As the economy and market have continued their growth, more Idahoans find that they need more than a checking account and an automated teller machine. That’s where private banking comes in.
Also known as concierge banking and wealth management (see box), these services have several features in common. Generally, they offer customers with complex financial lives a single point of contact to a pre-selected team of experts in various financial areas, including estate planning, trust planning, and investment strategies, as well as banking services such as checking accounts. In addition, private bankers typically act as fiduciaries, meaning they are typically paid on salary, not on commission, and are required to act only in the client’s best interest. Fees for private banking are typically based on a percentage of the assets managed.
“Idaho being the growth state that it is, we have more groups of people than ever who are looking at that type of service,” said Trent Wright, president and CEO of the Idaho Bankers Association. In fact, there is so much demand the association is planning a wealth management conference for the fourth quarter.
There’s a growing focus on wealth management services, said Donnie Ethier, director of Cerulli Associates, a Boston consultancy. He said about two-thirds of banks offer “private banking services” of some sort, though they may define it in different ways. “Some smaller community banks, as they move upmarket or have a merger or acquisition, reach more scale and offer more true private banking,” he said.
Private banking as a service can play a good role in wealth management because regional banks, such as many in Idaho, have been working with clients for their banking needs. Private banking gives banks a way to ask customers if they’re aware of the bank’s wealth management services, he said.
Not all banks set a floor on the amount of assets a client needs for private banking, but typically it is $500,000 to $1.5 million, Wright said. Chase Private Client typically starts at $500,000, said Linda Vigneri, client service analyst for JP Morgan Securities in Chicago. Banks typically find private banking customers through referrals from other bank staff, from accountants and stockbrokers, and from word of mouth.
“Private banking inherently involves not only products and services, but also a very deep personal relationship,” said Tom Prohaska, president of Idaho Trust, which has one office each in Coeur d’Alene, Boise and Las Vegas. The bank offers private banking to all its customers, he said. It reports 27 percent asset growth in its wealth management division in 2017, and 25 percent asset growth so far in 2018.
Northern Trust’s Seattle office, while it covers the six northwest states, doesn’t have an office in Idaho. “I go there once a month, and spend a few days on the ground,” said Jordon Voss, vice president of wealth strategies. While he said the bank is exploring a physical presence in Idaho, he added that having an out-of-town banker is a plus for some clients.
“When some people come into wealth, they don’t necessarily want everyone to know,” he said. “In a community like Boise where everyone is so friendly and close, word could get out.” In addition, large market centers like Seattle can have more sophisticated service offerings, such as being able to hold operating businesses in trust as a trustee, he said.
While Voss didn’t have a specific asset requirement, he said that the bank’s fewer than 100 Idaho clients typically had between $5 million and $15 million of liquidity. “In situations where people are coming into a windfall” – such as a business sale, inheritance, or a divorce – “those are situations where we really thrive.”
KeyBank has three private bankers in southern Idaho, and has just placed a private banker in eastern Idaho as well, for a total staff of 12, said Jason Stoddard, interim market manager for Key Private Bank, based in Salt Lake City. While the bank services a number of clients in North Idaho, it doesn’t have staff there, he said.
“Just because you’re a small bank doesn’t mean you don’t have the expertise,” Wright said. “Obviously, large banks offer it. I would imagine each and every one of our institutions offer that level of service in one way or another.”
Private? Concierge? Wealth management?
Banks use different terms, so people looking for these services need to know what term a bank uses.
“There’s no such thing as concierge banking,” said Tom Prohaska, president of Idaho Trust. “That’s the person who picks the restaurant. Nothing gets me more fired up than that term.”
On the other hand, Washington Trust Bank likes the term “concierge” because it implies customized banking services, said Brian Gonzalez, branch manager of the Boise branch. In fact, it offers a financial concierge on its retail banking side as well. “Essentially, it’s the idea of a one-stop shop for any of your financial needs, so you have one person,” rather than the individual roles of “new accounts” and “tellers,” he said.
While private banking can often include wealth management as a service, wealth management is a more general term that includes investments but doesn’t necessarily include banking services.