Digital wealth management services have been available to Swiss investors for some time. True Wealth – a pioneer of online wealth management in Switzerland – launched its robo advisor in 2013. The primary advantage of digital wealth management services over conventional wealth management services is that costs are typically lower. This is possible because consultation is largely or completely replaced by a digital interface and many processes are automated.
Now, Swiss national postal bank PostFinance has entered the space with its e-asset management service. Here, moneyland.ch answers the most important questions about PostFinance e-asset management.
1. How does PostFinance e-asset management work?
As a PostFinance e-asset management user, you can choose between three different investment portfolios: Switzerland; Global; or Sustainable. PostFinance invests your capital in the components which comprise the portfolio of your choice. These are primarily mutual funds and exchange traded funds (ETFs). Aside from selecting one of the three portfolios, you have no influence over the individual portfolio components. This passive approach sets e-asset management apart from other PostFinance investment services including PostFinance e-trading and the newly-launched investment consulting plus and fund self-service offers from PostFinance.
2. Is e-asset management from PostFinance a robo advisor?
PostFinance communicated to moneyland.ch that it does not consider its e-asset management service to be a robo advisor. According to PostFinance, conventional robo advisors make investment decisions based on algorithms without interference by wealth management professionals. With the PostFinance e-asset management service, on the contrary, all investment decisions are made by PostFinance’s investment committee.
The term robo advisor is generally misleading, because it implies that all allocations and investment decisions are performed by robots or algorithms and are fully automated. In actual practice, that is hardly the case with any robo advisor. Today, the term robo advisor is loosely used to denote any wealth management service which primarily provides its services via a web portal or mobile app.
Conventional banks generally avoid using the term robo advisor because investors – and older investors in particular – are confused as to what it actually means. The concept of important investment decisions being automated based on unproven technology is also disconcerting to many investors. Swiss investors generally prefer wealth management services in which human wealth managers have the final say in investment decisions.
In the case of PostFinance e-asset management, PostFinance investment professionals actively manage investments based on predetermined portfolios. Conventional robo advisors, on the other hand, typically let investors make more decisions themselves and only play a very passive role in wealth management.
3. Can users get personal consultation?
Yes. PostFinance e-asset management is a hybrid service, with PostFinance offering personal consultation in addition to the canned support solutions included in the online service.
4. What is the minimum investment required?
A minimum initial capital investment of 5000 francs is required in order to use the e-asset management service from PostFinance.
5. Which investment vehicles does e-asset management use?
PostFinance e-asset management used both passively-managed and actively-managed mutual funds and ETFs. The funds used do not pay retrocession fees, meaning PostFinance is not paid sales commissions by the funds. While that is beneficial to investors, this has become more or less standard in Swiss wealth management. You cannot choose the investment vehicles included in your portfolio.
6. Which asset classes are included in portfolios?
Asset classes included in e-asset management portfolios include cash, bonds, stocks, real estate and gold.
7. What geographic regions are included in portfolios?
Capital in e-asset management portfolios is invested in Switzerland, Eurozone countries, the United Kingdom, Japan, developing countries and the United States.
8. How much does e-asset management from PostFinance cost?
You pay a flat fee equal to 0.75% of your wealth every year. This flat fee covers brokerage fees and custody fees.
On top of that, you also pay fund cost, exchange fees (for ETFs), currency exchange costs (for investments in foreign currencies), bid-ask spreads (for ETFs), and stamp duties (for ETFs and for Luxembourg-domiciled funds).
Fund costs are the main costs which applies in addition to the 0.75% per annum flat fee is the cost of fund fees. Funds charge management fees on an ongoing basis, and these collectively make up a fund’s annual total expense ratio (TER). According to PostFinance, the average TER of funds used in the Global and Switzerland portfolios is 0.25% per annum, and the average TER of funds used in the Sustainable portfolio is 0.55% per annum.
9. How does the cost of PostFinance e-asset management compare to that of other wealth management services?
The cost of PostFinance e-asset management is significantly lower than the average cost of Swiss wealth management services.
However, the PostFinance service is more expensive than Swiss robo advisor True Wealth, which has a 0.5% annual flat fee. The funds used by PostFinance are also more expensive than those used by other affordable digital wealth management services.
10. How risky is investing with digital wealth management services?
Investing in the stock market generally carries a much higher risk of loss than investing through banks via savings accounts. Alternative asset classes are even more risky.
Over the long term, stock market indexes have delivered higher performance than savings accounts. However, stock investments are prone to short-term and mid-term losses in value. For this reason, wealth management services which include stock market investments are only recommended if you are willing and able to invest your capital over a long term. Never invest money which you are likely to need in the near future.
11. Does PostFinance offer a demo account?
No, PostFinance does not offer a demo version of e-asset management.
12. Can fund shares be transferred from e-asset management to another custodian?
No, you cannot withdraw fund and ETF shares from PostFinance e-asset management nor have them transferred to another custodian bank. However, this limitation is standard across Swiss wealth management services.
13. What kind of investors does PostFinance e-asset management cater to?
The new digital wealth management service from PostFinance is somewhat expensive, which limits its appeal to a relatively small group of investors. It also does not offer a free demo, so consumers who are not familiar with digital wealth management have no way to test the service before subscribing.
These features indicate that with its e-asset management, PostFinance is targeting existing PostFinance customers rather than trying to compete for new customers. PostFinance has around 2.7 million existing customers, 1.8 million of which use its online banking services.
Most PostFinance customers who already use online banking will likely feel comfortable with the digital interface of e-asset management. PostFinance is well-positioned to promote its digital wealth management service to these customers, much like it already promotes its retirement funds.
There is no sure way to know how many PostFinance customers will subscribe to the digital wealth management service. However, even PostFinance customers should consider comparing all Swiss wealth management offers before subscribing to the PostFinance offer.
14. What does PostFinance aim to achieve with its new offer?
PostFinance has been working hard to increase sales to its existing customers. Even if PostFinance only succeeds in subscribing a small portion of its huge customer base to its e-asset management service, it will still become one of the largest digital wealth management service providers in Switzerland.
More on this topic:
Swiss robo advisors compared
Interactive Swiss wealth management comparison
Interactive Swiss stock broker comparison
