Page 204 - CAPE Financial Services Syllabus Macmillan_Neat

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02269020/CAPE/KMS 2016 SPEC

FINANCIAL SERVICES STUDIES

UNIT 2 - PAPER 02

KEY AND MARK SCHEME

4. (a) Private Banking
List of some points to be developed.

- Private banking is used almost synonymously with wealth
management. It is the act of taking wealthy people’s money,
keeping it safe, and making the money grow through
investments. The most common type of private banking is
discretionary private banking or wealth management, where
you deposit funds into an account and the bank takes care of
the rest.

- You agree with the bank on a personal investment portfolio
based on factors such as risk, moral concerns (whether to
invest in certain industries, such as tobacco or arms
manufacturing), financial goals, and your expectations.

- The level of interaction between you and the bank after the
initial consultation varies greatly depending on the bank
and your own needs. Many private banking clients are happy
to let the bank take care of everything, while some clients
want to be more involved in the process. This is where picking
the right private bank is important. If you want to have
frequent interactions and updates from your bank, you need
to pick a bank that offers Internet banking or otherwise can
give you detailed updates.

- Private banking is sometimes confused with high-privacy
banking and banking secrecy. Some banks offer private banking
behind a veil of somewhat strengthened privacy. The actual,
underlying bank accounts on which the private banking
relationship is based may not always be in the client’s name.
Sometimes a legal entity is created to act as beneficiary of
the account. This can be a company, a trust, a foundation,
or a combination of all three. Nominee directors may also be
involved.

- A private bank expects accounts to have very little activity
in terms of incoming and outgoing wire transfers and
essentially no transfer to or from third parties. Because of
this and as long as the client stays within reasonable
limits, it’s not unusual for private banks to offer these
services free of charge

1 mark for each for identifying the point; 1 mark for
explanation up to a maximum of 12 marks