History of Private Banking & Wealth Management

The Early Days

Private banks began to emerge in the 1600s as very wealthy royal and noble families across
Europe and England, fearful of revolutions and rebellions that could see their wealth assets
and titles confiscated, sought the discreet (hence the word private) banking and financial
services of banks to manage and protect their personal and family wealth. During this time,
for instance, the British royal family commissioned Coutts (founded 1692) to manage its
personal assets, with the firm now known as MeesPierson (part of ABN AMRO) managing
the Dutch royal familys affairs.

Private banking at this time acquired a reputation as relating to the management of the
private assets of the royals and nobility, distinct from the sovereign assets of the countries
they ruled. This type of banking was separate again from the borrowing and lending
business of commercial banks that involved themselves with the merchants and the
business classes of the period.
The Emergence of Switzerland
Over time, largely due to its long-standing neutrality and robust banking regulations,
Switzerland became the preferred center of European private banking and a relative safe
haven for the fortunes of Europes nobles and wealthy in general. This was particularly the
case during and following the French Revolution and the Napoleonic wars of the late 18th
and early 19th centuries, and is a position Switzerland has held globally till this day.

Switzerlands reputation as a private banking location was further bolstered by its stringent
support of banking secrecy laws that allowed clients to deposit funds and wealth
anonymously, which incidentally could be used as a method of minimizing taxes through
careful management of affairs or by simply hiding assets from clients own national tax
authorities. This concept of banking secrecy is also alluded to in the term private banking,
but strictly speaking was not the original purpose nor intent of the term.
The 1800s
Private banking and wealth management practice also evolved in parallel with the expansion
in global trade and wealth throughout the industrial revolution of the 1800s, and with
innovations in commercial structures that saw the emergence of private trust companies in
countries such as the US, Australia, and South Africa in the late 1800s. These trust
companies were professional institutions entrusted with fiduciary asset management
responsibilities and were ideally placed to manage the varied assets of wealthy nobles and
the expanding commercial classes who were often away on business and needed the
assistance of reliable trustee partners to manage their affairs in their absence. Trust
companies and private banks performed overlapping financial services functions at this time.
The 20th Century
The advent of world wars, revolutions, economic depressions, stock market crashes,
currency instability, and social dislocation saw private banks provide financial services and
support to wealthy political and economic refugees who recognized the value of an
international private banking service as a hedge against social and economic turbulence.

But this support was not without controversy, particularly around the relationship between
Swiss private banks (and other notable institutions) and the Nazi regime of Germany which
was transacting in gold and currency confiscated from the central banks and citizens of
occupied countries as well as Jewish victims of the Holocaust.

Following the Second World War and more recently the end of the Cold War, global
economic growth and trade expansion resulted in an increase in the number of wealthy
individuals and the scale of their wealth. The private banking and wealth management
industry grew in tandem and began to extend its services across the globe to the new and
mass-affluent middle classes everywhere rather than just the very wealthy.