A scant consolation to “regular” bank customers: the current high bank fees affect wealthy private banking clients as well.
The costs of wealth management services remain high, as a new moneyland.ch study shows. This situation correlates with a low client migration rate: The results of this year’s bank customer survey by moneyland.ch showed only 12% of wealth management clients expect to change their wealth management service provider within the foreseeable future.
Costs of conventional wealth management are high
The 2019 moneyland.ch study of Swiss wealth management services analyzed all relevant costs of both wealth management mandates and financial advisory services. Services from all major Swiss universal and cantonal banks were included in the study.
The verdict: Wealth management fees are consistently high. There have been changes to fee schedules – for example at Raiffeisen (decreases) and at the Berner Kantonalbank (decreases and increases). “On the whole, though, fees and charges remain high,” states moneyland.ch CEO Benjamin Manz.
A classical wealth management mandate with the highest possible stock component costs 7000 Swiss francs per year for the management of 500,000 francs of capital (a cost ratio of 1.4%) and 13,700 francs per year for 1 million francs of capital (1.37%). These fees in no way represent all of the costs involved. In most cases, taxes, currency exchange fees, stock exchange fees and investment product fees are not covered. Mutual fund fees and charges are particularly significant: many wealth management services charge these separately. Costs in addition to wealth management fees can easily come to an additional 1%.
Most expensive banks for conventional wealth management
The Manage Advanced mandate from UBS is among the most expensive wealth management services offered: A mandate for 250,000 francs of capital with a mid-range stock component costs 4375 francs per year. A high stock component brings costs up to 5000 francs per year.
UBS clients pay 18,500 francs per year for the management of 1 million francs of capital with a high stock component. By comparison, the most affordable service provider charges 5000 francs – less than a third of the UBS fee – for the same mandate.
Of the banks studied, the most expensive bank for a more conservative mandate with no stock component for 250,000 francs of capital is the Basler Kantonalbank (3250 francs per year) followed by Migros Bank and Bank Cler (both 3000 francs per year).
Private banks are typically even more expensive than the retail and universal banks included in the study. It is not surprising that private banks typically do not publish their fee schedules.
The most affordable banks for conventional wealth management
Of all the wealth management services covered by the study, those offered by the Sparkasse Schwyz are the most affordable.
Example based on a 250,000-franc mandate with a mid-range stock component: An ETF mandate from Sparkasse Schwyz would cost 1875 francs per year and an individual-stock-title mandate at the same bank would cost 2625 francs per year. The index mandate from Credit Suisse would cost 2875 francs per year. UBS would be the most expensive option for this profile, at 4375 francs per year.
Example based on a 1-million-franc mandate with a high stock component: An ETF mandate from Sparkasse Schwyz would cost 6500 francs per year. Migros Bank and Bank Cler would charge 11,000 francs per year. An individual-stock-title mandate from Sparkasse Schwyz would cost 11,500 francs per year. The most expensive option for this profile is the All Instruments mandate from Credit Suisse, at 19,500 francs per year.
Most affordable option: Robo advisors
Digital offers from so-called robo advisors are even cheaper than the most affordable conventional wealth management services. The term robo advisor is something of a misnomer. These are not digital financial advisors, as their name suggests, but rather automated online wealth management services most of which do not provide consultation services. Typically, these services invest through passively-managed, affordable exchange traded funds (ETFs). The most affordable robo advisory services in Switzerland are True Wealth (0.5% flat fee) and ELVIA e-invest (0.55% flat fee).
Fee schedules in wealth management
Wealth management fees vary between service providers, mandates, amounts of capital and investment strategies. But there are a few general rules of thumb: Passive investment strategies are normally cheaper than active investment strategies; mandates with high stock components are typically more expensive than those with low stock components; conventional wealth management services are typically more expensive than robo advisory services.
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