Digital wealth managers are a relatively new addition to the Swiss market. Nettobank – which was built around the concept of online wealth management – ceased operations along with it parent bank Wegelin in 2012.
But a number of robo advisory services are available including the "Robo-Advisor" service from Swissquote, SaxoSelect from Saxo Bank, TrueWealth, online service provider Descartes Finance, the digital offer from VZ Vermögenszentrum and the more recent arrivals Selma Finance, Simplewealth, clevercircles (Bank CIC), Digifolio, ELVIA e-Invest, Yova and the pillar 3a solution Viac. You can request a comprehensive overview of Swiss Robo Advisors as a PDF using the field below.
Robo Advisors are the current trend
The term “robo advisor” is somewhat misleading, seeing that these services have nothing to do with physical robots and do not normally provide consultation. Instead, robo advisory services automate the process of investing money on behalf of investors.
TrueWealth which manages more than 200 million Swiss francs of assets and the robo advisor from Swissquote which manages around 225 million francs (2019) are among the largest Swiss robo advisors in terms of assets under management. The digital offer from VZ Vermögenszentrum manages more than 2 billion francs in assets, but is not a typical robo advisor. However, the portion of total assets managed by robo advisors is still relatively small, and most robo advisory services have not yet reached profitability.
But in spite of the modest success of robo advisors, the significantly higher costs of conventional asset management in Switzerland have come under pressure. With the increasing digitization of everyday life, wealth management is also moving towards digital and hybrid models.
How it differs from conventional wealth management
Unlike conventional asset management services which require large amounts of investment capital, digital asset management services can be obtained starting with investment capital as low as 500 francs (VZ), 2000 francs (Selma Finance), 8500 francs (TrueWealth), 10,000 francs (Swissquote) or 20,000 francs (SaxoSelect, Descartes Finance).
Robo advisors primarily invest through passive investment products like exchange traded funds (ETFs). Risk capacity and risk tolerance of investors is determined through digital questionnaires and assets are invested in ETFs based on the information provided. The investment consultation provided by conventional asset managers is not normally provided by robo advisory services. Hybrid models are an exception to the rule. These combine online services and consultation. There are varying schools of thought regarding the value added by investment consultants.
There is no doubt that Swiss robo advisor are notably cheaper than conventional private banking services. Depending on the amount of assets to be invested and your investment profile, the cost of using a robo advisor can work out up to ten times lower than that of using the most expensive private banking services. Buying shares in ETFs directly through an affordable online broker is an even more affordable option.
Flat fees compared
Swiss robo advisors do not charge fees for the opening and closing of accounts. Retrocession fees are either absent or are forwarded to investors – as is the case with VZ Vermögenszentrum.
Flat fees are the most significant fees charged by digital service providers. Practically all Swiss robo advisors charge flat fees as a percentage of managed assets and these flat fees generally include transaction and custodial fees. Government transaction duties and value added tax are charged separately. Fees charged by issuers of investment products are also charged separately in the case of most service providers.
Flat fees vary significantly from one service provider to another. TrueWealth charges the lowest fee at 0.5% per annum. Selma Finance charges 0.72% and SaxoSelect charges 0.85% per annum. Digital asset management services from VZ Finanzportal cost between 0.55% and 1.25% per annum, while the robo advisor from Swissquote costs 0.5% plus an additional administrative fee of between 0.45% and 0.75% based on investment volume.
Product issuer fees
Practically all digital asset management services pass on the costs charged by issuers of investment products in addition to the flat fee you pay for the service. Most commonly, product issuer fees are made up of the total expense ratios (TERs) of the ETFs included in the investment portfolio. On average, product issuer fees come to between 0.15% and 0.3% per annum.
In the case of conventional private banking services, product issuer fees are normally charged in addition to asset management fees. The fees charged by actively managed mutual funds are typically much higher than those charged by ETFs.
Robo advisor investment compared
As a rule, digital asset management services invest in passively managed mutual funds known as exchange traded funds (ETFs). Swiss robo advisors typically use replicating ETFs from large ETF issuers like iShares, including synthetic ETFs in some cases. Exchange traded commodities (ETCs) are sometimes used for commodity investment. Some services like those provided by Descartes Finance and VZ Vermögenszentrum also allow you to add individual securities to your portfolio.
How secure are digital asset management services?
Assets invested through robo advisor services are held in a custodian bank, and benefit from the same depositor protection guarantees as other assets held in banks. In the case of TrueWealth and Selma Finance, assets are held at Saxo bank (Switzerland). Assets managed by Descartes Finance are held at UBS or Vontobel. Robo advisor services operated by banks hold assets at their corresponding bank. Assets managed by the robo advisor from Swissquote are deposited at Swissquote, SaxoSelect at Saxo Bank and VZ functions as its own custodian bank.
Unlike money, securities such as ETF shares are not included in bankruptcy proceedings when a custodian bank fails but remain the property of investors. Money held in custodial accounts is guaranteed up to a maximum of 100,000 francs. In the case of Simplewealth, invested assets are deposited in the U.S. with Interactive Brokers.