

  • Large Banks: The usual suspects (all the bulge brackets and some middle-market firms and in-between-a-banks).
  • Pure-Play Private Banks: Each firm here manages hundreds of billions of assets (huge but smaller than some of the “large banks”). Example firms include Pictet, Lombard Odier, Julius Baer, EFG, St. James’s Place, Schroders, and Vontobel Holding.
  • Boutiques: These firms tend to have less than $100 billion under management. Examples include Mirabaud, Bordier & Cie, and Degroof.
  • Multi-Family Offices: These firms are also small but might be a bit bigger and more diversified than the boutiques. Examples include Bessemer Trust, Stonehage Fleming, Iconiq, and Notz Stucki.

If you go by assets under management, UBS, Credit Suisse, BAML, and Morgan Stanley tend to be near the top, along with JP Morgan and Goldman Sachs.

These firms differ based on regional strengths, client focus, and internal process and hierarchy.

For example, CS and UBS tend to be stronger in Europe and Asia than in North America.

GS and JPM tend to favor UHNW clients, while BAML and MS have a broader range of clients.

At GS and JPM, there’s more of a structured hierarchy and advancement process, while at firms such as UBS, BAML, and MS, advancement is linked more closely to commissions.

These are general trends, so expect to find exceptions and variations.

Large Banks vs. Boutiques and Family Offices

The general differences between large and small firms are:

  • Client Count: Each financial advisor at the large banks might have 100+ clients, while a family office might have 100 clients total.
  • Net Worth Requirements: Many family offices effectively deal with only UHNW clients, while the large banks are open to a broader set of clients.
  • Investment Strategies: The large banks usually recommend more conventional strategies based on the public markets, while family offices customize their strategies and are willing to recommend the unorthodox for certain clients.
  • Recruiting: The large banks recruit on-campus at both the undergrad and MBA levels, while family offices are far less visible; you’ll have to network on your own to get in.
  • Workflow and Jobs: The scope of services at family offices tends to be broader because they might do everything financial for clients. The RM and IP roles are often blurred because each person does a bit of everything.
  • Junior-Level Roles: At family offices, you’ll spend more time on investments, research, and reporting and less on cold calling and cold emailing because most clients come via word of mouth.

Moving Up the Ladder

There is a traditional Analyst to Managing Director hierarchy at some firms, with different responsibilities at each level.

At others, you start as a “Financial Advisor,” retain that title, and build your book of clients over time.

Regardless of your starting title, you normally begin by supporting the existing Relationship Managers for 2-3 years.

After that, you need to strike a balance between bringing in new clients and maintaining existing ones to keep advancing.

On the Investment Professional side, advancement is more about working with RMs and clients and getting them to implement your strategies and recommendations.

At most banks, you’ll advance from Analyst to Associate in 2-3 years; the advancement time after that is highly variable because it’s performance-based.

Along the way, many people burn out or realize it’s not for them and switch groups. As with IB, PE, and even Big 4 Transaction Services, only a tiny percentage make it to the top.

On the flipside, both RMs and IPs can get promoted quickly if they perform very well.

There’s less of an artificial “promotion timeline” than there is in investment banking or private equity, so you’ll occasionally see people who get promoted from Analyst up through VP in < 5 years (though it’s not common).

A Day in the Life of a Private Banker

day in life
Daily life depends heavily on your role, location, firm type, client focus, and seniority.

If you’re in a junior Relationship Manager role, an average day might go like this:

  • Morning (8:30 AM – 12:30 PM): Meet with your senior RM and some Investment Professionals to review client accounts, performance, and market activity. After the meeting, you scrub corporate websites and LinkedIn for new leads, send some outreach emails, and place a few cold calls.
  • Lunch (12:30 PM – 1:30 PM): Meet with one of the MDs in your group to discuss long-term career planning and the PB industry (this person has volunteered to be a mentor).
  • Afternoon (1:30 PM – 5:30 PM): You go to a series of client meetings with your senior RM and take notes on each client’s goals, major life/business updates, and so on. Occasionally, you chime in with facts and information on investment, estate, and tax products.
  • Closing (5:30 PM – 6:30 PM): You review the day’s activities with your senior RM, plan the rest of the week, and follow up with a few prospects you contacted last week.

If you’re on the investing side, the day might look like this:

  • Morning: Meet with the RMs to discuss different client accounts and update them with your latest recommendations. You then run some performance reports for another set of clients to benchmark them against the markets and their stated goals.
  • Afternoon: Do some research on alternate asset allocations for a few clients who requested them and estimate their returns with these new mixes. You also put together recommended allocations for a few prospects that the RMs recently contacted.
  • Closing: Meet with the rest of your team to discuss market events this week, new products that might interest clients, and overall performance over the last quarter.

On average, the private banking job is about 50 hours per week.

But you are always at the whim of your clients, so expect random requests and favors at unusual times, especially with UHNW clients at smaller firms.

Private Banking Salaries and Bonuses

Compensation for private bankers is based on structured salaries and bonuses or commissions, depending on the firm.

It’s difficult to give ranges for commission-based compensation because it’s highly variable, but the approximate ranges at large U.S. banks that use the salary/bonus scheme are:

  • Analysts: Base salaries starting at $85K and rising to over $100K with bonuses around 15-30% of base. Expect total compensation in the $100K to $150K range.
  • Associates: Total compensation will be in the $150K to $250K range, with the majority in the form of your base salary.
  • VPs / Directors: Total compensation will progress toward the $300K – $500K range.
  • MDs / Partners: At this level, total compensation might be in the $500K to $1 million range, and some may earn over $1 million.

