As a bright and ambitious young finance professional, you have many possible career paths. Most of your classmates and contemporaries are probably marching off to careers on Wall Street as investment bankers, stockbrokers, and floor traders. The motivation for pursuing these careers is not difficult to ascertain: big money is made on Wall Street, with investment banking often seen as the natural destination for sharp, motivated finance majors.
- Investment bankers and stockbrokers can make a lot of money on Wall Street, but they come with notable downsides—notably, long hours and stress.
- Private banking is a way to enjoy the high incomes offered by Wall Street, but with reasonable hours and less stress.
- Private banker salaries vary based on total assets under management (AUM), which is the aggregate value of their clients' portfolios.
You can make a lot of money as an investment banker or as a stockbroker, but these careers are not without their downsides. Investment bankers often find 16-hour days the norm, particularly during their first few years on the job. Long days also plague stockbrokers and floor traders.
Although the markets remain open from 9:30 a.m. to 4 p.m. EST, additional research, meetings, and strategy sessions can double the amount of time a trader spends at work. Stress is another factor to consider before embarking on a Wall Street career.
Fortunately, you can make a lot of money as a finance professional while you keep reasonable hours and a daily work routine that does not send your blood pressure into the stratosphere.
Private bankers earn huge incomes managing the finances of high-net-worth individuals (HNWI), but with reasonable hours and less stress. Their clients typically boast a net worth of seven figures or more.
Huge Income Potential
Young professionals do not necessarily flock to investment banking because it's rewarding and has a great work-life balance. The work is high-stress, the hours are long, and there's little distinction between work and life. The career is popular, however, for the income potential.
Private banking offers equally strong income potential. Your salary varies based on your total assets under management (AUM), which is the aggregate value of your client portfolios. Private bankers from wealthy families may be able to enter the business and draw large salaries almost right away by merely managing their family's money.
If you are not so connected, you might find the road to lavish wealth longer and more challenging to navigate, but a few big clients are all it takes to begin earning a paycheck that rivals investment banking.
A day in the life of a typical Wall Street worker does not provide much time for relaxation or decompression. Investment bankers and stockbrokers have to stay on their toes, often from before the sun comes up until well after it sets.
The constant stress can wear on a person quickly. The trade-off for enduring this stress, of course, is an income that places you in the upper percentiles of Americans.
Private banking can offer similar high income, but it comes with much less stress. Rather than spending a typical workday in a cramped cubicle poring over market figures, as a private banker you are more likely to be found courting a prospective client on the golf course or reviewing an existing client's portfolio at a country club or a five-star restaurant.
At 5 p.m., private bankers head home, while investment bankers settle in for several more hours of work.
Not only are a private banker's working hours less stressful than those of a stockbroker or investment banker, but they are also almost invariably fewer in number. Calling it a day at 5 p.m. is more than a once-in-a-while treat for private bankers. You can look forward to a regular 40-hour workweek in private banking.
Rather than obsessing over the nuances of the market the way investment bankers and stockbrokers are forced to do, a private banker's career centers more around relationship management. Workers in these other positions take care of a lot of minutiae on behalf of private bankers and their clients.
This leaves private bankers with workdays free to woo potential clients and treat high-net-worth clientele to rounds of golf, happy hours, and helicopter tours of Palm Beach. Most importantly, you can punch out in time to catch your kid's junior varsity basketball game.
Frequently Asked Questions
What Is Private Banking?
Private banking is a set of wealth management services offered to individuals with high net worth. Most of the big names in global banking have separate private banking divisions, and there are standalone private banks.
Private bankers help high-net-worth clients manage their money. They may offer investment suggestions, manage a brokerage account, provide tax advice, and help with estate planning.
This is a one-on-one service between a private banker (or "relationship manager") and a client. It comes with a fee, usually based on a percentage of the assets under management by the banker.
What Is the Purpose of Private Banking?
Private banking exists to help wealthy people handle their finances and increase their wealth over time.
It is a personalized, one-on-one service designed to take the burden of money management off the shoulders of the rich.
The purpose is also to enrich the bank, of course. Private bankers charge an annual fee averaging 1% of the client's assets under management.
What Is the Difference Between a Bank and a Private Bank?
A bank offers basic financial services such as a checking account, a savings account, and loan services to everyone who wants them. It may also offer investments such as certificates of deposits to people who want a better interest rate for their savings than a regular savings account offers.
A private bank offers a much greater range of services related to investing and personal finance. It caters to high-net-worth individuals. In fact, you have to deposit a substantial chunk of change to get a private bank account. The minimum is about $250,000, and many require much higher deposits.
The Bottom Line
As a private banker, your interactions with other humans are more meaningful than frenetic phone conversations. There are frequent meetings with clients, which are often done on their turf—and quite often, their turf resembles a playground more than an office. The golf course, rather than the boardroom, is more likely to serve as your venue for building rapport and discussing investing strategies with your clients.
Meeting with your high-net-worth clients in their natural habitats enables you to get to know them as people. With the work-life balance private banking offers, your personal relationships outside of work have a better environment to thrive. You get to see your family on a regular basis, and you'll even have time to go out with your friends.