How do private banks make money??
How do they make a profit? Management fees? If so, what is the typical fee structure?
Thanks
Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
April 30, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
Deleted
Well, you can't just fly to geneva and walk into a Pictet & Cie to get a loan for your shitty small business, what you described are retail/commercial, not private banks. I don't know the answer either though, my best guess is management fees as well.
establishing relationships with wealthy clients. Goal is to suck them in through the private bank and then eventually take over all their financial needs (mortgage, loans, wealth mgmt, estate planning, etc.)
By private bank, I meant what JBGH is trying to get at.
Ok, but how does the Private Banking unit make money? How does a solely private bank like Pictet make money??
Private banks make money in a few ways. The first way that is through selling managed accounts which results in recurring (annuity) revenues for the bank. A managed account is one where the client does not have discretion; rather the discretion is up to the bank. For example, a client comes in with $10M and puts it all in a managed account. The bank charges a management fee (between 50-125bps) that the bank gets on a quarterly basis in perpetuity (or until the client leaves).
Private banks also make money through selling brokerage products. Think of this as the classic "eat what you kill" scenario. Typically, clients will have a brokerage account in addition to their managed account (now they may only have a managed account or they may only have a brokerage account in some scenarios). A brokerage account would be used for selling one off products, such as an IPO, a structured product, etc. For example, think back a few months ago when Goldman Sachs was supposed to lead a private placement for Facebook. GS's IB structured the deal, but GS's Private Bank client got exposure to this deal as well.
As JBGH said, private banks also try to offer a full scale of solutions to their clients. Products such as mortgages, LOCs, etc also produce revenue.
Strategy to increase profitability for Private Banking (Originally Posted: 09/01/2016)
Hello everyone, I am working in a Private banking
Due to the market turmoil, the private banking business is sharking all around the world. Principally the business is driven by NNM (net new money) and Market effect. (which will increase AuM and increase asset related revenues) Points I'd like to discuss notably:
How to decrease the costs and increase revenues for a Private Bank ? Any idea is welcome
Thanks
Placeat sit amet voluptatum dolorem sit quos alias. Sit similique dignissimos ab. Officiis quidem vero dolore corrupti totam ea.
Illum nulla nobis qui tenetur sed sed deleniti. Velit facilis reiciendis accusantium nam voluptatem corporis voluptas. Officia illo in dolore atque.
Quidem odit voluptas vero. Iusto odio voluptatem accusamus in quam.
Facilis dolores nulla voluptatem rerum ducimus atque repellendus est. Eum rem fuga ducimus magni quam id non. Ullam eum dicta non quam magni exercitationem repellat modi.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...