If we run through a quick example, you’ll see how the math works.

The standard fee is 1%, so if a group manages $1 billion for clients, that’s $10 million in fees.

However, only a portion of these fees goes to the team; something like 60% might be allocated to the parent company, with 40% going to the PB team.

In this example, that leaves $4 million for the team.

If the average account is $2-3 million, $1 billion managed means around 400 clients.

At a large bank, a team of 8-10 people might support this client count.

There will also be some overhead expenses, so less than $4 million will be available for distribution.

That amount could support perhaps 2 Managing Directors, 3 VPs/Directors, 2 Associates, and 3 Analysts if you take the mid-points of the ranges above.

The trade-off vs. investment banking salaries is clear: in exchange for greatly reduced hours, expect greatly reduced bonuses.

The average workweek might be 50-55 hours, but your bonus will also be 15-30% of your base salary rather than 50-100%.

At the top levels, private banking can be quite lucrative with a good lifestyle, but it is not easy to get there, and ~95%+ will burn out or quit along the way.

Private Banking Recruiting and Interviews

waiting interview
Recruiting for private banking is less competitive than investment banking, sales & trading, and private equity recruiting.

A good comparison might be corporate banking, but PB may be “easier” in the sense that fewer technical skills are required.

Firms recruit on-campus at the undergrad and MBA levels, and the timeline is less accelerated/crazy than the one for IB roles.

You don’t need multiple highly relevant internships to win a junior-year summer internship; you could bounce around a bit and get a PB internship late in the game.

You can network your way into internships and full-time roles via informational interviews and cold emails, but “networking” is less important because there’s less competition.

Interviews tend to be straightforward and emphasize breadth over depth.

You can expect the types of questions you might receive in an asset management internship interview: market knowledge, portfolio management, different asset classes, economics, why this firm, why this industry, your strengths and weaknesses, etc.

However, the questions are likely to be even less technical, especially if you interview for RM roles.

For example, you probably won’t get detailed questions about the DCF model or even accounting and 3-statement models (which may come up in AM).

And you’re not likely to get any questions about company valuation, comparable company analysis, merger models, LBO models, etc.

A few example questions might include:

Q: How would you assess a client’s goals and make investment recommendations for their portfolio?

Q: How would you add value as a new hire in this group, given that you don’t yet have a wide network?

Q: Why private banking rather than private wealth management (if applicable) or why PB rather than other markets roles like equity research and sales & trading?

Q: How would you invest $1 million right now?

Q: Which asset classes perform best when interest rates are low and when interest rates are high?

Q: How would you analyze a client’s portfolio to recommend a different asset allocation?

I’m not going to write out answers because these questions are not difficult if you’ve read this article and you know enough about financial markets to be competitive for these roles.

With all the “client” and “investment recommendation” questions, the key is to assess the client first (age, background, current and expected future income, wealth, goals, etc.) and tailor your recommendations based on that.

To add value as a new hire, you can assist the senior RMs and IPs with tasks such as reporting and research so that they have more time to win new clients. Eventually, you can help them with maintaining existing relationships as well.

Private Banking Exit Opportunities

And now we arrive at the major downside of private banking careers: the exit opportunities are not so great.

If you’re in a Relationship Manager role, your main options are to stay in that role, move to a different firm, or eventually start your own firm.

You might be able to go into something like investor relations or fundraising for private equity firms and hedge funds, but the experience doesn’t translate 1:1 (sales to institutions vs. individuals).

Institutional sales is another option, but again, it’s not necessarily an “easy” transition.

It would be virtually impossible to move from PB into a transaction-based role such as investment banking, private equity, or corporate development without deal experience.

If you’re on the investing side, you’ll have more options, in theory, because of your experience doing analytical and markets-based work.

Asset management or mutual funds might sound like reasonable options, but the investing styles are somewhat different, and turnover in those industries tends to be quite low.

So, “possible, but not likely.”

You might stand a better chance at certain hedge funds, in macro research roles at funds, or even in something like investment consulting.

Certain sales & trading desks might be options, but it depends heavily on your product knowledge and experience.

If you know a lot about FX and swap products because you’ve helped foreign clients hedge their FX exposure, then the FX desk might be feasible.

But if you have no experience with derivatives, don’t expect to go from private banker to options trader.

Private Banking: Final Thoughts

I’m not going to write a long pro and con list here.

Instead, I’ll summarize private banking like this: it’s fine for an initial internship or entry point into the industry.

It can also be quite lucrative at the top once you have ~100 clients and you’re earning well into 6- or 7-figure income from them.

At the top, it’s less stressful than IB and PE because you don’t have to generate and close new deals constantly.

You just have to keep your existing clients happy and occasionally find new ones, and you’ll keep earning the fees.

However, private banking is not so great in the mid-levels, particularly if you decide against it after working in the field for many years.

Since exit opportunities are limited, you may need to go to business school to re-brand yourself for a total career change.

If you can survive your first 5-7 years, you have a good chance of earning a few hundred thousand dollars per year while working 50 hours per week (or less).

But most people do not even make it to that level because they don’t have the required sales skills and persistence.

If you have other options in finance, I would not recommend private banking for your first full-time job because of the limited optionality.

It’s a better choice if you’ve interned in a few fields, worked full-time in something like IB or S&T, and decided that you like the advantages of PB and don’t mind the drawbacks.

So, while the negative comments about private banking are overblown, it’s also easy to see why it’s not viewed in the same “tier” as the other front-office finance careers.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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