Low-hanging fruit in Switzerland
Switzerland’s private wealth advisers are increasingly looking to work for families based within the country’s borders, as they struggle with the strength of the Swiss franc. With an estimated 364,000 high net worth individuals living within its borders, Switzerland remains the seventh most popular country for the world’s wealthy, and continues to grow in popularity. According to the World Wealth Report 2017, published by CapGemini, Switzerland’s HNW population grew two percent between 2015 and 2016, even as the end of fiscal secrecy worldwide took some of the shine off the reputation of global wealth management industry.
Clare Usher-Wilson is a director at Summit Trust International and says: “Like comparable jurisdictions, Switzerland has some exceptional practitioners and that talent will attract large scale global wealth. My sense overall is that, even a decade after banking secrecy was declared dead, and even earlier since this was considered a defunct business model, Switzerland is still in an adjustment phase.” Usher-Wilson adds that far more sophisticated analysis is required now by financial intermediaries as to the nature of their client assets and structuring. “And this is against the incompatible backdrop of increased scrutiny on fees,” she points out.
To combat this Switzerland’s wealth advisers are now focusing on the growing number of Swiss-based wealthy families. Mark McMullen, partner and chief executive officer of the family office division at Stonehage Fleming, based in Geneva, says: “We obviously have a lot of foreign clients, but we are trying to look after more Swiss-based families, because those people are often under-serviced and having a Swiss family office is a real value-add.”
Many of those families will have ‘forfait’ arrangements in place, whereby non-Swiss individuals can avoid income and wealth taxes by negotiating lump-sum payments with Swiss cantons. Six of the country’s 26 cantons, including Zurich, have abolished forfait in the wake of a domestic backlash following the financial crisis, but where the old regime is still in place it continues to attract people.
Jacqui Cheshire, partner and head of family office, Switzerland, at Stonehage Fleming says, “The UK non-dom tax changes announced last year and effective April 2017 have proved a fairly strong driver for clients wanting to leave the UK. Brexit had little effect, but we have seen more people moving, and coming to places like Switzerland, as a result of those tax changes.”
McMullen says: “Switzerland remains competitive, but it has got the headwinds of cost and currency going against it. Nevertheless, it still has history in its favour with a long pedigree of operating in private banking and while clients do look at other jurisdictions, there is a tendency, when people are worried, for them to go with what they know. Any Swiss-based business that thinks that’s a USP, though, is wrong.” Cheshire agrees and says: “Switzerland can be more expensive than places like the UK and Jersey now, in part because of the weakness of the British pound, which is another reason why local clients based in Switzerland are attractive for us.”
What does attract clients is the expertise available in the state, both from an investment management perspective and for family office services. Maria Roumy is senior partner and global financial officer at A&M Global Family Office, also based in Geneva. She says: “I am seeing demand from Europe and the Middle East, for financing solutions and for family office services, including but not limited to the administration of entities, asset structuring and planning, property sourcing and business consulting. Global asset management is a key part of my business, and in the current market we have also been looking at alternative investments, through real estate or direct investment in companies, for our clients.” Stonehage Fleming has offices in both of Switzerland’s main centres of Geneva and Zurich, and McMullen says they attract slightly different clientele, but deliver all the same services.
Cheshire adds: “What we are finding on the people side is that in Geneva the banks have laid off a lot of people, so we can currently recruit from a fairly sizeable pool of high-quality talent. The market is definitely tighter in Zurich, and that’s maybe because we have seen more consolidation amongst trust companies and private banks in Geneva.”
These are changing times for Switzerland’s private wealth market, but if has been seen, UHNW individuals continue to move in, there will be plenty of business to be done.