Now's the Time to Talk with Your Private Banker
by Matthew Scholfield
It's a new world of personal lending: have you made the necessary adjustments?
Personal lending occupied a different world two years ago. Floating on easy credit and subprime loans were the way for some—then the bubble burst on those unsustainable practices and that world changed. Today, the economy is still recovering from the Great Recession, and economists predict there are still several years of hard work ahead.
With the shifts in the financial landscape, economic uncertainty and low interest rates, individuals are left wondering what this means for them. Now is a prime time to talk with a private banker and create a plan for the future—and the strategy session should start with a conversation about credit.
What was right for individuals five years ago may not be the right choice now. Markets shift, and it’s important to periodically survey the financial landscape and lay fresh groundwork to prepare for new opportunities.
Know your bank. Sound financial planning is built on solid financial and banking relationships, not individual transactions, and those relationships are built on knowledge and trust. Private bankers should be privy to their clients’ total financial picture, so they can help make decisions that fit their goals and benefit their portfolio. Likewise, individuals should know the financial strength of their bank.
Consumers should check the bank’s reputation with trusted advisors and reputable third-parties. Read annual reports and ask about metrics, including asset quality, loan to deposit ratio, tier-1 capital and earnings growth. Reviewing recent articles and SEC filings can also reveal beneficial data. Should a banking relationship change due to acquisition or a bank failure, individuals need to be aware of potential changes with lending philosophies and bank personnel that can come with these actions.
Don’t make credit decisions in a vacuum. In a credible banking relationship, a private banker works alongside a team of experts to determine the best lending solutions for investment, tax and retirement purposes while taking into consideration the overall wealth and estate plan.
Moreover, those relationships should extend beyond the walls of the bank—to accountants, attorneys and tax advisors.
Create a customized credit plan. The next step is to discuss a financial plan and how leveraging credit can help meet goals. The truth: most people don’t proactively manage the borrowing side of their personal balance sheets when planning to purchase art, a luxury vehicle, a business or a second home. That may stem from not knowing the varied credit options available.
A private banker helps individuals explore and customize lending solutions to match risk and best leverage assets, which provides them with options that may extend beyond ones commonly offered in the marketplace.
Get a financial checkup. Once a plan is in place, individuals should then drill specific credit opportunities into their portfolio and strategy. A private banker helps individuals explore solutions to optimize financial and tax situations and bridge gaps in the overall financial plan.
Part of this should include evaluating the biggest loans in the portfolio and optimizing them for financial and tax situations.
Interest rates should also be evaluated to determine if the rate environment is conducive to locking down a low and secured fixed rate on mortgages for a home, second home or investment properties. This is the most proactive and, in the long-term, can be the most beneficial move for an individual’s financial future—and one that helps protect the portfolio against inflation.
Prepare for the unexpected. Most have heard the adage: the time to borrow money is when you don’t need it. A line of credit is an important tool in preparing for the unexpected and managing the overall financial picture.
Lines of credit can be used for a wide variety of purposes, including major ticket purchases, home improvements, wedding expenses, education and medical bills. Additionally, lines of credit can provide peace of mind when unexpected expenses occur.
The most familiar line of credit is the home equity line of credit (HELOC), which allows an individual to borrow against the equity in their primary residence. The interest paid may also be tax deductible.
Another example is one that allows individuals to use their investment portfolio as security. This can help manage cash flow or take advantage of opportunities while still allowing individuals to keep their investment portfolio working on their behalf.
Credit can expand your buying power and your life choices and create harmony in cash flow. Now is the time for individuals to talk with a professional who can ensure they are taking full advantage of the many credit solutions available while also ensuring their banker is providing holistic advice related to their overall wealth plan. 
Matthew Scholfield is a vice president and private banking client manager for UMB Investment & Wealth Management.
P | 816.860.4862
E | matthew.scholfield@umb.com