It comes as no surprise that wealth management in Switzerland is expensive. But some charge far higher fees than others.
A comparison of fees for Swiss asset management services reveals huge price differences, and for some mandates, fees of the most expensive providers can be three times higher than those of their less pricey rivals, according to a market survey by the comparison service Moneyland.ch.
Asset management is one of the most lucrative business sectors for Swiss banks, as can be seen by the assets under management (AuM) at Swiss institutions. This is such an important part of the financial industry that much is written about the ebbs and flows of AuM at firms like UBS and Pictet, including by finews.com in semi-annual AuM rankings.
With so much money at stake, one might think that investors would be paying close attention to the fees charged by their managers. Perhaps another way to look at it is that investors have so much money at play that the fees are irrelevant to them.
Clients Unaware
Either way, «many Swiss investors have an asset management mandate at a Swiss bank, but know surprisingly little about it,» says moneyland.ch CEO Benjamin Manz. Most of them simply trust their bank consultants which can have negative impacts on wealth, a cost comparison by moneyland.ch reveals.
The average cost of investing 250,000 Swiss francs ($265,000) in an equities portfolio using conventional Swiss asset management services is 3,425 francs, equal to 1.3 percent of AuM. That is even before accounting for other expenses including taxes, stock-exchange fees, the cost of investment funds used, and foreign exchange costs which come on top of that. Moreover, the investment funds used can have fees as high as that for managing the assets.
Digital is Cheaper
Those willing to seek a digital solution can expect lower prices for such services. The fee charged by asset managers through digital-only channels is 0.73 percent. Most funds and investment products used by such investment apps are also much cheaper than those used by most conventional asset management services. As a whole, the average cost of classical private banking mandates is around double that of digital asset management services. At the extremes, the most expensive conventional asset managers can cost many times more than the cheapest available offers.
Big Differences
Even when accounting for only conventional offerings, the differences between banks can be substantial as can be seen here in a table from moneyland.ch which uses three different wealth level scenarios.
A pure stock portfolio as an example with an investment of 1 million francs costs 6,500 francs per year at Sparkasse Schwyz, and 19,500 francs per year using the Credit Suisse Invest Mandate (all instruments). «Of the services included in the analysis, the most expensive offer is three times more expensive than the cheapest one,» states Manz.
It is not just pure stock portfolios that can result in major cost differences. Investing the same amount in a portfolio with a stock component of 40 to 60 percent costs 3,500 francs per year at Sparkasse Schwyz, and 8,750 francs using the Invest Mandate (all instruments) from Credit Suisse.
To be sure, if paying higher fees generate higher returns, then that certainly makes paying more worthwhile, but still raises the question of whether you are unnecessarily making your asset manager wealthier.
