Private banking refers to a host of services offered to a bank’s wealthiest customers. You can think of private banking versus regular banking as the difference between flying first class and coach.

In other words, private banking involves the same types of services that regular customers can access, but includes a few more perks and far more personal attention. If you have a higher income or large amount of assets, private banking might benefit you.

What is private banking, and how does it work?

Private banking is a form of banking that is customized for an individual or household with a high net worth.

Depending on your bank and how it handles private banking, you might have one banker who works with you one-on-one or access to a team of financial professionals. In either case, one thing is for sure: If you’re a private banking customer, you will be treated well. You aren’t likely to be waiting on hold for 20 minutes, hoping to talk to a bank manager, or having any conversations about getting an overdraft fee refunded.

Common private banking services

If you engage in private banking, there will be numerous wealth management services that you may take advantage of, often including the following:

• Tax specialists. They can offer insight on everything from income tax planning to how an investment will affect your taxes.

• Estate planning specialists. They can help you transfer your wealth to your heirs.

• Insurance specialists. If you’re looking for products such as life insurance or long-term care insurance, they can make sure your assets are well protected.

• Philanthropic guidance. If you want to set up a foundation or make the most effective impact with your donations, private banking services can help with that.

• Lending services. If you’re interested in any loan, from real estate loans to bridge loans, your private bankers can help.

Private banking eligibility

Who is eligible for private banking? Every bank has its own eligibility requirements, but commonly, private banking services are available to clients with assets of at least $250,000. Some banks will have higher thresholds of $750,000 or $1 million in household income, but if you have at least $250,000, you should be able to find a bank that will offer private banking services.

Pros and cons of private banking

There are pluses and minuses with just about anything, and private banking isn’t any different. Some pros and cons you’ll want to consider include:

Pros

• Convenience: With private banking, you should be able to handle all of your finances under one roof, with one financial institution.

• Speed: When accessing private banking services, you shouldn’t have to stay on hold or stand in line, waiting for your turn to talk to somebody. Even if you do, your private bankers will do everything they can to make sure you’re in and out of a branch or that a phone call you make is conducted as efficiently as possible.

• A brain trust at your disposal: Maybe one of the best things about private banking is that you have access to so many professionals, and you may get a lot of consulting and advice for free that you wouldn’t if you had to hire all of your financial professionals (like an estate planning attorney or financial adviser) separately.

Cons

• It can be expensive. If you’re investing money through private banking services, you’re going to pay some fees or commissions. The fees may be worth it since they’re probably offset by the free professional advice you receive. But you’ll want to crunch numbers and make sure you’re comfortable with the costs involved. For instance, you might pay a 1% asset management fee on an investment portfolio. Or you may have to pay a monthly fee if your checking account balance goes under $50,000. Every financial institution is different, so before starting a private banking relationship, you’ll want to know how much this will cost you.

• There may be turnover at your bank: When you work with independent professionals, such as an insurance broker or a tax accountant, they may have their own practices and are likely to be in business until they retire. That makes it easy to establish a relationship that lasts years if not decades. If you’re working with private banking professionals, your bank could be swallowed up by another bank, and some of the employees you’ve been working with could be shuttled out. Or, some of the gifted professionals you’re working with may leave to work at another bank or open up their own practice. It could be harder to maintain an enduring relationship with the private banking staff.

• You may not be working with somebody who has a fiduciary duty: On the whole, private bankers will work toward your best interests. But the private bankers you work with may or may not be a fiduciary; if they’re not, they aren’t legally and ethically obligated to act in your best interest. For instance, a non-fiduciary professional could steer you toward investments owned by the bank instead of another investment that may be more profitable for you. Still, fiduciaries can give bad investment advice, and non-fiduciaries can give excellent financial advice. So whether you want a fiduciary is something to consider, but it shouldn’t be a deal breaker.

Is private banking right for you?

Whether you should or shouldn’t engage in private banking is purely a judgment call. If your income is on the high side, you really like your bank, and you want to supercharge your financial portfolio by saving and investing more, or perhaps working on your estate planning, it’s probably worth having a conversation with your bank about whether their private banking team can help you.