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Private banking isn't what it used to be. I suppose that's not so insightful, ever since Schwab did the financial services' version of AOL's downloading of Time/Warner. But I have to admit, I wasn't all that surprised that an upstart discount broker took down U.S. Trust, one of the most venerable of the private bankers that has catered to generations of America's wealthy.

You see, the handwriting's been on the drawing room wall for the private banks for some years now - at least since they moved beyond managing leisure-class portfolios that start well into seven figures and began schlepping mutual funds to the Joe Lunchbuckets who turn to financial planners for advice. The private banks realized that as the booming economy combined with the technology revolution, old money just wasn't what it used to be. So they started taking their blueblood advice down market via private labeled funds. And like most repositionings in the history of financial services, this one didn't work out too well. Hence, Boss Schwab.

The question is, will the current kings of the hill at Schwab have any better handle on what they possess, and what to do with it, than the private bankers did? 'Cause if they do - and admittedly it's a long shot - then the merger bodes very well for the financial planning community. If not, then it raises serious questions about the future of Schwab itself.

I stumbled onto the world of private banking years ago, while I was covering high-net-worth finance for Worth magazine. I'm not talking about some newly-minted upscale division of the trust department in a regional bank: I'm talking about real, old-money private banks, such as J.P. Morgan, Northern Trust, Harris Bank, Brown Brothers Harriman, Fiduciary Trust, and formerly U.S. Trust; firms that number their clientele in generations and their histories in centuries. And what I found was sobering: large institutions that offer long-term, comprehensive advice through trained professionals (usually lawyers or accountants) with a fiduciary obligation to their clients. They were the apex, the nirvana, the Tiger Woods of financial planning.

It occurred to me that if they could ever get their act together with their top-shelf estate planning, tax planning, risk management, generational planning, and portfolio management, they could take the financial planning world to a new level. But despite my repeated, and I'm sure annoying, suggestions to management at Morgan, U.S. Trust, Brown Bros., and others, no private bank has been able to overcome its internal politics long enough to offer even a portion of its high-net-worth expertise to independent financial planners and their clients.

Enter Charles Schwab & Co. If they do what most observers fear, they'll turn U.S. Trust's upscale planning resources over to their retail marketers, create a massive competitor to independent planners, and alienate what even the Schwab folks acknowledge is the future of their company. Or they could think out of the box and market that vast expertise through both firms' institutional branches, which already work with independent planners to the mutual benefit of clients, planners, the planning community, and even Schwab itself. Is such a novel strategy too much to ask from the folks who brought us discount brokerage services, OneSource, and fee-based asset management? I truly hope not.

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