Too Poor for a Private Bank? No Worries, Use the Next Best Thing

Did you know that there are institutions which cater to the very rich? Of course you did. But you probably haven’t encountered private banking. They have been around for a while and offer their services – usually by invitation only – to folks with $10 million or more in net worth. In return they provide access to things such as alternative investments, financing for airplanes, art collecting, gold purchases and storage as well as providing some of the personal concierge type services offered in multi or single family offices.

Are you too poor for a private bank? I sure am. Don’t worry though, you get another shot. If you are part of the top 10% – having a net worth between around $250,000 and $1 million you are the target for eager banks of all sizes. You are part of the ‘mass affluent’ and are highly sought after by banks such as Chase Private Client, Bank of America and Citigroup. These banks are being (believe it or not) squeezed out of squeezing you for fees by new regulations and are trying to make up revenue by gathering in the mighty assets of the mass affluent.

Why banks offer mass affluent services.

The bank benefits by having a large amount of cash on deposit, which they get to use almost without paying any interest. They also win by up selling in house proprietary investments to the affluent clients.

What clients get from mass affluent services.

The client benefits by getting more services, with perhaps fewer fees, but needs to adopt a buyer beware attitude on the investment recommendations, according to the NY Times.

An interview with Chase Private Client representative Melissa Shuffield.

At FinCon12, I took an opportunity to seek a contact for the Chase Bank version of mass affluent banks. Their service is called Chase Private Client and Melissa Shuffield from external communications at Chase filled me in on some of the details.

Melissa indicated that it is for clients with between $250,000 to about $500,000 in net worth. These clients don’t pay any direct fees to be part of it, however, they are sold accounts and investments that benefit Chase. “This is not a typical banking relationship” she said.

The program assigns a financial adviser to a client. That adviser then works with a team to do many different things. The team consists of the banker, a lender, the financial adviser, and the JP Morgan research resources. One adviser serves multiple clients.

The services that Case offers to the private clients include:

• Personalized service, you can always interact with your assigned financial adviser (you can also just walk into the bank and use any of the people there).
• A 24×7 service phone line so that you can do things like a wire transfer, get new checks and etc after bank hours.
• Free wire transfers.
• Use of out of network ATMs without fees.
• One consistent contact for any need (your adviser).
• Adviser recommendations on investments to make.
• Access to JP Morgan advice and investments (through your adviser).

The Chase website also lists the below:

• No foreign exchange fees for debit card usage outside the U.S.
• No charges for domestic and international wire transfers, notary services, personal checks, traveler’s checks, stop payments, online overnight checks, and more.
• Higher daily withdrawal limits on debit cards.
• A special debit card that can be linked to your checking account and given to children, home staff or others, with specific monthly spending and withdrawal limits that are set by you for each cardholder.
• Specialized lending products.
• Preferred mortgage benefits.
• Expanded credit guidelines.
• Access to a greater variety of credit cards.

Per Shuffield, the same services are offered across all regions/Financial Adviser locations. She noted that there are fewer advisers than bank locations and advisers handle multiple clients and that financial advisers may or may not be certified by independent organizations, but they all train with JP Morgan.

The program was started last year. There were about 1000 locations in October 2012 – either within or adjacent to a Chase branch with between 15,000 to 70,000 clients in the program currently.

Other mass affluent banks have similar services.

Other banks have similar programs. Citi bank, for example has Citigold – for clients with investible assets upwards of $50,000 and Citigold Select for clients with half a million or more to drop on them. For these select clients expectations might include things like box seats at the Olympics,Omega watches, first class airfare, safaris and invitations to exclusive concerts.

Are mass affluent banking solutions best for the clients?

In spite of the perks and freebies, use of these mass affluent banking solutions may not be the best option for the individual investor. An independent, fee only financial planner or adviser probably will give a less biased and proprietary view of what you should be doing – and with the money you save, you can get your own box seats at the Olympics!

If you had the money, how would you use the services provided by these mass affluent banking solutions?  Do you think it is wrong that people with more money get offered better service without added fees?