The Current State of the Wealth management Market in Switzerland
What a ride it’s been; and it’s not over yet. The Swiss wealth management market has changed, it seems, forever. Whether it’s for the better or not, is up for debate, but AP Executive remain optimistic about the future of one of the world’s largest offshore financial centres.
If we look back a just five to 10 years ago, it seemed the undeclared tax merry-go-round would never end; Global banks undertaking dubious practices, which helped overseas clients evade billions of dollars in takes. The 2007/8 financial crisis was probably the catalyst that shook EU and the US governments into action against Switzerland, and other ‘offshore’ jurisdictions, for lost tax revenues.
As if the additional costs incurred by private banks in meeting the new compliance demands weren’t enough, let alone the billions of dollars in fines, the Swiss National Bank decided to uncap the CHF/EUR exchange rate back in January 2015, creating a 20% relative increase in the countries cost base, in Swiss Francs, practically overnight.
Throughout 2015, and even during 2014, the ebb and flow has been felt by all actors: High-Net-Worth (HNW) clients, financial institutions, and its employees. Let’s take each one in turn.
The lack of banking secrecy has led certain HNW clients, primarily a large part are global wealth entrepreneurs, to pull funds out of Switzerland. This is also due to the fact that their respective governments are forcing them to keep assets onshore, or use approved offshore centres. On the other hand, wealth managers are making all the effort to attract and retain ultra high net worth individuals, who are the lifeline of the private banking industry.
Let’s not sugar-coat this: the Swiss banking model is under attack by other European governments, and of course, the US FATCA policy, who have always been jealous of Switzerland’s business model. Under this sustained barrage, the AUM’s are coming down – losing 7% in net new AUM’s between 2009 and 2014, according to Deloitte’s Wealth Management Database.
The rise of centres like Singapore will likely make that Eastern city-state the location of choice for the growing Asian market. That said though, Switzerland is still fairing better than any other European jurisdiction, with Luxembourg and the UK down 11% and 21% respectively.
Even with this turmoil, Switzerland is still identified as the top holding centre of offshore wealth management funds in the world, with $2.8 trillion in AUM according to WealthInsight. The fact is, Switzerland has a long heritage in cleverly managing wealth for the world’s elite; centres such as Singapore or Hong Kong attract a slightly different demographic – typically younger, newer money, from Asia. That said the Asian centres are experiencing higher growths in AUM’s than Europe, which will no doubt place them ahead of even Switzerland in the years to come, unless Switzerland can come up with some unique selling point.
There has been a renewed focus on both Russian and LatAm markets, in terms of clients. Geneva has a strong heritage in the latter, but some Zurich-based institutions are also looking in that direction.
Russia may surprise some of you, especially as some institutions have actually closed their desks. Not to be deterred, however, others are stepping in to take up the slack. Russians have a huge incentive to park their money offshore and Switzerland is a natural centre of choice. Interestingly, Singapore and London is also benefitting from the Russians, but this seems to be more corporate trust and single family office in nature. Switzerland mainly offers private client services and there are some very well-connected trust and fiduciary providers that are reaping the benefits of their focus.
This is where that quaint saying about a certain natural substance rolling downhill becomes a harsh reality because of all the above factors. If you are a trust practitioner, you could be forgiven for thinking that there has been a decimation of the trust and fiduciary business in Switzerland. Certainly there has been a flood of redundancies, a couple of hundred here, five hundred there, that has turned a once buoyant market, into a desert, but we need to see the big picture.
In a bid to cut costs, amongst other things, we’ve seen mainly foreign-owned trust and fiduciaries shed staff, or sell up (M&A activity). The high cost basis of Switzerland has essentially forced trust administration to other jurisdictions, notably the Channel Islands and the Caribbean and quelle surprise even America. To make matters worse, a significant proportion of these highly qualified personnel do not speak the local language (German or French mainly), making finding another job, in what is essentially an employer’s market, extremely difficult.
