Private Banking Explained

Swiss Private Banks work in the field of Wealth Managementand are usually privately owned, general or limited partnerships serving both domestic and foreign clients. whose main function is to preserve and safeguard their clients interests.

Privacy is the primary benefit of Private Banking. Private banks often provide HNWIs with tailored solutions, which are kept confidential.

Advantages of Private Banking

Private banking offers clients a variety of perks, privileges, and personalized service, which has become an increasingly prized commodity in an automated, digitized banking world. However, there are advantages to both the private bank clients as well as the banks themselves.

Wealth Management (WM) or Wealth Management Advisory (WMA) provides services to a wide array of clients ranging from affluent to high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals and families. It is a service that incorporates structuring and wealth planning to assist in growing, preserving, and protecting wealth, whilst passing it onto the next generation in an efficient manner and in accordance with their wishes for the current and future generations. Wealth management often brings together tax planning, wealth protection, estate planning, succession planning, and family governance. 

The big banks essentially offer every type of transaction, particularly investment banking (capital market transactions, securities trading, money market transactions, financial engineering, securities underwriting as well as consulting on and conducting mergers and acquisitions).  

Investment banking is the division of a bank or that serves governments, corporations, and institutions by providing capital raising and mergers and acquisitions (M&A) advisory services. Investment banks act as intermediaries between investors (who have money to invest) and corporations (who require capital to grow and run their businesses). IPOs helping companies to go public, leveraged finance that involves lending money to firms to purchase assets and settle acquisitions.

Corporate banking, also known as business banking, typically serves a diverse clientele, ranging from small- to mid-sized local / international businesses with a few million in revenues to large conglomerates with billions in sales and offices across the globe. 

Commercial banks usually offer the following products and services to corporations and other financial institutions:

• Loans and other credit products (secured or unsecured)
• Treasury and cash management services
• Equipment lending
• Commercial real estate
• Trade finance

Retail  Banking provides financial services to the general public usually with a domestic focus. Also referred to as consumer or personal banking, this side of the banking sector allows consumers to manage their money by giving them access to basic   banking services, credit, and financial advice.

Retail  banking offers a wide range of products and services including:

• Checking and savings accounts
• Mortgages 
• Automobile financing
• Credit cards / Debit Cards
• Lines of credit (unsecured        consumer loands)
• Foreign currency remittance services
• Basic Investment Services

An External Asset Manager (EAM) is a wealth manager which works independently from banks. Wealth managers may be individuals or companies.

The terms external asset manager and independent asset manager are often used synonymously, although not all external asset managers are completely independent in the strict sense of the word.

Services offered are numerous and vary between service providers, depending on their level of specialization. Tax consultation, cash management, trading, estate planning and inheritance management are among the services offered by EAMs.

 A Family Office can be designed either   as a Single Family Office or a Multi Family Office and serves usually a group of wealthy family members with their interests in investments, succession planning and generational wealth.

A Family Office is a commercially operating company which employs staff that offers support to a number of wealthy families with the organisation, management and maintenance of part or all of their assets, needs and wishes. This can range from Banking to Real Estate Management, Concierge services and education. 

When opening a Swiss bank account, you will likely be required to provide the information for the KYC, explaining the SOW and the following documents:

• Passport: A valid passport will be required as proof of identity.
• Proof of address: A recent utility bill or bank statement showing your current address.
• Proof of income: This could include a pay slip, tax return, or other financial statement demonstrating your income and financial stability. Some banks may require a minimum income or net worth to open an account.
• Reference letter: Some banks may require a reference letter from a current bank or financial institution, attesting to your financial history and reputation.
• CV: In some cases, a CV or resume may be required to provide the bank with a complete picture of your financial background and employment history.

By regulation, your financial advisor and the respective institution are required to explain the background of a client, how their personal situation is and how the wealth was generated. This is why the term "KYC - Know your customer" was created many years ago. 

The main purpose is to elaborate on the career path and along those lines to explain how a client was generating the wealth displayed by properly documenting the wealth path to the present day. 

Often this is considered as an intenseive  exercise, but it does actually help all parties involved and is predominantly for the protection of the client. 

This is usually a larger section in the conversation with your banker. By regulation, the bank needs to document how your wealth was generated and accumulated. This should usually not be too difficult. The bank must try to establish the path of your wealth generation to explain your present-day wealth situation. Those can range from documents such as contracts of selling real estate or tax statements or balance sheets and divident payouts of your enterprise, depending on how your business developed.

The Discretionary Portfolio Management service allows you to delegate the   management and execution of all investment decisions to the Bank or Asset Manager with their dedicated teams of professionals offering expertise and experience in managing your investments according to a preselected investment strategy usually ranging between “conservative” to “growth” profiles. 

Discretionary Portfolio Management is suitable for clients who wish to have their funds professionally managed but do not have the time to be directly involved in   the day-to-day management process. Instead, clients would then choose a   portfolio model that best suits them in terms of investment experience, risk   appetite, return objectives and investment horizon, and the company will take   care of the decision and reporting to their clients. 

The mandate for Investment Advisory are mainly for clients who would like to be actively involved in the investment decision process with the experts of the Bank or Asset Management professionals, in close collaboration and monitoring by the specialists. 

With clear recommendations and objectives and a tailored, bespoke approach, offering a personalized risk and return assessment, independent analysis, tailored investment advice and timely executions across all asset classes.

The ultimate investment decisions remain with the clients based on the recommendations of the Investment Advisory teams.

Clients who would like to take all decisions alone, without involvement of the professional teams of respective Banks or Asset Management Companies usually chose the profile “Execution only” which required that the investor does his own research and strategy. Often chosen by clients who are deeply connected to the financial markets with ample time to follow the global news and economic developments. 

The banks main task is the proper execution of clients instructions, often limited by regulation that no advise or recommendation can be given to the client and the responsibility of asset allocation and risk monitoring remains with the client/investor.