Tired of your bank and wishing you could switch to a different one? Really better?
According to the findings of the recently published Best Banks 2023 Survey, which was developed by GOBankingRates, more than one-third of American consumers considered switching banks during the past year. Approximately twenty percent of people who were polled are unhappy with the services provided by our existing financial institution.
The survey goes on to identify the following as top considerations for those who are searching for a new financial institution: attractive rates (15%), sign-up bonuses (11%), and minimal fees (40% of respondents indicated this was the most significant factor). Accessibility, which includes convenient locations and robust mobile banking alternatives, placed in fourth place with a score of 10%.
All in all, these are excellent qualities to seek for. But if you really had an infinite amount of money, how would that change the way you interact with the banking system? Or at the very least a sizable portion of it? In that case, what kinds of goods, services, accounts, and financial assistance would you be insisting upon getting?
As is the case in a great many domains, extremely wealthy people have access to a great deal more possibilities than other people.
Since there are a variety of tiers to take into consideration, the first thing we ought to do is attempt to define “very rich.” The following is a breakdown provided by Daniel Roccato, a clinical professor of finance at the University of San Diego.
You’ve got your billionaires. There’s also something called the “Hundred Million Club” (think rich enough to afford your own jet). People that are considered “very rich” may have net worths ranging from $80 million to $100 million. Let’s define “extremely affluent” as having between $1 million and $80 million, and “emerging or aspirational wealth” as having between $1 million and $5 million.
The further up the list you are, the more banking options you will have available to you. For instance, billionaires have access to investment opportunities that are only available to a very exclusive group of people. Here are four ways in which extremely wealthy people conduct their financial affairs differently than the majority of us.
They Use Private Banking Institutions
There are a lot of national chain banks that claim to provide high-end services, but if you have a lot of money, your best option is probably to work with a private bank.
According to Roccato, “You’ll see a tremendous difference in terms of the personal attention you receive, as well as the variety of services that are on offer.”
These services include providing finance for high-value items such as aircraft, yachts, and extremely expensive real estate. In addition to that, you’ll receive a degree of personalized service that the vast majority of people can only fantasize about receiving. Imagine having your very own personal financial specialist who attends to all of your banking requirements, is always there to answer your financial questions, and is just a phone call away 24 hours a day, seven days a week.
Roccato advised, “Your private banker is available at your beck and call.” “Let’s say you’re in Istanbul and you come across a piece of art that you really like and you want to buy it, but it’s on a weekend… On a Friday night, a private banker needs to accept the call and figure out how to get that done.
They employ groups of people — often very large groups — in order to manage their finances.
The extremely wealthy frequently retain the services of a group of financial professionals to manage their banking and other areas of their finances, including the administration of their donations to charity organizations. The size of these teams might range anywhere from a few to dozens of individuals. They frequently take the form of “family offices,” which are corporations that are privately held and whose main purpose is to manage assets.
This provides a high level of control and privacy, as well as individualized solutions that are tailored specifically to the requirements and objectives of a given family or other entity.
It’s not going to be cheap, but you presumably already knew that. Let’s imagine you decide to engage a team of four professionals, one of them is a certified public accountant and possibly a lawyer. It’s possible that between salaries and expenses, you’ll spend close to $2 million each year. Therefore, if you have a net worth of approximately 5 million dollars, this is not something you are likely to undertake. Think more like $50 million.
They Provide Their Own Funding
The extremely wealthy are highly strategic in the way that they employ debt and leverage their holdings.
Roccato stated that these families acted in the capacity of their own personal banks. They are their own source of financing. They won’t be getting a mortgage from Bank of America for their second home in Vail because they don’t plan on visiting there.
Let’s imagine you have a stock portfolio worth $100 million, and you have your eye on a second home in Vail for which the asking price is $20 million. You could easily buy the house by selling the stock instead. However, doing so would result in a significant increase in taxes in addition to taking you out of the market for that stock. If you are sufficiently wealthy, you will have the option to borrow $20 million against your own assets in order to purchase a home, maintain your stock holdings, and avoid paying the tax hit.
Roccato stated that up until a recent point in time, “they were doing this for incredibly low interest rates.”
They Put Money Into… A Lot
Surveys have revealed that extremely wealthy people have a tendency to be less risk averse than the average investor, and they frequently invest the majority of their income in the market.
There are also unusual investment opportunities that are only made accessible to a small number of people. These chances are typically pitched to wealthy customers by their clients’ very own devoted private bankers.
Roccato stated that you and I do not have access to certain assets that are available to the people he was referring to. “The options available on a worldwide scale, many of which are unknown to the general public, are presented to those individuals.” A straightforward example would be making an investment in a privately held company. It’s possible to become as obscure as investing in llamas in Peru. That’s how esoteric it can get.