So you’ve just sold those Facebook shares that your high school buddy, Mark Zuckerberg, let you buy years before it went public, and you’ve made an after-tax profit of $4m. You’re feeling very, very rich.
Until, that is, you talk to a private bank that specializes in managing money for rich people. That’s when you realize that you’re nothing more than a “single-digit millionaire”. You’re just not that special.
In fact, the rate at which the ranks of millionaires is expanding is so great, you’re actually pretty boring. Last year alone, the US welcomed 300,000 new millionaires: that translates into a growth rate of 3%, outpacing the growth in the US gross domestic product.
In fact, there are now so many millionaires out there that the private banking system simply can’t cope.
JP Morgan Chase’s private bank has been raising the minimum amount of assets you need to become of its clients slowly and steadily for many years. Early this year, it announced that the minimum asset level to remain a private banking customer would double from $5m to $10m. When that takes effect early next year, about 10% of the bank’s customers could be shuffled off to a less deluxe service, Private Client Direct. While a private banker might work with only 20 or so people, those working with “single digit millionaires” might have 100 clients – meaning that every one of them gets much less of their adviser’s time and attention.
JP Morgan’s move was partly aimed at convincing clients to shift any assets they might be stubbornly holding at other banks, bringing them up above the $10m threshold. But it’s also a recognition that with the proliferation of millionaires, the private banks that you’ve heard about – the ones that will walk your dog, deliver gold bars with your monogram stamped into them and provide “wealth therapy” so your children don’t grow up entitled brats – can pick and choose the clients that they deal with.
A sign of just how ruthless they have become is that JP Morgan’s new rule even applies to the corporate lawyers with whom its investment bankers work closely on big deals. Until now, access to private banking programs have been among the perks offered to lawyers at firms like Skadden Arps, Slate, Meagher & Flom; now, the word is that they too will be shut out from this special treatment (and the access to hedge fund investments and other products and events that only the super-elite can tap into). Imagine how the poor lawyer who does a deal for a Silicon Valley billionaire must feel: he’s negotiating with the very bankers who have thrown him out of their private club, on behalf of a client who is welcome to join it.
If you don’t feel much empathy for that hypothetical lawyer, worth millions, just because he can’t qualify for super-special treatment from banks, I don’t blame you. The fact is that as banks scramble to emphasize with wealthier clients, it comes at the expense of serving the rest of their clientele.
JP Morgan’s private clients might feel offended at being demoted. On the other hand, those of us who merely toil for our money and whose net worth hasn’t reached seven digits yet might be flattered to be invited to join Private Client Direct, a program serving the “mass affluent” that offers after-hours access, a phone number to reach a banker any time and a few special perks. (Yes, even if that also involves some heavy pressure to buy the bank’s proprietary investment products.)
But even then, we’ll need $500,000 in investments or $250,000 in deposits to qualify, and minimums for other such programs at other banks aren’t very different.