International private banking conjures up images of private jets, secret accounts, Swiss accents, and exclusivity.
But for almost a century, the attraction of international private banking had less to do with exclusivity and everything to do with taxes. Or, perhaps better put, not paying taxes.
People used to move money into a Swiss bank account, have the banker invest it for them, and then conveniently “forget” to report it to their tax authorities… whoops.
It was a boorish, unrefined approach to “tax planning”.
Not surprisingly, it all came crashing down with the introduction of FATCA, CRS, and the aggressive adoption of automatic information exchange.
As a result, international private banking has changed radically. Secrecy is dead and hiding money is no longer considered a viable “tax strategy”. In other words, private banks can’t just sell secrecy and charge high fees anymore.
Today, wealth owners need highly customized wealth planning, tax expertise, structuring advice, and more.
In this article, we’ll share who should tap into these services through international private banking, what the benefits are, and how much you need to open accounts. We’ll also dive into misconceptions, what you need to watch out for, and where you should be careful.
Before reading on, if this is your first time visiting GlobalBanks, don’t forget to download your free copy of the Non-Resident Banking Starter Guide. It helps non-residents identify and open offshore bank accounts in top banking hubs, including for private banking.
International private banking refers to a private bank that offers specialized banking, investment, and wealth planning services to high net worth individuals, families, entrepreneurs, and businesses with at least US $1 million in investable assets.
That said, depending on the country and bank, international private banking can take on different meanings. For example, it may suggest that the private bank caters to non-residents, international clients, and cross-border families with complex needs across multiple jurisdictions.
As a result, the private bank you choose may offer a variety of international solutions. These can range from tax planning, succession, and estate planning structures. Or, they may include financing, investments, investment banking services, specialized advisory, and much more.
Popular International Private Banking Jurisdictions Include:
Private banks vary dramatically in terms of services offered, areas of specialization and expertise, financing capabilities, fees, personalized attention, transactional banking limitations, and even banker quality.
So, before choosing a bank, it’s important to scrutinize the services offered, understand the specific capabilities that each bank has, and how each might benefit you.
Does the bank regularly service peers with similar client profiles, backgrounds, and characteristics? If so, what benefits do they receive?
Additionally, make sure to understand which specific services you’ll have access to, which are included, which cost extra, and what those fee structures are – before signing on.
Depending on the bank, international private banking can include the following services:
Sometimes, the term “international private banking” may be used as more of a marketing term, in an attempt to differentiate an elite segment of the bank. This is commonly seen amongst small private banks located in onshore wealth management hubs like the US which are almost exclusively focused on domestic markets.
For example, there may not be anything “international” about the private banking services offered and the private bank itself may have limited international expertise and capabilities.
Pro tip: If you require international private banking services, make sure that your private bank has the expertise and specific services you require before opening accounts.
Before diving into the benefits of international private banking and how to open accounts, let’s take a look at who it’s actually for.
Not surprisingly, international private banking caters to high net worth (HNWI) and ultra-high net worth individuals (UHNWI), entrepreneurs, and even businesses with significant assets, that can meet the entry requirements.
Such entry requirements vary widely by country and bank. But, generally speaking, you need at least US $500,000 in liquid assets to open an account. Though, some private banks will require US $1 million to $2 million, or more.
For clients from first-world countries looking to invest US $100,000 to $200,000, international private banking might not be worth it. This is especially true for individuals who don’t have any immediate plans to grow that amount or invest more each year.
Additionally, for those who don’t plan to make use of the private bank’s financing capabilities, investments, or other wealth planning services, it’s often worth waiting until your assets grow and you have a legitimate need for international private banking services. Otherwise, there may be limited upside and you may not be able to offset the fees since such a small amount is being invested.
Clients from the Unlucky Passport Club (a term we affectionately use to refer to those with nationalities and residencies that constantly face banking difficulties) who are unable to access stable banks in their home country (and abroad), may look to access international private banking sooner than others.
After all, having a stable bank, in a stable country, with stable currencies, and the ability to transact internationally with ease is critical today. So, finding banks that offer international private banking services to non-residents from such countries can offer many advantages.
Another group that should consider international private banking are individuals who stand to benefit from a private bank’s other specialized offerings. This can include any number of the services outlined in the previous section, including tax planning and advisory, estate and succession planning, pre-immigration advisory, real estate financing, Lombard credit, trust administration, and much more.
