Where They're Piling On the Perks
Soon after Marty Sternberg and four partners purchased a 28-acre riding stable in Old Westbury, N.Y., they turned to Citigroup (C ) for help in managing the staff and equipment. Turned to whom? While providing advice on running an equestrian facility may seem a world away from traditional banking services, it is one of several specialized products Citigroup offers clients of its private bank. "This will make the farm more efficient," Sternberg says of the daily, weekly, and monthly maintenance and staffing schedules Citigroup devised for him.
In recent years, the private banks that cater to the superrich--often defined as those with assets in excess of $5 million--have piled on perks and expanded their expertise to include nonfinancial assets such as art, airplanes, and thoroughbreds. Merrill Lynch (MER ), for example, recently helped a client navigate the adoption process. Meanwhile, the private banks at both Citigroup and J.P. Morgan Chase (JPM ) have experts who scour the art world to locate treasures for clients.
Intense competition for customers is the driving force behind these extra services. Despite the stock market's slump, the ranks of those worth $5 million or more rose from 578,000 in 2000 to 677,000 last year--the latest available figures, according to the Spectrem Group consulting firm. Their accounts can generate fees of up to 1% a year, or $50,000 on a $5 million account, making this a lucrative business for the banks.
PAMPERED PEOPLE. Of course, private banks still cater mainly to clients' complex financial needs. Bankers spend most of their time shaping investment strategies and figuring out how to transfer money to the next generation while minimizing Uncle Sam's take. In the process, they offer access to hedge funds, derivatives, and other sophisticated investment products.
But private banking is all about pampering people, too. Bessemer Trust will take charge of your monthly bills. Merrill Lynch will score hard-to-get tickets to hit shows and sporting events.
Many now offer more than just gofer services. Both J.P. Morgan and Citigroup have art experts who--for undisclosed fees--will educate neophytes or bid at auction for clients wishing to remain anonymous. The banks' advisers also help authenticate, insure, and value pieces. If a client needs cash, they can arrange for a sale or a loan against the art.
Citigroup helps clients care for their farms--and their homes. Sandra Stern, head of Citigroup Private Bank's Multiple Residence and Farm Advisory Group, compiled for free an inventory and maintenance schedule of the equipment, paddocks, fields, fences, and barns at Sternberg's riding center. She also creates employee handbooks and performance appraisal forms to manage household staffs.
These days, private banks are taking a more active role in educating clients about both the nuts-and-bolts of money management and the special challenges that accompany wealth. J.P. Morgan sponsors conferences for the under-35 set featuring renowned finance professors. Its bankers also help families devise "mission statements," so they can agree on what they want to achieve with their wealth, says John Straus, who heads Morgan's U.S. private bank.
Meanwhile, Peter White, head of Citigroup Private Bank Family Advisory Practice, advises clients concerned about their kids becoming spoiled. He helps them address issues such as "whether to leave money to the kids, when, how much, and how to raise them." Try getting answers to those questions from your regular banker or broker.
By Anne Tergesen