Does anyone know when it makes sense to go with each of these categories? And for the bankers out there, can you have a discount brokerage account? I would think there would be serious temptations that may occur arising if you could make independent trades.
Regardless, when does it make sense to go with:
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Discount brokerage: Etrade, Scott trade, etc.
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PWM: Goldman, MS, etc.
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Private banking: Northern Trust, JPM, etc.
You probably don't have enough assets for a private bank or even an FA at a full service brokerage for that matter.
Clearly, really, the first two are the only options for someone out of college, nevertheless, I'd be interested in all categories.
When you have a reason and the ability to pay for them.
For fuck, please spare me the paternal advice – or saying if you have to ask, you can't afford it.
The genesis of the question: I've a full service brokerage account (due to family), h/w it does not make sense as the fees are so high at my level – there is a sliding scale and small trades have HIGH fees.
The last two categories are out of curiosity, the other two apply.
Further I'm curious if bankers can have discount or other external accounts or how you stay out of trouble in this regard.
Bump.
I think it's a legitimate question to:
A. Have a better grasp of these things for the future B. Have a better idea of the kinds of people / institutions who would make the strategic decision to go with one of the aforementioned investment categories
It's a good discussion for a finance community, not sure why nobody even attempted to answer the OP's question.
Thanks man, I feel the same way, obviously.
Yeah, I just hate when people post a real question and the immediate response is "well, you shouldn't even be thinking about that because of x, y, and z." These are meaningless assumptions, the person asking usually has a reason for asking the question. The person asking will deal with their own end, either respond with some real information or don't waste everybody's time.
I personally use TD Ameritrade. The trades are pretty cheap (around 9 bucks per trade) and there's no management fees. If you don't have much money but still want to get a taste of things, I recommend opening up an online brokerage account. I think ING even offers a lower priced one at $5 per trade.
Also, if you don't have a lot to invest (or even a lot for that matter), go with ETFs instead of mutual funds. ETFs in general have lower fees, very easy to transact just like any other stock (with real time prices unlike mutual funds which are priced only at the end of the day or even slower for some brokers...), plus ETFs have the great benefit of easily diversifying to eliminate unsystemic risk.
Good question OP. IMHO it's all about maximizing your personal funds. Therefore, if you're losing a lot of money to fees and whatnot, it doesn't make sense to got with an FA if you can do it yourself.
They're all about keeping the money you've made and growing it to keep up with inflation and to pass on to future generations. PB is generally very full service, anything you need that is finance-related, they will do for you (and probably even a good number of things not related to finance). I believe that PWM also offers more services than a traditional FA, but PB is far more comprehensive as everything must be analyzed to minimize loss and maximize growth. Therefore your team at a PB will not just be a financial advisor, but they will also have lawyers and accountants working continuously for you. That's why so many people that are supposed to be paying ~50% of their income in taxes only pay maybe 35-40%. That extra 10% is huge when you're pulling in a million, 5mm, 10mm a year.
Frankly, for just out of college you're probably best sticking with a savings account or playing around with it yourself on etrade or whatever (that's assuming you're not working 110 hours a week). Of course, I'm not even graduated from college yet, this is just how I see it.
Any private bankers out there who know the answers the the high net worth questions: When does it make sense, in terms of AUM, to go with PWM and a private bank?
Also are there any FAs out there who know when it makes sense, again, in terms of AUM, to go with a full service brokerage?
It depends on the service/product you are looking for. You want certain p/e or hf deals or access to certain/prop funds etc... You can be 10mm + and at a regular brokerage (not pwm/private) and still get benefits. Its really about the person you are working with and what they can do for you.
Faustus... if you wanna go with a private bank, you are probably going to be in the neighborhood of $10MM minimum before you want to start serious considerations. That was the target client minimum threshold at a previous employer. In terms of a step below that, you may see some specialty in-house divisions of full-service brokerages or trusts that will give you a full-suite of services/benefits at north of $3MM... i.e. Northern Trust, Bessemer, US Trust, etc...
Most likely, you're gonna want to go with a discount brokerage where you can make online trades. TD Ameritrade, Chuck Schwab, Fidelity, or Merrill Edge are probably a good fit for a young professional looking for the ability to make a decent amount of trades and have a bit of guidance on the side if you need it. Didn't mean to be so dismissive before, it just seemed ridiculous that anyone on this forum would need a private bank, so I assumed you just didn't know what it was...
Thanks — I am not suggesting I need a private bank, the last two categories are out of curiosity. Maybe this is just the wrong place to ask but there must be buckets for each area. This is what I was thinking: JPMPB min 10mm, and this is on the low end; 5mm for PWM; and 50k-100k for full-service to make sense. This is just a guess, I could be totally off. And Northern Trust is a great private bank from what I understand (not a step below JPM, if anything JPM is trying to catch up with them with some services), they've been at it for a while. Again, I could have done this without posting, so please correct me if I'm wrong
JPM PB (I think that's what you meant) has a minimum of $30mm (possibly lower for legacies, not sure).
no, 10mm, recently spoke with their team about account.
12 years ago it was $30mm, sometimes these things change. That said, I'd be very surprised to hear the Private Bank dropped to $10mm in that time.
Great, thanks, so we have one data point now – and yeah, I meant JPM PM.
I use TradeKing. 4.95 / trade for stocks + ETFs. Can't get much cheaper. They always fill orders fast and limit orders are reliable. Some decent research tools, but most do their own.
If you do your own research grab a discount.
If you like some "better" tools, use TD / Etrade / Scottrade
The thing is Faustus, each bank has a different view on what amount of money fits the service they're providing. So, I guess the best way to answer your question would be if a firm offers a service and has a minimum amount needed to take advantage of it, that is probably the amount you should have. Actually, you should probably have more than that...
So, to find out the best service for you (or the best service at a certain level of liquid assets), it would probably be best to ask a specific firm what their minimum is and why it is what it is.
Good luck, man!
Thanks for all of the help – again the last two categories are out of curiosity.
If you guys noticed, I asked when full-service "makes sense" b/c there really is no minimum with a lot of brokers, it is just too expensive at lower asset levels. So I was wondering at what asset level does this begin to make sense in terms of fees.
Again the second two are like asking how much a Gulfstream costs, you just want to know (~30MM for a G3 new, depending on specifications)! So in all likelihood, I'm probably not going to call a private banker and ask what his her minimum is for said product.
i think it makes sense if you're incredibly wealthy to have everything under one roof at a private bank, but aren't the fees associated with private banking (JPM type places) incredibly high for the asset levels we're talking about? Many I've seen are well above 1% AUM when you could just invest it all in index funds at vanguard and pay an attorney 500 bucks an hour to advise you on estate and an accountant to advise you on tax issues, i think anything bw 200,000 and 10 million should be with a financial advisor with fiduciary responsibility, discounts for below that
fun fact, with vanguard's flagship services (>1 million at vanguard) all equity trades are $2 a trade, if i was rich I would love paying that little, do you think that the private banking names are status symbols for the rich, namely that they overpay for a brand that sounds better when compared with golfing buddies?
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