Additionally, certain private banks have niche-specific expertise and offer highly tailored solutions for specific client types and sectors. We share some of these areas of expertise in the benefits section below. So, not surprisingly, clients with specific requirements may find that international private banking can help advance their interests quickly.
Finally, clients who have established trusts, foundations, or offshore entities for wealth planning purposes will likely benefit from the services offered through international private banking. This is especially true when international investments, foreign stock portfolios, foreign real estate, businesses or related assets, art and collectibles, intellectual property, as well as aircraft and yachts are involved.
Through international private banking, such entities can often increase tax efficiencies while benefit from a range of internal expertise at the bank. However, for this to happen, the client needs to make sure the bank they choose is capable of providing the services they require.
The benefits of international private banking are entirely dependent on the applicant, the chosen bank, and how each individual plans to use the available services.
That said, here’s a quick overview of some of the benefits to expect from international private banking.
There are many other benefits to international private banking. However, banks vary dramatically in terms of service offering, areas of expertise, banker quality, level of personalized service. So, which banks have the best combination of benefits ultimately depends on the specific needs and priorities of each client.
For this reason, it’s best to start by clearly defining your objectives for international private banking. Then take the next step and start identifying the banks (and bankers) that best match your needs.
How much money do you need for international private banking? It depends on the bank, banker, and your client profile.
Generally speaking, most private banks typically require at least US $1 million in investable assets. However, the minimum amount required and services offered vary dramatically depending on which bank, banker, banking division, the country you’re in, and your client profile.
For example, JP Morgan Private Bank requires a minimum of US $10 million, and clients with less are bumped down to the less exclusive Private Client division.
At some private banks, it is possible to access international private banking with as little as US $100,000 to $200,000. However, private banking services that cater to lower wealth brackets are more like premier banking services designed for the mass affluent. For this reason, while a dedicated private banker or relationship manager may still be provided, the attention is less personalized and communication may be limited. Or worse, the banker’s expertise level may be low, and service offerings aren’t as robust.
For instance, many specialized services and perks will not be offered until the account reaches the bank’s desired threshold. Unless, of course, the client has significant assets or businesses elsewhere, intends to grow the account substantially, or will be using financing solutions offered by the bank.
Additionally, those from lower wealth brackets who are investing low sums will have less negotiating power when it comes to mandates, terms, and fees.
In the international private banking world, each private bank and private banker has different client preferences and caters to different wealth brackets. For example, some banks accept clients with US $1 million while others require US $5 million or more.
Once you reach a certain threshold, your bank may try to transition from personal to private banking.
This automated “referral” process usually kicks in after you either have a certain amount of money in your account. Similarly, the bank may notice that you had a liquidity event or crossed a certain income threshold.
While being kicked up to private banking can feel nice, there are issues to be aware of. For example, the current bank’s private banking division may be subpar (and not have the services you need), the relationship managers may be inexperienced or unresponsive. Alternatively, you may have little time to review the new fee structure, read the fine print, and properly negotiate fees.
So, be careful before automatically transitioning to international private banking without fully understanding all that this implies.
Today, it’s up to wealth owners to determine which banks actually add-value. Likewise, they need to be able to determine which banks have reasonable fee structures. Of course, they also need to know which banks have the benefits and the specialized services they require.
With this in mind, it’s critical to understand all the moving pieces related to international private banking before opening.
In this section, let’s explore one of the most important (and often overlooked) aspects of private banking: fees.
If you’re interested in international private banking, you must become an expert at scrutinizing fees. Private banks not only have different fee structures, what they charge for certain services varies dramatically.
Likewise, knowing what’s normal, which fees are inflated, which fees are 100% negotiable, where the hidden fees are, and how to protect yourself – can make all the difference between a profitable or a painfully expensive international private banking relationship.
People who don’t have the right information going in and don’t know where to negotiate are not only charged higher fees than usual, they’re also often charged hidden fees and commissions, given unclear mandates, and murky fee structures. So, be careful.
We help GlobalBanks Insiders navigate the traps of private banking fees. We do this by helping them navigate which banks are best suited to their requirements. This includes identifying banks that offer reasonable fee structures and clear mandates.
If you want to discover the most advantageous international private banking solutions for your situation, we can help.
If you’re ready to take action and start opening international accounts now, you can access GlobalBanks IQ, our dedicated international banking intelligence platform.
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