Some of Switzerland’s independent wealth advisors are doing all they can to uphold the industry’s reputation among their foreign clients seeking assurance the country is still a safe place to keep their money after Credit Suisse's demise last month.

In the wake of 2008's financial crisis when US investigators began clamping down on Swiss banks for helping clients avoid paying taxes, firms catering to wealthy clients based in the US, are required to have a license with the US Securities Exchange Commission to do so.

While Vontobel has the largest market share consisting of $10 billion in US offshore assets via its Swiss Financial Advisors unit, boosted in 2021 with the acquisition of UBS's US offshore portfolio, many smaller boutiques offer US clients, from as little as $250,000, wealth management services in Switzerland. 

Niche Market

finews.com spoke to some of these wealth advisors about how their US clients interpreted recent events, including the loss of confidence in the country’s second-largest bank, the financial regulator’s stance on who gets paid first when a bank collapses, and the government’s forced rescue of Credit Suisse.  

WHVP, a firm with 150 million of Swiss francs under management and led by Jamie Vrijhof-Droese, is one of the approximately 20 wealth managers in this niche market. «Weeks before the merger, clients were already concerned about the headlines coming out of Switzerland’s financial center,» Vrijhof-Droese said.  

US Bank Runs

Like other wealth managers, her firm sent out communiqués to her clients explaining what had happened as soon as the announcement of the takeover came out. «Our clients’ main concern was the collapse of Credit Suisse would turn into a wildfire,» she said, adding that the bank runs in the US had aggravated that fear.    

There were also misplaced comparisons with Silicon Valley Bank (SVP), and WHVP had to explain how the situation with Credit Suisse’s differed. Vrijhof-Droese told clients that, unlike SVB, Credit Suisse had very high liquidity ratios and that its problems were caused by bad governance and mismanagement, and most importantly «did not reflect a structural problem related to the country’s financial industry.» 

Speedy Response

«Unfortunately, Credit Suisse has 'Suisse' in its name causing some clients to ask if this was our national bank,» she said. 

For CEO Egon Vorfeld, from The Forum Finance Group overseeing two billion Swiss francs under management, «the speed at which the Swiss authorities acted was a great comfort to everyone.» Although, for him personally, it was also unusual because European and Swiss authorities «are not known for acting in such a decisive and meaningful manner when compared to the US,» making it all the more impressive, he said.

«Switzerland continues to be one of the world’s most stable countries with a solid banking system and therefore still considered to be a safe and sensible place to diversify one’s assets,» the CEO of the Geneva-based wealth manager, added. 

Opportunity for other Banks

 

Pierre Gabris (Image: Alpen Partners)

Ultimately, Pierre O. Gabris, (image below) founder and CEO of Alpen Partners sees other Swiss banks as gaining the most from Credit Suisse’s demise as clients redirect their funds into other banks in the country. 

From his perspective, the crisis in the US can be seen as «positive news for Switzerland's financial center.»

»Contrary to some of the US regional banks, which were levered and invested deposits in long-dated papers, including bonds and mortgage-backed securities with a bad duration mismatch between assets and liabilities on their balance sheet, Swiss cantonal banks and small private banks, which build the industry's core, are much less leveraged than their US equivalents,» he said.  

Really Bad for Switzerland

What will hurt the reputation of Switzerland however, in his opinion, is how Finma ordered the bank to write down $17 billion worth of AT1 bonds. «This is really bad for Switzerland as it puts a precedent on this basic and internationally accepted capital structure order,» Gabris said, adding that he hopes that Finma will revisit its stance.

Alpen Partners has over two billion Swiss francs under management, while Alpen International manages 750 million Swiss francs for US clients.