SwissBanking
The online magazine of the Swiss Bankers Association
September 26, 2019

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Swiss wealth management: the global leader despite changed circumstances

Swiss wealth management: the global leader despite changed circumstances

The SBA’s 2019 Banking Barometer focuses on the trends in Swiss wealth management. The transition to the automatic exchange of information was a challenge for the sector. Based on the figures as at the end of 2018, however, it can be concluded that assets under management in the international business are increasing, although margins have decreased. In the future, the sector must capitalise on its proven strengths.

The banks in Switzerland managed a total of CHF 3.7 trillion in private assets in 2018. Around 62 percent thereof, or CHF 2.3 trillion, are attributable to beneficial owners domiciled abroad. With a share of around 27 percent of the global cross-border wealth management business, Switzerland remains the global leader in this market. However, Hong Kong and Singapore are growing significantly faster due to the advantages of their close proximity to the dynamic Asian markets. Their cumulative volume of assets under management has reached the same level as Switzerland.

Assets under management rising –  also as a result of inflows

The abolition of bank-client confidentiality vis-à-vis foreign countries has often been predicted as the demise of the Swiss financial centre and the end of its position as a global leader. A look at cross-border assets in Switzerland at the end of 2018 shows that they have grown by CHF 300 billion since 2013. All regions of the world have contributed to this – including Western Europe, the most important region in terms of volume. During this period, outflows of around one tenth, or approximately CHF 95 billion, of net assets were attributable to Western European customers. However, these were more than offset by investment and market performance, meaning that the assets under management of Western European customers increased overall. Over the past five years, there has also been a significant cumulative net inflow of more than CHF 100 billion from the rest of the world. This is a clear indication that the Swiss wealth management offering is intact and continues to be very popular with foreign customers.

Overcoming homemade obstacles

Swiss wealth managers should not, however, let this give them a false sense of security. In addition to changes in the market, they also face political headwinds. On the one hand, market access to the EU, the most important market, remains highly restricted. This, despite the fact that the rules in question have long since been adjusted in Switzerland to be equivalent to those in the EU. On the other hand, the local capital market is disadvantaged by homemade rules: withholding tax acts as a brake on issuances and stamp duty as a brake on trading. Other locations are not subject to such disadvantages.

Competition is intensifying and the pressure on margins has increased in Swiss wealth management. Returns on assets decreased by 12 basis points between 2013 and 2018. Total returns, however, have increased slightly due to the higher volumes.

Building on reliability, digital solutions and sustainability

In the past, national differences in regulation were the most important factor in international competition, but today the trend has moved towards quality and performance as differentiating factors. Swiss institutions have a considerable lead in this respect: almost no other location can offer such comprehensive, high-quality and competent asset management that is diversified in terms of cultures and languages. In terms of the digital transformation and sustainable finance, which are important topics for the future, the financial centre is also very well positioned to meet the growing needs of private customers. In view of the geopolitical uncertainties, Switzerland also has an advantage thanks to its high degree of reliability.

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SBVg Fig. 30 Banking Barometer