What is a private bank account, and how to get one

Written by Andrew Henderson

Dateline: Warsaw, Poland

One of the biggest challenges in the world of offshore strategies and flag theory is a challenge facing many other businesses.

The advent of the internet has allowed anyone, in any corner of the planet, to talk about topics as sophisticated and important as offshore banking. Of course, I’m all for freedom of speech, and I’m glad that more and more people are realizing the benefits of internationalizing their bank account.

However, the reality is that there are a number of shady characters out there promising everything from cheap diplomatic passports to totally secretive private bank accounts.

If only you pay them, they’ll open some anonymous account for you at “Bank X” (they would love to tell you the real name, of course, but they really can’t due to whatever reason).

Because there is so much confusion involving different types of offshore bank accounts, I thought it would be worthwhile to discuss exactly what a private bank account is.

For starters, private banking does not mean anonymous banking. In reality, the old Swiss-style numbered bank accounts no longer exist.

Private banking refers to wealth management accounts held by affluent individuals who want banking with a higher level of customer service and hands-on management. Often, private banking relationships involve clients’ investments being made by bank officers.

The origin of private banks dates back to the 16th or 17th century in both Switzerland the United Kingdom. Even before the word existed, businessmen in Venice accepted and re-invested money from affluent families who wanted safekeeping for their wealth.

The first private banks were unincorporated companies that made liabilities of the general partners’ personal assets in addition to the depositors’ assets in the bank.

Over time, many of these banks became incorporated and began to look more like the banks we know today. In fact, the main differences between a private bank and a regular bank are the minimum deposit and services performed.

How to open a private bank account

Similar to the exclusivity of platinum cards, the term “private banking” has been somewhat diluted. I recently shared my story about HSBC Premier, which offers quasi-private banking services with a minimum of around US$100,000 in most countries.

Service at HSBC Premier leaves much to be desired.

While I have come to find HSBC rather unappealing and their level of service for that deposit level rather poor, you can’t expect private bank-level service in the low six figures.

There are a growing number of banks offering “premier” and “private” bank accounts in countries ranging from Singapore to Switzerland to Monaco to the Middle East, there are also private banks offshore.

For me, the lowest minimum deposit level to consider is around $250,000 (substitute “francs” or “euros” for “dollars” as appropriate). There are a few banks in Switzerland that offer decent service at that level, including one open to US persons so long as they’re living overseas.

In the United States, JP Morgan has been pushing its way into the semi-private bank market through its network of retail banks with a $250,000 minimum (of course, Chase is about the worst bank if you want to go offshore).

Once you reach the $1 million level, more options will open up to you. There are a few banks in Singapore with legitimate private banking at that level, although Asian banks are increasingly raising minimums.

If you want to be accepted at virtual all private banks, you’ll need several million dollars. Offshore private banks often demand even more; HSBC Private Bank, for instance, demands $5 million in deposits at its offshore division in the Cook Islands or in countries like the United Kingdom.

Whether you choose an offshore bank when “going private”, or you stick to your home country, a private bank account will come with the expectation that the bank manage your money for you.

Swiss banks, in particular, want to see minimal transactions in and out of the account. A private bank account isn’t what you need if you need to be receiving salary payments, taking business draws, or paying third parties.

If, however, you have money that is sitting around – proceeds from the sale of a business, family wealth, or whatever else – a private bank relationship can provide you with better service and your own relationship manager at the bank.

When researching private banks, it’s important to pay attention to customer service. How well is English spoken by bank employees? How well are you treated? It may seem obvious, but when you’re handing over a large sum of money, you want to be confident the bank will hold up its end of the bargain and not treat you like just a number.

One trend I see is that Asian banks are increasingly imposing higher minimums as more uber-wealthy Chinese flood into banks in places like Hong Kong. Private banking at the highly conservative local banks in Hong Kong is largely reserved for locals and HKID holders.

Another big private banking destination is the Middle East, which actually has some of the strongest banks in the world. Again, there is so much wealth floating around there that many westerners may be surprised to know their $500,000 is a drop in the bucket there.

If you’re on the edge of qualifying for private banking, I might suggest to open a traditional retail account at the bank of your choice and then upgrade to a premier or private account later if you’re satisfied. The last thing you want to do is transfer all of your money to a bank you end up disliking.

If you need help finding the right bank for you, you can apply for a Strategy Call so we can determine your best options as part of a personalized and completely legal offshore plan.

Andrew Henderson
Last updated: May 21, 2020 at 4:30PM

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