The current unemployment rate in Switzerland as a whole was 3.7% in December 2015 according to surveys conducted by the State Secretariat for Economic Affairs (SECO), the highest number since April 2010, and demand for bank jobs in 2015 was also down by nearly 20%.
It seems that very senior and very junior staff are hardest hit; the former because they are too expensive and the latter because, frankly, no one can afford the time or financial expense to train staff up.
There are, however, some notable exceptions. Compliance and Risk officers are in the limelight at the moment. All those added regulations and complexities have a silver lining. Also in need are STEP qualified trust officers as well as trust accountants with specific languages: Russian and Spanish, secondary languages to German, French and/or English of course. Another skill set, where being senior is a distinct advantage is private bankers with a sizeable book of transferable business. The key words here are “sizeable” and “transferable” for obvious reasons. In this volatile wealth management market every jurisdiction need hunters with a plentiful supply of AUM’s you say. (I agree, but would add, not many jurisdictions can boast the excellent work/lifestyle balance you can achieve in Switzerland – a great selling point – it’s hard to leave once you arrive here.) Zurich and Geneva still rank in the top five favourite places to live in the world and nominated so for the past 10 years by most well-known data.
Regarding the overall health of the local markets, there are regional differences. Geneva currently is far worse off than Zurich, probably because there are not so many ‘boutique’ banks or fiduciaries in Geneva as there are in Zurich. This is probably because there is less diversification in the overall finance sector too. Zurich has a buoyant asset management market, with surrounding cities offering attractive tax incentives, which seems to have cushioned the economic blow somewhat.
Foreign employees, who do not have the right experience or language levels, have been looking elsewhere, typically London, or in a few cases striking out on their own, and not necessarily in a wealth management-related activity. But that doesn’t mean that there is no place for foreigners. We saw 25% of our placements last year go to non-Swiss residents despite the Swiss vote to curb immigration.
In conclusion then, Switzerland’s wealth management sector is going through a rocky patch. But historically, being a cash rich country it is better equipped than most countries to be able to weather a storm. Now the tax treaties are more or less finalised, Switzerland will become stronger – not relying on bank secrecy or tax avoidance techniques, but continuing the tradition of wealth and succession planning for future generations, being managed by talented and professional people and, crucially, the country will start to focus on real returns on assets. This in turn plays to the strengths of the global asset management business, which in Switzerland is currently the third largest in the world.
So, there are still options for skilled and qualified professionals in Switzerland – the talent queue to work here has just got a little bit longer though.
AP Executive is a specialist global executive search consultancy with dedicated recruitment experts assisting businesses and individuals in the private wealth management and asset management industries worldwide.
We recruit professionals for executive jobs in a number of areas including asset management, wealth management, private equity, trust, family office, tax, accountancy (permanent and contract), company administration, captive insurance, fund administration, investment management and legal.
Darryl Cox is the Executive Consultant for AP Executive’s Zurich office. He specialises in the search and selection of mid-to-senior level professionals for a mixed portfolio of asset management, trust, family offices and private banks in Zurich, German speaking Switzerland, Liechtenstein, Austria and Germany. Darryl has over 4.5 years experience as an independent associate gained working at a boutique hedge fund in New York. With an impeccable track record and excellent client management skills, he has a professional track record in client retention and new business development. Born in London, Darryl holds a BSc (Hons) in Computer Science gained at Aston University, Birmingham.Darryl can be contacted on +41 44 214 6621 or by email at firstname.lastname@example.org
Gina Le Prevost, CEO founded AP Group in 1990. Her early success included being named the first female president of the Young Businessmen's Group for the Guernsey Chamber of Commerce. After developing successful professional relationships with many major organisations, including STEP and the CISI, AP Executive, the executive recruitment division of AP Group, is now one of the leading independently owned recruitment consultancies in the world. Gina is also a Fellow of the Institute of Recruitment Practitioners and a professionally qualified recruiter. Gina works from the Geneva office and is presently focusing on recruiting for clients in the Swiss wealth management market as well globally promoting and networking the AP Group brand.
Gina can be contacted on +41 22 731 1290 or by email at email@example.com