Mistake - I meant high 7 figures, too late to edit.
Congrats :)
Ask HN: Why would I use private banking?
21–28 of 28 posts
Re: Ask HN: Why would I use private banking?
#22There might also be profit in using some of it for day to day expenses then putting all your income into a pension (if possible). Effectively reducing tax. Maybe you can borrow against it so you keep it invested. Talk to tax expert.
Re: Ask HN: Why would I use private banking?
#23In order for this service to make sense, they would need to deliver returns that are at least 1% in excess of say the S&P 500 index performance. One quick way to verify is to test it. Put some amount of money in their care and see if their performance (minus fees) exceeds what you can get in a passive index. Also keep in mind the compounding effect of the fees towards your returns over time so the excess return requi…
You cant test it or back test it in any statistically significant way. If you have a way to tell if they have Alpha then you don’t need them.
See if they have Omega ;)
But as you say, if you know what Omega is you're probably not their customer.
Re: Ask HN: Why would I use private banking?
#24I'm not a client of a private bank, but I have friends in the industry so i have a little bit of familiarity. For With a "private bank", you'll have access to financial experts well-versed in the tax consequences of your investments. They'll be familiar with trusts and other things like that. They might give you access to exclusive deals. And you'll have a phone number that you can call any time of day and speak to s…
Came here to say this, so just echoing.
A private banker and their team become problem solvers long term also almost like a modern butler servie. Have a kid that needs picking up across the country, they'll make it happen, or solutions to college applications, holidays planned, they're there to help.
Re: Ask HN: Why would I use private banking?
#25Just use US index ETFs. However, my brother worked in that space. In case you are wondering, you are missing some things that you might want: 1. preferred rates in mortgage space and others. These rates can sometimes be 0.25-0.5% lower than your best open market rate. 2. borrow against your portfolio. Your pay some points over SOFR rate. This way, you don't trigger tax event or liquidate your portfolio. 3. access to…
He can do #2 at IBKR pretty cheap.
0.5% cheaper loan while you're paying 1% more compared to Vanguard etc.
Re: Ask HN: Why would I use private banking?
#26Mistake - I meant high 7 figures, too late to edit.
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Re: Ask HN: Why would I use private banking?
#27Mistake - I meant high 7 figures, too late to edit.
Too bad this is at the bottom, as many of the comments would be different if they saw this first. You can probably get by without private banking, but there might be some ideas you'd miss out on ("real estate is about to go on a tear" or "get out of oil/gas" that would be well-known in certain circles before they are well-known the general public.
If you are in index funds that's great, but the question of which index funds you're in is also important. With high 7 figures, you can allocate a decent chunk to various different verticals (in a way that you really can't with under a million.
Re: Ask HN: Why would I use private banking?
#28In order for this service to make sense, they would need to deliver returns that are at least 1% in excess of say the S&P 500 index performance. One quick way to verify is to test it. Put some amount of money in their care and see if their performance (minus fees) exceeds what you can get in a passive index. Also keep in mind the compounding effect of the fees towards your returns over time so the excess return requi…
You cant test it or back test it in any statistically significant way. If you have a way to tell if they have Alpha then you don’t need them.
Couldn't you just look at their historical performance and compare against an S&P500 index? It would be trivial to see if their performance justified the fees. It may not be statistically valid but if they can't demonstrate a benefit over the last 5 years, I wouldn't put any stock in them.