German Private Banking: How to Choose Wealth Management in Germany

Major banks, family-owned private banks and independent managers

Wealth management in Germany, known to the banks as Vermögensverwaltung, covers the private banking, discretionary management and securities custody services offered to affluent clients. Providers include major banks, family houses such as Metzler and Berenberg and BaFin-licensed independent managers, mostly in Frankfurt, Munich, Hamburg and Düsseldorf.

For anyone comparing a German private bank, the market combines the private banking arms of large groups, historic family houses such as Metzler and Berenberg, and many licensed independent managers. Frankfurt, Munich, Hamburg and Düsseldorf account for most of this clientele.

Vermögensverwaltung or Anlageberatung: mandate or advice

Under Vermögensverwaltung, the classic discretionary mandate in Germany, the manager decides alone within the agreed strategy; under Anlageberatung the adviser recommends and the client decides. Both fall under MiFID II as transposed by the Securities Trading Act, with a mandatory suitability questionnaire.

Typical entry amounts for a discretionary mandate

Individual mandates often start at a few hundred thousand euros, while standardised fund or ETF mandates are open from much smaller amounts. Each institution sets its own thresholds, which are rarely published.

The Depot: securities custody and segregation of assets

Securities are held in a custody account, the Depot, and remain the client’s property, separate from the bank’s balance sheet if it fails. Cash in the settlement account is covered by the 100,000 euro deposit guarantee.

The EdW investor compensation scheme

If a manager or broker cannot return the securities or funds entrusted, the Entschädigungseinrichtung der Wertpapierhandelsunternehmen pays 90% of the claim, capped at 20,000 euros. This scheme never covers market losses.

Abgeltungsteuer: 25% withheld at source for residents

For a German resident, the bank withholds the 25% Abgeltungsteuer plus solidarity surcharge and any church tax on interest, dividends and capital gains. An exemption order keeps the first 1,000 euros a year per person untaxed.

Non-resident clients: dividend withholding and residence certificates

A non-resident is generally not subject to Abgeltungsteuer on interest, but German dividends bear 26.375% withholding. Partial refunds under a tax treaty are claimed from the BZSt with a certificate of tax residence.

Manager pay: flat fees, inducements and ex ante costs

MiFID II requires an ex ante cost statement before any investment, covering management, transaction and product costs. Deutsche Bank, like its competitors, must also disclose any inducements and the total cost in euros and as a percentage.

Inheritance and gifts: German allowances and international wealth

German inheritance and gift tax offers high allowances between parents and children, renewable every ten years. Assets located in Germany held by a French resident also fall under the France-Germany inheritance tax treaty.

Reporting duties of a client resident in France and CRS exchange

Portfolios of clients living outside Germany are reported by the bank through the BZSt under the CRS. A French tax resident lists the securities account on form 3916 and declares dividends and gains in France.

How to choose a private bank in Germany

Before comparing institutions, define what you expect from wealth management in Germany: handing over all decisions, receiving advice while keeping control, or simply having your securities held in custody. Write down your investment horizon, risk tolerance, reference currencies and country of tax residence. These criteria steer the choice between a large bank, a family-owned house and an independent manager, and help you avoid signing an unsuitable mandate. A preparatory meeting often clarifies these points at no commitment.

Meet several providers and put the same list of questions to each: BaFin authorisation, services genuinely available to clients living abroad, working language, the named adviser and cover during absences. A written comparison on identical terms is worth more than a general impression. It also reveals which banks do not accept non-residents or sharply limit what they offer to that clientele. Keep a written record of every answer so you can compare the proposals calmly.

Documents to prepare for a Depot and a mandate

A German private bank, bound by anti-money-laundering rules, verifies the client's identity and the source of funds before opening a securities account. Prepare a valid identity document, recent proof of address, your tax identification number and the tax residence self-certification requested for the CRS. Depending on the institution, certified copies or a remote identity check may be required. This step avoids discovering late a condition that is incompatible with your personal situation.

Anticipate the question of where your wealth comes from. A business or property sale, an inheritance, employee savings or accumulated income: each source is proved with dated documents such as a sale deed, an account statement or a tax return. A complete, consistent file shortens the exchanges with the compliance team in practice, although timing varies by bank and by how complex your situation is. Exact requirements depend on each institution, which remains free to accept or refuse a request.

Wealth management in Germany: questions to ask before you sign

Start with the proposed strategy and how it fits your profile: which instruments are used, how much is placed in in-house funds, and which risk limits apply. Ask how performance is measured, against which benchmark and how often you will receive reports. Serious wealth management in Germany should be explainable in plain terms, without unnecessary jargon. Do not hesitate to ask for an explanation of any technical term that seems unclear before you sign.

Then ask about all costs, the list of custodians holding your securities, whether you can change or end the mandate, and how long a transfer of securities takes if you leave. Request these answers in writing and keep them. Also have the effect of withholding tax on your dividends checked with the bank and with an independent tax adviser before you invest. This discipline protects the client as much as the bank and makes it easier to follow transactions over the years.

Finish with the relationship itself: who is your contact, how often will you speak, and how are complaints handled? A German private bank is a financial services provider, and the quality of follow-up matters as much as the sales pitch at the first meeting. An independent adviser can review the terms if the amount or complexity of the situation justifies it.

Common mistakes with a private bank in Germany

The first mistake is to compare only the management fee rate and forget custody charges, transaction costs and the costs of underlying funds. The total cost, shown in euros in the ex ante statement, is the only reliable basis for comparison. The second is to confuse advice with a mandate: under advice you decide, and you therefore bear responsibility for each transaction you approve. This transparency is part of the information duties imposed on providers, and you are entitled to ask for it.

Other traps are frequent: neglecting to report the account in your country of residence, assuming that German withholding tax removes any local taxation, or signing without rereading the suitability questionnaire you completed. Finally, check the institution's authorisation with BaFin and with the bank itself before making any large transfer. These checks take little time and avoid costly surprises later. Use this as the fairest test of each wealth management in Germany proposal you receive.

Monitoring wealth management in Germany: reports and reviews

Once the mandate is signed, the quality of the relationship is decided by the follow-up. A private bank in Germany will normally send periodic statements and a performance report comparing results with the agreed benchmark. Read these documents alongside the fee schedule you received before signing, check that each line matches what was announced, and report any difference in writing. A regular exchange with your adviser confirms that the strategy still fits your investment horizon and your tolerance for risk.

Plan a review whenever your circumstances change: a move abroad, the sale of a property, a birth, retirement or a new country of tax residence. These events can alter the purpose of the portfolio, the treatment of your income and the information passed to the authorities. A discretionary mandate in Germany can be amended or ended according to its terms, so reread the notice period and the way securities are transferred before committing, to avoid staying tied to a solution that no longer suits you.