Personal Finance » Banking

Are high fees in private banking worth it?

Are high fees in private banking worth it?

I’ve written about bank accounts in the past and the importance of reviewing the type of bank account that you use. Today there are bank account that pay you high interest with no monthly fees. I’ve written about examples of people who benefited from high interest bank accounts.

So you can imagine how shocked I was to talk to two people in the same week that were paying over $100 per month in service fees through private banking. Can you imagine paying this much in monthly in bank fees?

Linda was getting a deal at $100 per month

At 50 years of age, Linda was recently widowed and just getting by with her income from work. When she lost her husband, she lost his income but the expenses on the house pretty much stayed the same. She got some life insurance proceeds and his share of a business giving her a significant investment portfolio of about $700,000. Although cashflow was tight, she was reluctant to touch this money because this was designated for her retirement and tapping into it too early was risky. Linda had no pension.

Linda asked me to look at places we could cut spending. That’s when I discovered she was paying $100 per month in bank fees. That’s $1200 per year we could save by going to a high interest low fee bank account.

I have heard of private banking before but I never realized the magnitude of the monthly fee they charged for the service. When I looked up the services of Private Banking, I was kind of surprised at how there was nothing overly special for the fee. In fact, you can read about it yourself.

The real problem was she was not utilizing any of these services.

Jack is questioning his private banking fees

Jack is a dentist and has been using a private banker for the past 10 years at $125 per month. That’s $15,000 in fees over 10 years. Jack’s OK with this because in his mind he was very busy with the practice and could afford the fees. Jack is now semi-retired and has more time to spend in his finances and is now questioning the fee and the services he is getting for the fee.

Curiously, I asked him what he was getting for his $125 per month fees. In his words “I don’t really know myself which is why I am questioning the service”.

Jack was a good client of the bank. He had his business accounts there, his personal accounts, some RRSPs, a business line of credit and a long standing relationship. This idea of private banking confuses me because other areas of the financial industry are scalable. In other words, the more money you have, the more power you have to pay less fees, not more. So why is it that Jack has to pay $125 per month when he gives the bank as much business as he does?

My two cents

I have never utilized the services of private banking myself so I can’t speak from experience. I know that almost 10 years ago, I was not happy paying $13.50 per month for a premium bank account so I made the switch to a high interest bank account and have never looked back on my decision.

If I put on my objective hat, maybe private banking is a way to take normal banking a step up. No lines, special phone numbers, and a special black bank card. Maybe it’s just like paying extra fees for sitting in first class on an airplane. Pay more and you get special treatment.

I try and understand this but I have to admit I don’t get it. Shouldn’t the bank give special treatment to good clients as a standard? How do they get away with charging these fees to their best clients? How do these clients not know they are paying that much in fees when there are alternatives? Do they not know they have the bargaining power to demand no fees on their bank accounts?

It’s no secret that fees matter when it comes to mutual funds and investing. So shouldn’t fees matter when it comes to banking? I think the answer is yes which is why I have a high interest bank account and I go to great lengths to promote these forms of alternative bank accounts.

With my bank account, I don’t have to stand in line. I don’t have a special black bank card but that’s the last thing I care about with my bank account. I think my bank account is far superior to these high fee bank accounts for the simple fact that I pay not fees and get interest.

The bank needs to know that outside of the bank, consumer have more options than ever that will not cost $100 or more per month. Consumers need to know that $100 per month or more in bank fees is excessive and there are great alternatives worth looking into.

Am I out to lunch? What do you think?


  1. Kevin

    The link to the RBC private banking website pretty much sums it up with their first point, “Black Card Experience: As a Private Banking client, you will receive a distinctive Private Banking black card”.

    It seems the main selling point of a good or service is the colour of the card. I can understand how some people think, though…my father was thrilled when banks came out with “platinum” credit cards because they were even “higher” than “gold”. We got into a fight when I suggested he go for the one with the lowest interest rate, which was just an ugly red colour. 🙂 Absolutely true story.

    • Jim Yih

      Thanks Kevin! My card is a really ugly yellow. I keep wondering if one day, yellow will be the new black!

  2. Deanne

    I agree with the fact that $100 – $125 a month is quite a bit of money for banking services, but I must say, working in Private Banking, It is far more than getting special treatment. Like Jack who was too busy to manage his finances when he still working, we work for and help many people who are unable to do their own banking. Be it because of time or complexity. And we’re not just a high net worth branch, we partner with other channels of the bank to find the best solutions for our clients. I like to think of it as no-hassle banking, you want it, we do it for you. No waiting in lines, no waiting on hold on the phone, no esclating to managers.

  3. Sam

    I have been with private banking (as a customer) for last 4 years now. Looking at the fee I pay, its far less than the service I get from the bank. Whether it is filing my taxes or looking after my net worth or managing my corp accounts. I agree with Jim, if you are using private banking and your net worth is very low, its not worth it. But if you are a busy professional, its definitely the way to go.

  4. Walker

    I think it’s a bit suspect to write an opinion piece on private banking having never been a client or knowing what’s actually included in the service. The reality is its not for everyone but it carries considerable value for the right clients. Some people just want an entry level car because it gets you from point A to point B. Some people want something a bit nicer because its a more enjoyable experience and they can afford the premium.

    For most private banking clients, time is money and private banking is absolutely a time saver. You’ll always have the same banker which means never having to reexplain yourself, and you’re dealing with a top level personal banker which means no rookie mistakes. Also, the preferred rates on credit often off-set the fees.

  5. Julie

    This would be a better link to include:

    I use RBC private banking and when you have multiple personal, Corporate and trust accounts and money moving back and forth trust me, its worth it! If something has to be signed it’s couriered to me at no extra expense. I don’t use a lot of the services provided, invest my own money, but for the services I do need it’s worth it to me. Maybe not when I retire though!

  6. Scott

    Everyone is missing the point here – I analyse Private Banking / Wealth Management Portfolios for a living. The monthly / annual fee is trivial compared with the cost of the “management” service where the Banks really make the money. On average, you’ll pay around 1% for the privilege of being put into a basket of horrific mutual funds, paying commissions of up to 5% to the Bank initially and ongoing fees in excess of 2% pa (where around 75% of that fee also gets paid to the bank.) That’s the real story.

  7. Dave

    I’m not sure I really understand this blog post. Private banking doesn’t just charge a monthly fee of $100-$150 a month. They also charge you a percentage of what you hold with them. I sat down with someone from private banking to see if they could provide me with value for what they charge. So yes, there is a monthly bank plan fee as you describe but they also charge between 1.00-1.35% for assets under management. Also, you need to have a minimum $1,000,000 in investable assets or $1,000,000 in credit financing with them. That means, they charge you a minimum $13,500 annually on top of the $100-150 a month bank plan fee. I have more than $1,000,000 in investable assets and would be prepared to pay the 1.35% annual fee so long as I can see the value in it. Unfortunately, outside of a high level 15 minute explanation of the services they provide (which was generic and that you can pull from the internet yourself), I don’t actually understand where the value was. What I was looking for was for them to create a personalized plan, present it to me, and let me judge that they added value. If they did, I would gladly pay because they would improve my financial health. Unfortunately, they can’t do that until I sign to transfer my assets to them first. The approach felt very horse before the cart or cart before the horse, whichever it is.

    At the end of the day, I’m the customer. I’m just asking them to show me they can provide extra value that justifies what they charge for. I don’t think that’s too much to ask for. Ultimately, if someone is trying to sell me something and no value is shown, I need to stop, turn around, and walk out.

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