It’s not just about loan structures, deposit rates or even wealth strategies. It is actually about you, your family, your aspirations.
Facilitating that journey is what private banking is really about.
But why might you need a private bank?
Let me illustrate why. Consider two high-earning professionals, perhaps partners in an accounting, law or consulting firm, entrepreneurs, surgeons or investment bankers. These are the kinds of people who make up our client base.
Over a 30- to 40-year career, these two might earn millions of dollars. Like you, they love their jobs, their careers. They even get a bit consumed by them at times!
Their constraint is time, not money, and by every measure of Western society they are highly successful. Somewhere between 55 and 70 years of age, they retire from their profession.
What is incredible, and we see the numbers, is the stark contrast in where they end up in retirement in terms of wealth and assets. Two individuals, for example, who may have had exactly the same income profile over a similar period can end up in very different financial situations.
Two similar incomes, two separate wealth journeys
This shows us that income is NOT the greatest determinant of wealth at retirement. I’ll repeat that because it can be quite a confronting statement: income is NOT the greatest determinant of wealth at retirement.
At one end of the spectrum, there is the professional who retires with little more than the equity in their home, along with a mortgage and maybe a little in super. By necessity, they end up focused on how they will replace that income, now that retirement looms. Or they question which lifestyle sacrifices they might need to make? It may be a matter of fewer holidays, downsizing the family home, or despite being in retirement, getting another part time job or continuing consulting to maintain their lifestyle.
At the other end of the spectrum, is the retiree who had an asset accumulation strategy and stuck to it. They methodically built an asset base and on retirement have both the time and the resources to enjoy the reward of decades of hard work.
So, what did the wealthy retiring professional – let’s call her Sally – do differently?
Generally, it’s a combination of things.
- Instead of parking surplus cash on deposit at 2.5 per cent, Sally got help from a private banker who referred her to a number of specialists who recommended strategies that generated an inflation protected income with the right balance of risk, but always with a view to protecting that principal. At NAB Private we have a Global Investment Desk that caters to these needs.
- Sally also paid down her home loan through a standard principal and interest structure, rather than be tempted with the short-term cash flow benefit of too many interest-only loans.
- She coupled this with the equity in her home to buy an investment property or two, maybe a commercial property, and started to build an income that wasn’t reliant on personal exertion, her personal hours or intellect.
- Without compromising materially on lifestyle, while Sally was working, she kept a close eye on her finances. Every year that went by she tucked away a few dollars into investments, generating yield and making her wealthier, rather than her becoming more and more reliant on a bigger income, no matter how steep the trajectory of her career success.
- As Sally concedes, she wasn’t even that interested or focused on money and banking. She found it quite boring. She simply got other people to do that work for her.
The value in help
We see this situation repeated among many other types of high earners. Many put a lot of effort into their careers, but are uncertain how to realise the value from them when they want to exit, let alone preserve and grow wealth for themselves – and their families.
From experience, we can certainly say that if you can make yourself more like Sally, it can impact your life.
To ensure you stick with the program, though, you may need a private banker to help maintain the discipline.
There are more than 435,000 high-net-worth individuals (HNWIs) in Australia, defined by those people with a million dollars of investible assets outside the family home, according to the latest research from financial services industry research company Investment Trends.
Just like the general populace, financial services professional also need assistance – just a little more sophisticated assistance – knowledge, expertise and experience that, above all, saves them that valuable time.
What could a private banker mean to you?
As mentioned earlier, private banking isn’t simply about banking. It’s also about service.
Of course, we can take care of all your day-to-day transactional needs and help introduce simple digital banking into your daily life. But it is the service, the saving of time, that is important to most.
Every private bank client appreciates that they have a dedicated point of contact, there to understand their personal financial situation and help navigate the increasingly complex financial landscape.
The fact that there is also an entire team supporting their dedicated banker is appreciated, too. But it is that peace of mind that their financial plan is on track, plus the fact that their banker can help solve issues and capture opportunities that arise, that many clients value.
Private bankers also work with business bankers, accountants and wealth advisers to ensure clients’ banking and wealth needs are seamlessly met.
While NAB has been servicing the unique needs of HNWIs for more than 150 years, it is now taking private banking into the 21st century and transforming it to better meet the needs of the modern day HNWIs.
Jason Murray is customer executive of NAB Private.
