Business Today

Top of the class

Private banking has a lot to offer, if you have the moolah that is.

By Anand Adhikari | Print Edition: July 29, 2007

The private banking lounge of a typical foreign bank is not decorated in old oak furniture, but instead has the look of a modern and open-space banking office. And it's behind these cubicles that many individuals get the best advice on a whole range of asset classes-even assistance for buying a turboprop aircraft or selecting a Tyeb Mehta painting. Little wonder, private banking is attracting more individuals as the booming economy spawns new millionaires.

There are many private banks offering specialised products and customised services for their clients. Last month, Standard Chartered became the latest entrant to launch private banking services in a dozen new markets, including Singapore, Hong Kong, Beijing and Mumbai. Neeraj Swaroop, ceo, Standard Chartered India, said the bank had a natural advantage given its strong banking presence amid the growing number of entrepreneurs.

For a few rupees more

What else can you get with private banking.

Complete tax planning: Private bankers advise on all aspects of tax planning and even help compute tax from all sources like business income, house property and capital gains. Also suggest tax reduction strategies.

Succession planning: Succession planning is often overlooked by most investors. A private bank helps with a proper succession planning, ensuring that your wealth goes to your legal heirs. This protects your wealth and ensures that the transition is smooth.

Art advisory: This is a new area private banks have got into. With art fast emerging as an investment class in India, bankers help in understanding art and distinguish the various artists. They also help in identifying and allocating funds to various artists.

Trust services: The banks are now providing trust services to support activities like education, poverty alleviation, or a trust that is solely to benefit a family or young ones. The bank advises on transferring assets to a trust and plans how best the trust can manage its assets.

Estate planning: Distribution of your wealth and real estate as per your wishes can sometimes be a chore. Private bankers ensure that your wealth, even house items, is distributed among your legal heirs in accordance with your wishes.

Aircraft financing: There's a complete advisory on which aircraft to buy (for personal use or for office services), including how you can pay for the same and also get the best interest rate.

Co-investment opportunities: Private bankers also advise on co-investment opportunities in the areas of real estate, unlisted companies, or other asset classes where both the bank and the client can invest jointly.

India ranks second among the fastest growing high net worth individual (hnwi) population in the world, according to Merrill Lynch and Capgemini's World Wealth Report. The Indian millionaire population grew by 20 per cent last year, but is expected to beat the Asian average growth rates in the coming years. Asia Pacific hnwi Wealth is projected to reach $10.6 trillion by 2010 at a 6.7 per cent growth rate. "We think India is expected to grow faster than the Asian average, probably at a rate in the 15-30 per cent range," says Ajay Sondhi, md (Region Head-Global India), Citi Global Wealth Management. Also, in a recent Forbes report, India outranked China and Japan for the most number of billionaires. This new money is finding its way to private banking.

Take, for example, paediatrician Janakidas Trivedi, 50. Trivedi does not have the time to manage his money on a regular basis. A relationship manager updates Trivedi on a daily basis on his accounts, and advises him on the next course of action.

"Private banking is personal and a relationship manager is like a family doctor," sums up Subir Mitra, Head (Private Banking), hsbc India. In fact, not all banking customers can avail such privileged services as net worth limits restrict access. Besides, not all cities are covered under private banking (see What's on Offer). "Private banking is purely relationship driven. When you deal with the rich and the powerful, the relationship and customised services matter the most," says Mitra.

Private banking focusses on wealth management. The services are for hnwis like doctors, film stars, small businessmen and top management executives, who have little time to take care of their investments on a regular basis. The private banks invest on behalf of their clients. They even advise investors on the best course of action to save taxes. They set up trusts, manage the assets of the trust and also plan for succession (see For a Few Rupees More). Says Sutapa Banerjee, Head (private banking), abn amro, India: "We offer holistic services covering all the asset classes allowed by the regulator, including wealth protection and wealth transmission (succession planning)."

"We offer a variety of services catering to our clients' needs that go beyond investment advisory, including art advisory, trust and estate planning, philanthropic advisory, aircraft financing as well as co-investment opportunities," says Puneet Matta, Country Manager, Citi Private Bank. The scale of these services goes beyond geographies. Recently, a foreign private banker helped his Indian client to acquire a company overseas.

"We offer holistic services covering all the asset classes"
Sutapa Banerjee
Head (Private Banking)/ ABN AMRO. 
"A relationship manager is like a family doctor"
Subir Mitra
Head (Private Banking)/ HSBC India.
Private banking clients also get door-step banking services. Some banks have begun to give advisory services on alternative asset classes such as art. abn amro, which launched its private banking business five years ago with assets under advice of over $1 billion, suggests allocation into art depending on an individual's risk appetite.

While nobody talks about returns, it normally ranges from 10-20 per cent depending upon the risk profile and the investment horizon. Undoubtedly, foreign banks are better placed with global product access and streamlined processes to handle hnwis. When capital account gets fully convertible, foreign bankers will be able to draw on their global expertise in managing multiple assets in different countries.

Of course, there are many domestic brokerage houses and mutual funds which have begun to offer similar types of services. Therefore, one must choose a private banker carefully. If the bank pushes a product with a high commission structure, one should be wary. The job of the private banker is to assess both risk and also invest for a decent return. If the bank strikes that balance, then it's worth signing up for.

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