Switzerland: market shifts and maintaining stability

Date: 12 Jul 2023

Ashleigh John

Citywealth caught up with professionals working in the wealth management market in Switzerland to discover recent news and domestic views from the historic home of private wealth.

Credit Suisse collapse

It is impossible to discuss Switzerland currently without acknowledging the big ‘CS’ in the room, so we dived in with our experts on everything Credit Suisse. How is the takeover of Credit Suisse by UBS shifting the markets in Switzerland? The Swiss National Bank recently called for a review of banking regulation, saying that the takeover indicates “the need for a review of the Too-Big-To-Fail framework”. What could the future look like off the back of this for Swiss business?

Geneva-based Managing Director of Summit Trust International SA, Stella Mitchell-Voisin reported minimal actual impact and said: “On the ground in Switzerland we don’t see any real change, although Credit Suisse suffered massive outflows and we did see that in structures that we run.”

Andrea Huber and Oliver Widmer, Partners from Pestalozzi Attorneys at Law (PL), commented: “The takeover of Credit Suisse by UBS and the measures taken by the Swiss authorities have far-reaching implications for the Swiss financial centre. These measures were mainly targeted and effective in ensuring the stability of the Swiss financial centre and building confidence. It is too early to say how the ‘Too-Big-To-Fail framework’ will look in the future. A review of the events and government measures shall examine whether existing regulation was not sufficient to prevent the events that occurred or whether it was not applied in a timely and/or targeted manner. It will show whether and in which areas, if any, there is a need for stricter regulation.”

Sending the wrong message?

Switzerland has long been seen as the home of private wealth; is the collapse of Credit Suisse sending the wrong message about Switzerland’s stability to the rest of the world? Swiss cash and gold reserves remain high and research from Boston Consulting Group shows that the country remains the biggest centre for offshore wealth globally. We asked if, on balance, it is still safe to say that Switzerland is staying strong as an epicentre for the ultra-wealthy.

PL said: “The Swiss banking centre is still well positioned by international standards. It is important to emphasise that the regulations implemented in the last decade and the measures taken have been fundamentally effective. This is demonstrated by the fact that Credit Suisse is the sole bank  that has run into difficulties. The other Swiss banks are generally stable and robust.”

Dr Ariel Sergio Davidoff, Partner at LINDEMANNLAW in Zurich, further details the strengths of doing business in Switzerland: “In principle, Switzerland is still strong as indeed the government action to save Credit Suisse proved that it is a stable country which looks after its banks and therefore after the bank’s clients (and their assets).  As a AAA jurisdiction, Switzerland has an attractive environment, from the country’s rule of law, to the low debt, to the stable currency connected to a really independent Swiss National Bank, which keeps the currency strong by keeping inflation in check. Compared to others, it is still comparatively wealth-friendly. In addition, Swiss bankers are very well trained, educated, supervised and checked. The unique network of lawyers, trustees, and bankers, which cater for an international, highly demanding clientele, can only be found in a very few places on the globe.”

Stella Mitchell-Voisin commented: “I would say that the Credit Suisse issue in Switzerland was very specific to that particular company which had not been well run, albeit other banks elsewhere have obviously failed. On balance Switzerland certainly remains a strong and popular home for private wealth.”

Top-of-mind considerations

Moving away from current affairs, we asked our experts what is currently top-of-mind for them and others working in the wealth management market in Switzerland. It is worth noting that many of the issues faced by Swiss companies are ones that are having a global effect: inflation, central bank policies and interest rates, potential recession, default rates rising, etc. PL notes that the Swiss wealth management market is facing challenging times, with plenty of uncertainty and consolidation in the wealth management business.

From a trustee perspective, Stella Mitchell-Voisin answers: “Top of mind for trustees now is probably the licensing of trust companies. Very few have as yet had their licenses through and it is difficult to make material changes in the business (such as major changes to IT systems for example) as that would entail making changes to your application, which is not attractive at this point!”

Dr Ariel Sergio Davidoff provides a legal perspective: “As a law firm, we help external asset managers and trustees to adhere to the new regulatory framework applying to them since 1 January 2023. This is still a struggle for some, at the same time, many have coped well with the change and implemented the necessary steps to comply with the law on a continuing basis.”

Re-location, re-location, re-location

It is indisputable that Switzerland is a crucial financial centre for UHNW individuals, but what is the relocation market looking like these days? Are the ultra-wealthy still being pulled to Switzerland or are we seeing stagnation on that front?

PL noted an increase in the amount of Norwegians relocating to Switzerland, and cited on of the reasons for this as the tax hike implemented by the Norwegian government, which particularly affects wealthy entrepreneurs.

Stella Mitchell-Voisin said she has noticed less interest recently in people moving to Switzerland and added: “[T]he more recent conversations I have had have been with people moving to the Caribbean, Dubai and Italy. These things do tend to go in waves though so I will probably now speak to people for whom Switzerland will be firmly in their sights!” 

Dr Ariel Sergio Davidoff said: “It is an interesting question. In my practice, of course all Russian and connected migration to the ‘West’ as defined as US, UK and Europe including Switzerland, has ceased. However, with the perception that Switzerland has found its newly defined neutrality and therefore is firmly committed to the ‘West’, as defined above, we see increased migration interest towards Switzerland from Germany, Northern Europe, the United Kingdom and most recently from the United States.”

Alternative assets: art and crypto

Finally, we take a moment for some insights into the alternative investment markets in the country. What is the general interest in areas such as art and crypto looking like?

From the crypto front, Jonas Rey, Founder of Athena Intelligence, said: “Crypto in Switzerland has evolved a lot. Right now the buzz word is asset tokenization and we have seen some very formal players like private banks enter this space in the last few months. Zug and Geneva are driving the innovation and we are slowly seeing the ‘tradfi’ service industry catching up.”

Stella Mitchell-Voisin said: “The Credit Suisse collapse certainly supported the case for DeFi and I have had a number of conversations more recently with (particularly younger) beneficiaries who have rather lost faith in the traditional system. Art has always been of interest and we do run various art collections in trusts. I would suggest that interest in art amongst the UHNW individuals has always been strong and remains so today.”

Dr Ariel Sergio Davidoff commented: “Crypto assets seem to be correlate with the price volatility of the underlying instrument. If Bitcoin increases in value, many projects with Crypto are on the rise too, from structured investments to mutual funds, platforms, NFT, etc. The same goes with the art market which is thriving as a perceived safe haven for excess funds of the wealthier clientele. In some cases, the two are combined in new structured investments like NFT. In our practice, we have helped clients with the regulatory work to implement those plans. At the moment, the art market is more in the forefront of investors I see.”