Giving money away can be just as complicated as making it.
Private bankers help spread the wealth.
Private bankers help clients to guard their wealth; they also hold their hands when it’s time to give some of it away.
“Many times clients are interested in donating, but they don’t really have the people to sit down and have a dialogue with,” says Nicholas Stonestreet, head of Trust & Wealth Structuring at Merrill Lynch International Private Client Group. “It’s a really important part of private banking.”
Stonestreet encourages his staff to ask clients about their philanthropic intentions. Like therapists exploring personal problems, charity experts at private banks can help donors think through their altruistic inclinations and motives.
Will the client get more out of giving while still alive or after death? Some may want a foundation to carry on their legacy forever; others may want the bequest spent out at some point.
The tax implications of giving are a frequent concern. Though the U.S. leads the world in tax breaks for charitable giving, other countries are catching up.
In recent years the U.K. has improved its Gift Aid plan, introduced in 1990 to allow charities to reclaim basic-rate tax (now 22%) on one-time cash donations of at least £250 ($390), by eliminating the minimum amount and allowing income tax deductions to those donating stock.
This year Canada indefinitely extended legislation that halves to 25% the amount of capital gain subject to tax for gifts of public securities made directly to charities.
Private bankers will help structure a donation to maximize the writeoff, selecting the best asset and even seeing to the completion of the transaction. Sometimes an offshore trust is advantageous for tax or other reasons; private banks have always known the score there.
As philanthropy becomes more widespread on the giver end, so too are receivers becoming more active. Banks can set up a screening service for pleas and proposals from would-be beneficiaries.
Researchers can also identify charities that meet a client’s criteria, assist in establishing boards and policies for foundations, even act as secretary for the family office.
The fees for these services, as with many others in private banking, aren’t low. At the Royal Bank of Canada, the cost ranges from 1% to 2% for a $1 million foundation, according to Jo-Anne Ryan of RBC in Toronto. But that’s still less expensive than hiring a staff that could cost $70,000 a year and renting and furnishing office space for an additional $20,000.
“Giving away money is really hard,” says Adele Simmons, a senior adviser to the World Economic Forum and a former president of the John D. & Catherine T. MacArthur Foundation, which has assets of $4.2 billion.
“It takes a professional staff to evaluate a [charitable] organization, examine its accounts and assess whether or not its strategy is going to make a difference.”
In a family situation, the private banker will help to imbue children with a sense of giving. Schroders Private Bank, for example, hosts seminars for adolescents to help them decide what causes they want to support and how, covering both local projects and efforts abroad.
Whether you’re planning to give away $10,000 or $10 million, now or later, it can be every bit as challenging as an investment diversification. “Philanthropy really is another business,” says Joanne Johnson, the managing director of J.P. Morgan’s wealth advisory group. “And that’s how people should approach it.”
This next article may be a good guide line for asking questions to determine some qualifications for choosing “your” private banker
How to Become a Private Banker
Private bankers are bankers who provide personal financial services to wealthy clients. Millions of Americans with more than $1,000,000 in assets do business with private banks.
Personal bankers provide investment services in addition to routine commercial banking services with a personal touch. While most people must call an automated line, sign on to their online accounts, or go to the bank to speak to a teller in order to transfer money from one account to another, someone with a private banker only needs to call their banker to take care of it.
Learning how to become a private banker can be helpful for anyone wanting to work in the banking industry.
1 Know the various names assigned to private or personal bankers.
A banker providing "high touch" services like estate planning, tax advisory services, and managing investment portfolios may also go by these names:
2 Understand that wealth managers work for private banks and for divisions of commercial banks.
Many private banks are in Switzerland.
Brown Brothers Harriman & Co. is a private bank in New York.
Financial institutions such as First Union create private banks under their umbrellas. First Union's is called Private Capital Management Group and has approximately 50 offices. Other banks like Citibank and Bank of America offer private bank services to select clients.
Private bank services often are influenced by the geographical areas in which they're located. A private banker in Silicon Valley needs to know about biotech and software products, while Kentucky personal bankers may need to know horses.
3 Study accounting, banking, or finance while in college.
An MBA isn't as important as having diverse knowledge and background.
4 Make certain you have the right kind of personality to be a successful wealth manager.
Outgoing with good people skills.
Customer service oriented.
Always reachable by phone.
Experience or connection to wealthy people, also known as HNWIs (high net worth individuals), can be helpful.
5 Gain experience in the banking industry, particularly in investment banking before pursuing a job as a personal banker.
Most personal bankers are experienced bankers and wealth managers.
Most entry level private bankers start out in junior banking positions, which are limited and stiff with competition
6 Attend a wealth management trainee program with a financial institution that offers private banker services, but beware of strong competition for limited openings.
An outgoing professional with a solid academic background and a wide range of financial knowledge and experience is the typical person attending a wealth manager program
7 Prepare to work hard in an in-house training or apprentice program that can last as long as five years.
Training programs often pair you with a senior mentor from whom to "learn the ropes."
Some companies like Goldman Sachs operate graduate training programs for personal bankers
8 Manage a team of specialists that can see to a wealthy client's every need, yet the personal banker remains the point of contact for the client.
9 Develop a wide-based technical knowledge of financial products.
Continue your education into investment and tax areas, which are continuously evolving