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Wealth management industry under pressure in Switzerland

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Wealth management business is booming amid historically low interest rates in Switzerland. New digital players on the market, however, are placing pressure on the industry’s traditional operators.

A universal bank charges 13’667 francs per year ($14’920) on average for the management of a 1 million franc ($1.1 million) stock portfolio, while a digital provider charges 6214 francs ($6784), according to a study published by Moneyland on Wednesday.

In the case of an equity mandate consisting of 80-100% dividend stocks, traditional operators charge 1.4% for volumes between $300,000 and $600,000, plus product costs related to committed funds, which Moneyland experts say can be as expensive as the mandate itself.

Pressure on prices
“The importance of wealth management for Swiss banks is increasing,” says Benjamin Manz, director of the online comparison service, quoted in the document. The assets managed by the new digital players are growing steadily, albeit slowly so far.

“This is also the reason why fees in traditional asset management have not changed much in recent years in Switzerland,” the manager continues, but he predicts that online offers will accelerate significantly. According to the study, Credit Suisse ($21’288) and UBS ($20’197) have the most expensive mandates.

The authors of the study claim that even investment advice, which should allow the client to have “the last word”, has a similar cost structure to asset management.

Many banks offer several advisory mandates that vary in terms of fees and services, with the more expensive ones usually including “more advisory services and lower fees for independent stock trading.”

For a stock portfolio of $270’000, the price range at Credit Suisse, for example, is between $1360 for an entry-level product (Invest Compact) and $9400 for a premium product (Invest Expert).

No advice
While digital service providers are significantly cheaper than their traditional counterparts, they do not provide advisory services. According to Moneyland’s experts, the amount of risk these clients are willing to take on is significantly lower.

For a portfolio of $27’000, the total cost – package and products – is not more than CHF $220 per year at Findependent and True Wealth. Several traditional banks also offer digital products.

By increasing the investment amount to 1 million, the price of the mandate represents 0.62% of the total, plus 0.28% of product-related costs. The total costs charged to clients thus remain on average below $9825.

For MetaNews.

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Jonathan Hobbs

Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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