Switzerland is the most important location for wealth management. After a study recently published by Bosten-Consulting-Group, it is estimated that worldwide wealth management has a volume of approximately 7400 B$ which is invested offshore. This amount is an increase of 8% in comparison to last year (spring 2010). Switzerland harbors 27% (2100 B$) of this amount which makes it to the most important financial place for wealth management in the world. The next following places are already lying far behind (London and Luxembourg with 800 B$, USA with 600 B$, Singapore with 500 B$).
However, different factors need to be considered. The actual economic situation doesn’t look too promising at the moment, then there are the changes in regulation of the banking systems which might hamper the wealth business in one way or another in the near future, …in short, competition among wealth managers will increase and new strategies need to be developed, to explore new markets, to become a real global player, to offer highly personalized services with highest quality but low costs and others.
Not surprising, each wealth manager applies different commissions and charges. For me it is somehow amazing to reckon how different and not transparent those conditions sometimes are. The study below summarizes some of the charges…
| Commissions and fees for wealth management in Switzerland | ||
| Management | ||
| Administration | 0-2.5% | p.a. |
| Participation on profit | 0-40% | of net profit |
| Initial fee | 0-5% | On initial investment |
| Banking | ||
| Depot maintenance | 0-0.5% | p.a. of capital, plus 10-40 CHF per position |
| Administration fee | 0-0.2% | p.a. of capital |
| Foreign currency fee | 0.05-0.2% | on titles in foreign currencies |
| Account maintenance | 0-100 CHF | Per account |
| Courtage | 0.2-2% | of trading volume |
| Spread on currency change | 0.01-2.5% | exchanging currencies |
| Product fees | ||
| Spreads | 0.05-3% | of trading volume |
| Initial commission | 0-5% | of purchase |
| Sale commission | 0-3% | of sales |
| Administration | 0.1-3% | of invested capital |
| Source: After “Vermögenspartner” in NZZ 21-Jun-2010, nr. 140, p. 23 | ||
However, I can grant you that the differences are even bigger if you go to the extreme. Do you need monthly reports printed on brilliant paper or on 200gr heavy sheets which easily could be used for pastel art if they wouldn’t have an impressive water sign. No problem you can find such institutions and will also pay for it.
Should your adviser have at least three university degrees? Sometimes it helps but how about the network he has, the direct access to those markets you are interested in, first hand information?
Do you feel more comfortable if the office of your wealth manager resembles a palace in “1001 nights” or where you put him a tip on table when you leave because you think he might need it. Do you think a chaotic office is a nightmare because of data security or reflects the need to understand chaotic financial markets. You will find such institutions – the ordered ones too..lol.
When it comes to wealth management, confidence is most important. If you have not 99.9% confidence in your wealth manager then simply forget about it. Offered services cost some money, however, it should be important that you understand easily the commission structure. If you think that the wealth manager is your closest best friend but you need a lawyer to understand the details of your agreement then leave it as well..;-).. If your wealth manager is giving you a ride with his personal RollsRoyce where you are persuaded that even driving a second hand small Fiat means showing off, better leave it. The opposite is also true.
Among the 100′s of wealth managers in Switzerland also black sheep exist who run their business after the “once and never again” client model. They often earn a living on commissions they charge in moving your fortune frequently from one position to another till it is gone in a nutshell. Hopefully for you, such cases are rare related to Swiss regulation. But it can happen.
Another category of black sheep are those with their challenging mathematical models which you should understand within 5 minutes, either they don’t do business with you as they say- if you don’t want to appear as an idiot and confirm – also nobody seriously can – then you become responsible for the outcome …I’m afraid that you will not like the outcome…lol.
Recent performances are risky evaluation criteria. They may change as the financial environment does. Your personal risk level must be in line with what you see and understand. If your wealth manager is old school and you a lunatic derivative maniac, problems are programmed to appear.
And yes before I forget – about the commissions again. There are institutions which are so eager to trap you as a client that they hire a bunch of intermediaries who get bonuses on the earned commissions – long life for the clients who are never changing the wealth manager then – the commissions will nicely bubble and the intermediary will like it too….
So what to do, my humble Lemurian thoughts:
- Rule 1: Have confidence only if you can feel confidence with your belly too: presentation, quality of services, references, reputation. It’d you give confidence if your wealth manager is member of VSV-ASG. And to make it even more complicate – professional financial intermediaries must be affiliated to a self regulating body since 2000, because of banking regulation!
- Rule: 2: Homo sapiens is rather a stupid creature. Forget about what you cannot fully understand within minutes as you never will understand it: experience, access to markets and information, does agent understands my needs, products
- Rule 3: Every service cost money but there is no need that your manager is stirring the coffee with a golden spoon: transparency of commission, simulate annual charges
- Rule 4: Take your time: Compare-compare-compare, no stress – urgent investments don’t exist
- Rule 5: Take no risks which aren’t necessary: Learn about products, understand them, invest money you can afford
- Rule 6: Plan your investment: Define and follow goals in regular manner.
- Rule 7: Take a sunbath from time to time as I do in the zoo & relax & have fun…;-)
As a Lemurian I only have to deal with my fruit basket – I’m not unhappy about that…;-)…but I have to add it is interesting to learn how much variability exists in Switzerland in wealth management- its almost like comparing appels with bananas, but not the green beans as I don’t like them..the latter is meant for my care takers
