Swiss banks are a fortunate bunch because Swiss bank customers rarely compare banking services. Customer migration rates in private banking are low. In spite of digitization, Swiss wealth management has remained a “human” business. Customers continue to base their wealth management relationships on the individual qualities of their bank representatives rather than on the services, terms and conditions.
High fees for wealth management
moneyland.ch compared the fees and overall costs of Swiss wealth management services. The analysis covered both discretionary wealth management and financial advisory services from major national and cantonal Swiss retail banks.
The results of the analysis show that Swiss wealth management customers’ reluctance in changing banks is hitting their pocketbooks hard. In spite of the advent of robo advisory services, the costs of Swiss asset management have not yet come under pressure.
Wealth management remains a costly service in Switzerland. For example, the average cost of a stock-investment mandate worth 500,000 Swiss francs across major Swiss retail and universal banks is 7094 francs per annum. Those annual costs are equivalent to more than 1.4% of the invested amount. The cost for this mandate is as high as 9750 francs per year – or nearly 2% of the invested amount – at the most expensive banks like UBS.
It is important to understand that the flat-rate fees charged to not cover all of the costs associated with wealth management. Administrative and custodial fees are normally included in the flat-rate fee. But incidental fees charged by third-party services providers, including investment fund fees and charges, government duties like stamp duties and value-added tax, securities exchange fees and currency exchange fees are generally charged separately. “The use of expensive investment funds is particularly problematic” explains moneyland.ch analyst Michael Burkhard. “When these are used, customers pay twice: once for the asset management service and then again for fund management service”.
Lack of transparency at Swiss private banks
The costs of wealth management services offered by Swiss private banks are typically even higher than the costs of services offered by retail banks. Many private banks do not openly publish their fee schedules, which gives the impression of a lack of transparency. Some of the large Swiss universal banks also do not openly publish the terms and conditions of their wealth management agreements on their websites, but do publish them on the unbiased private banking comparison on moneyland.ch.
Major differences between banks
On average, the costs of Swiss wealth management services are high. But there are major differences in the fees charged by individual banks. For example, classic asset management for a 500,000-franc investment of which stocks make up 80% to 100% would cost 3500 francs per year using the ETF Mandate from Sparkasse Schwyz. Using the Individual Mandate from Sparkasse Schwyz or the asset management services from Bank Cler or Migros Bank, the same investment would cost 6000 francs per year. At the upper end of the scale alongside Credit Suisse (Invest Mandate All Instruments) is the UBS Manage Advanced Mandate. At 9750 francs per year, that mandate costs over 6000 francs more than the most affordable mandate from Sparkasse Schwyz. Credit Suisse has a number of mandates which are cheaper than its All Instruments offer.
“Customers should be aware that cost ratings can vary depending on the amount of capital to be invested and the investment strategy used” clarifies Michael Burkhard. Using a classic asset management service for a 250,000-franc investment portfolio with a minimal-risk strategy (limited or no investment in stocks) is cheapest at the Sparkasse Schwyz (ETF Mandate at 1750 francs per year and Individual Mandate at 1875 francs per year). Next in line is Credit Suisse (Index Mandate at 2375 francs per annum) and UBS (2625 francs per year). At the Migros Bank, which recently raised its wealth management fees for lower investment amounts and low-risk investment strategies, the cost is 3000 francs per year.
Rules of thumb for reducing asset management costs:
1. Mandates which make use of passive investment instruments like ETFs are cheaper than actively-managed mandates.
2. The larger the portion of your investment portfolio made up of stocks, the more expensive the investment management mandate will be. However, an increasing number of banks charge identical fees regardless of the investment vehicles used.
3. Wealth management mandates are more expensive than financial advisory mandates which simply provide you with advice and let you choose the investment instruments.
4. Classic mandates which include consultation services are more expensive than online-only services.
Robo advisory services among the most affordable
Online, digital asset management services – known as robo advisors – are typically even more affordable than the cheapest classic asset management services. The annual costs of the True Wealth robo advisor, for example, are equivalent to 0.5% of the invested capital – regardless of the investment strategy used. That is notably less than what you pay for classic wealth management services. If, on the other hand, you are looking for investment consultation, robo advisors will not likely suit your needs because digital asset management services do not normally include personal consultation.
Interactive private banking comparison
The interactive wealth management comparison on moneyland.ch lets you compare the costs of wealth management services based on the size of your investment portfolio and your preferred investment strategies. The comparison includes both wealth management and financial advisory services. You can use filters to limit results to offers which include specific services and investment categories.
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