Do You Need A Private Banker?

A private banker is someone who focuses on the needs of wealthier-than-average clients. Sometimes, he or she works for a private bank within a large institution, like J.P. Morgan Private Banking; other times, his or her institution is a private bank, like U.S. Trust.

Private banks used to exclusively serve people with millions of dollars in assets, but in recent years they’ve been broadening their services to appeal to people with somewhat less. After your company has an IPO or is acquired, you might get a knock on the door from a private banker.

In this recent Quora post, Wealthfront CEO Andy Rachleff listed the pros and cons of using a private banker.

Among the pros: A private banker might provide financial planning advice, hold your hand through turbulent markets and introduce you to tax advisors and estate planners.Andy Rachleff on Quora

Among the cons: Private bankers don’t have access to the very best alternative asset managers, like hedge funds. And, their fees are typically very high: 1-1.5% of assets under management.

“In the end you trade off fees for handholding service. There’s no right answer. You just need to determine what’s right for you,” Andy wrote.

Why DIYers Tend Not To Like Modern Portfolio Theory

Interested in more on Quora? Check out Andy’s Quora post on why do-it-yourself investors tend to talk down Modern Portfolio Theory, in response to TechCrunch’s recent article on the subject.

“The critics of MPT … tend to be do-it-yourself investors who believe they have the skill to outperform the market.  It’s classic cognitive dissonance. They can’t accept the basic tenets of Modern Portfolio Theory. If they did, they’d be forced to recognize outperforming the market probably is impossible over the long run – and that even in the short run, only the very best investors can outperform.”


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