Boots on the Ground in Zurich: 3 Trends

I always enjoy the city. And I like the Swiss approach to life, although why is hard to put into words. On the one hand, the Swiss have been at the forefront of technology for centuries, especially in matters of engineering. As a society, they’re very forward thinking.

But on the other hand, theirs is a very traditional society that values the way things have “always been done.” Traditions are an important anchor in a fast-changing world.

This, of course, shows up in one of their most famous exports – financial services.

And within that world, I get the sense that their perspective is based on the idea that money is easy enough to make, but that keeping it’s the hard part… and that their traditional role in this space is to be the safe steward of that money.

The bankers and asset managers that walk the streets of Bahnhofstrasse know this, and it’s one of the reasons they’ve attracted – and continue to attract – wealthy folks more concerned with preservation than growth-at-all-costs.

But how they deliver this service has had to change in recent years. They’ve had to adapt repeatedly. Perhaps even the most since I first landed there nearly 20 years ago now.

And in today’s missive, I’ll share a few insights about these changes through the meetings I had during my time there.

#1: Americans.

No surprise, but Americans have been a big story for them in the last year. It’s the same trend we’ve seen in our own business.

Americans aren’t a new source of business for Switzerland, of course. The opposite, in fact – Switzerland has bent over backwards to keep serving US clients through all of the compliance headaches of the last 10+ years (thank you, Uncle Sam!).

But what is surprising is who is opening accounts. The traditional sort of client for these services is often in their 50s, 60s, or 70s and concerned about protecting their nest egg. But the profile is changing.

I can’t give much away, but I can say the profile is getting younger. And the source of wealth is changing – people experiencing liquidity events (say through blockbuster IPOs) rather than through the slow accumulation of wealth over time.

#2: Compliance continues to be an issue.

Potential clients are often surprised to learn that the US is not the most paperwork heavy place to do business; in our experience at least, Switzerland is high on the list.

There are a number of reasons for this – most of them boring – but the effect has been that minimum mandates continue to go up because it simply costs more to onboard and maintain a client.

If you’ve read our Swiss mandate-related materials, you’ll know the practical minimum is one million, two million preferred.

During my recent trip, I visited an asset manager that still had a minimum of USD 500,000. But at that amount, the fees were quite high – 50% more than other managers at the million-dollar level.

And although they offer a fantastic service, when you add it all up, you could expect to pay about 2% a year. That portfolio drag can really add up over time.

Well, after that meeting, they formally announced an increase in their minimum mandate – from the half million to “$800,000 minimum, $1 million preferred.” The fees stay the same.

The reason for the increase? Compliance is just too heavy and they didn’t want to raise their fees.

#3: Switzerland still attracts a lot of wealthy and skilled people.

When the world is in chaos, people tend to hunker down and wait for the storm to pass. Switzerland has long been a place to hunker. And certain hiccups aside, the country is quite welcoming to people who have money and/or who bring needed skills.

I had separate meetings about this with two trusted contacts, both of whom help foreigners relocate to the country.

Both noted that the major cities (Zurich, Geneva, and, to some degree Bern, Basel, Baden, and St. Gallen) are attracting the majority of these migrants.

Indeed, at least in Zurich, you’re just as likely to hear English as you are Swiss German as you walk around the city, including outside the tourist areas.

Even from our own clients, we’ve seen a marked increase in interest for Switzerland. And perhaps in a future version of the Notes, I’ll share some more about the pros and cons of moving to, as one wag put it, the land of “milk and money.”

Should Switzerland be a part of your international strategy? Feel free to reach out to have a discussion with one of our associates. We’d be happy to help point you in the right direction.