Private Banking Versus Retail Banking

With over one trillion dollars managed, UBS is the largest wealth management bank in the world. With Citigroup and HSBC following, UBS has blazed a definitive trail for handling the financial needs of the richest people in the world. But what about for the rest of us, people who do not have at a minimum, one million dollars in liquid assets; who is there to guide us along the financial journey to help us reach that point, when avoiding taxes and managing wealth over several generations becomes a legitimate concern.

In financial planning, financial gurus develop plans that serve a diverse set of needs based on their ideals of what is in our best interest. However, I cannot help but imagine that the service and support that banks and other financial services organizations render to the uber rich outperform those given to consumers who are in the process of starting their first business or establishing their first IRA or 401k. That begs the question if that is a bad thing or not. And obviously with most financial services being fee-generated, the amount of money someone with only $25,000 is immeasurable when compared to an individual who has $25,000,000.

In fact, when you visit a bank, financial planning is not something that is pushed. They do not advertise their financial planning services. In fact they leave them to other agencies like Charles Schwab, Edward Jones, or Etrade. Only when you reach the point of private management does Goldman Sachs or UBS knock on your door or pick up the phone to contact you. Which beckons the belief that you are insignificant until your net worth can pay a portion of the salary of the person giving you the advice that a wealth management specialist would.

As opposed to private banking, most Americans are retail banking customers. Which is the difference between having your clothes custom-tailored just for you with a private label on the inside lapel and going to the local Gap and buying something off the rack. The fabrics are different. The cut is different. The price is certainly different. And the expectations are way different.

What that does not do is diminish the need most people have when it comes to managing their finances in order to build a comfortable lifestyle down the road. This expectation and belief is the fundamental basis for financial planning and opens the door for wealth management when the plan is worked to perfection and market conditions do not change drastically.

So for the generation now known as Generation Broke, who read Suze Orman like a modern version of the Ten Commandments of Personal Finance, retail banking has to take on the look, feel, and purpose of private banking. That does not mean UBS or Goldman Sachs will immediately open up an office in your neighborhood or focus on signing you up as a client. They could never afford to do that. But what must take place is a distribution and clearinghouse of ideas and strategies that are universal in their connection to people who do not have a net worth above seven figures.

Private banking as a whole is needed for people with an obvious need for wealth management. But equally, retail banking must take on the texture of private banking in order to bring the level of services that UBS does for its customers.