Kiyosaki’s experience illustrates the importance of constantly evaluating our relationships with our financial institutions. The needs of every entrepreneur and family evolve over time. Businesses prosper, wealth accrues, people age, grandchildren are born, philanthropies become passions. At the same time, the financial institutions on which our families depend—especially publicly held ones—can transform just as dramatically. Mergers and acquisitions, management shakeups, new business strategies, shareholder pressures, adjustments in the economy or financial markets all contribute to the strategic twists and turns in an institution’s long and varied history.

It is vitally important that we monitor our relationships with our financial institutions to ensure that our private banking needs are met, and that our bankers are still capable of meeting them. Without regular evaluation of this relationship, we may overlook products or services that would best serve our increasingly complex financial needs. We also may fall victim to the all-too-common indignity of being taken for granted by a private bank that may consider our business a fait accompli.

Kiyosaki now evaluates his financial relationships every three years. "A lot of times these guys will get sloppy; they’ll lose their aggressiveness. You need to have another guy check the numbers," he says. "The more money you have, the more important it is to do that."

Keeping Tabs
Even if our needs have stayed fairly constant, the pace of change in the banking industry has made it crucial to keep a careful eye on our relationships with our private banks; mergers or other changes can throw them into disarray. Darrell Mayeux’s unhappy experience with his private bank illustrates how rapidly the relationship can spiral out of control. Mayeux is embroiled in a bitter lawsuit with his former private bank, Fleet Bank’s Private Client Group, claiming the firm is responsible for losing virtually his entire $16-million fortune.

"Like a lot of people who come into money, he was totally reliant on his bank, and this is the nightmare come true," says John Piper, an attorney at Portland, Maine-based Preti Flaherty, who represents Mayeux. "On the one hand, they can be a financial advisor; they can court you, woo you, and tell you how they are going to invest your money. At the same time, they’re trying to sell you a loan, and when they do that, they are not your friend," says Piper.

The lawsuit contends that Fleet failed Mayeux (whose erstwhile fortune derived from amassing Fairchild stock over the course of a 32-year career) in three key ways. First, the suit alleges that Fleet did not apprise Mayeux of an "upheaval in Fleet’s Private Client Group." Nine managers resigned or were fired, leaving three remaining officers to manage $2 billion in assets and several hundred clients. Stretched so thin, the group did not realize until too late that a problem existed with the declining value of the stock being used to collateralize a $4-million loan. Mayeux contends that the bank then panicked and sold Mayeux’s stock during the middle of last spring’s war in Iraq, when its price was severely depressed. Fleet counters that the losses are Mayeux’s fault and is suing for $238,770, the remainder of money owed on the loan when interest and fees are included.

Piper notes the lessons learned from Mayeux’s experience: "Know your relationship manager. Talk to him frequently. If there are long silences, or if your relationship manager keeps changing, that’s a danger sign that things are not going well."

Of course, even if left unattended, few private banking relationships devolve into such acrimony. Given the complications and time involved in severing a private banking relationship and beginning a new one, many simply endure less-than-perfect relationships. Finding a new private banker is not like changing your dry cleaner, observes Bradley E. Turner, the senior managing director at the McDonald Financial Group, who runs the firm’s wealth management area. However, we have every reason to remain watchful and constantly be aware of our bank’s financial health—as well as the health of our relationship with it.

Heidi Steiger, executive vice president of Neuberger Berman, concurs with Piper that a high turnover at a private bank is a sure sign of danger. Substandard investment performance compared to the rest of the market for more than one year provides yet another worrying indication that all is not well, as do small, but frequent, errors.

Turner suggests several techniques for ensuring our banking relationships stay on track. Basic as it may sound, we should spend some time considering what constitutes a successful relationship. Turner advises us to ask: What is the scope of services we want? How often and in what way do we want to communicate with the bank? How aggressively do we want to invest? "You’d be surprised how few people do that," he says. "If a person can come to the table at least having given some thought to the ingredients that could make it a success, that’s key."

The second technique involves clients having a frank discussion with their banker about their expectations and then putting a summation in writing, Turner says. This documentation will prove invaluable in future assessments of the relationship. Turner also recommends that we ask ourselves whether the banker has actually delivered on our established goals after a reasonable period of time. Indeed, "reasonable" is the criteria that should define all aspects of the conversation. "The spirit from both sides needs to be one of realism and practicality," he adds. Just as we cannot realistically demand above-average investment returns while insisting on below-average risk, our bankers should not oversell the capabilities and expertise of their institution.

Steiger advocates basing 50 percent of our decision to stay with a bank on an evaluation of the firm, while the other 50 percent should be predicated on an evaluation of the individual handling our account. On the institutional side, we should make certain our profile aligns with those of other customers. If the average account is $25 million, and ours is $5 million, or $75 million, we should reflect carefully on the firm’s appropriateness, since at either end of the spectrum, we may not receive the level of attention and service we expect.

We should also understand the background and dynamics of the bank’s money management team. How experienced are they, and on what do they base investment decisions? Do they do their own research, or do they just work off someone else’s buys and sell list? How flexible is the investment philosophy at the firm? Does it have a one-size-fits-all approach, or does it tailor its suggestions to each client’s needs? How objective is the firm? Can it reach outside the firm for best-of-breed investment products, or are all investments steered to internal products? Does it offer trust services? How are its fees and other compensation determined?

Steiger adds that our private banks should comply with reporting standards created by the Association for Investment Management and Research, which allow us to compare the firm’s investment performance to those of its peers.

The Personal Touch
We should always feel comfortable with the individual banker with whom we will be working. Does he elicit trust? Can he communicate our needs effectively through the firm? Is he sophisticated enough to understand our needs? How often does he call or otherwise communicate? Does he pay attention to the markets, and is he proactive? Will he be around for the long term?

Kiyosaki echoes this last point, advising against working with private bankers who may retire while we are in our prime. They also should be excited by the opportunity to work hard for us. "Make sure they meet your risk tolerance. I’m extremely aggressive, and I had to find someone I wouldn’t scare."

Stanley H. Pantowich, a principal at TAG Associates, a family office in New York City, looks for honesty in owning up to mistakes, and a willingness to make reasonable exceptions to policies.

The ability to pick up the phone and talk to a private banker who knows us by name, and not just by account number, is absolutely indispensable. "The bottom line for a private banking relationship is that you know who to call when you have a need or a problem," says Raymond T. Nasser, a certified financial planner in Midlothian, Virginia. "Not only should they respond to your inquiries, but the banker should be familiar with your situation. This will enable the banker to come up with ideas that can benefit you."

Additional Information
 A Natural Cycle
 Personal Attention

Illustration by Matt Mahurin