The landscape of retail banking firmly establishes private banking at the pinnacle, with premium/privileged banking and consumer banking occupying the base of the pyramid. However, even among the high net worth clients that private banking services, there are different tiers for the different levels of wealth and investable assets. Importantly, the classification depends on the amount of assets under the private bank’s management rather than the net amount of assets that the client possesses.
The hierarchy is divided into three segments; “Mass Affluent”, “High Net Worth” and “Ultra High Net Worth”. “Mass Affluent” refers to clients with SGD$200,000 to SGD$1 million of assets. “High Net Worth” refers to clients with SGD$1 million to SGD$2 million of assets while “Ultra High Net Worth” refers to clients with upwards of SGD $50 million of assets. This distinction is arbitrary and varies from bank to bank and country to country. For example, UBS defines “Ultra High Net Worth” in the “World Ultra Wealth Report” as individuals who possess upwards of US$30 million of assets. “Assets” refer to the amount of investable assets that exclude primary residence and collectables such as adornments, antiques, artwork and automobiles.
In Singapore, the definition of “High Net Worth” has become more expansive and includes individuals whose annual income is not less than S$300,000 or an individual who has been assessed by a covered entity to have the potential to achieve $1million of assets within a period of two years.
Acquiring a Private Banker
Investors who are eligible for private banking can initiate their search for a private banker by exploring the local and foreign banks in their country. They may also consider boutique private banks. Boutique private banks are generally designed to serve a select group of important clients, however they may have higher capital requirements compared to bulge bracket banks.
Typically, however, potential clients eligible for private banking services are sourced out by private bankers themselves – private bankers, after all, earn their revenue by servicing clients. This is done via extensive sales and marketing efforts on the part of service providers. Customer (purchase) databases can often indicate that individuals have a certain level of affluence, and banks use their network of affiliated merchants to source out HNWIs. On a less structural plane, HNWIs also tend to have closed networks with other HNWIs. It is common for one HNWI client to know several more, and service providers can tap onto such networks to locate and service new HNWI clients.