Switzerland Remains Leading Wealth Management Centre

by Ulrika Lomas, Tax-News.com, Brussels

21 January 2009

A Swiss Bankers Association report, released this month, has reflected on Switzerland's success in gaining status as a leading global wealth management centre.

The report states that the tradition of high-end services, the availability of skilled staff, and a predictable regulatory environment have all contributed to Switzerland’s leading position among global wealth management centres.

“Switzerland provides wealth management banks that are a pillar of market positioning in an increasingly brand-conscious industry. Merging tradition and entrepreneurial spirit has winning ways and, clearly, a profitable edge.”

The latest report assesses how Switzerland compares to its global peers, in what ways Swiss wealth management banks differentiate themselves, and which strategic responses to industry threats and opportunities they have espoused.

With 9.1% of global assets under management (AUM), Switzerland is among the world’s leading trio of wealth management centres, alongside the United States and the United Kingdom.

It is the world’s leader in offshore private banking, with a market share of 27%. The country’s largest banks, UBS and Credit Suisse, rank among the world’s largest wealth management firms.

The report also looks at the effect of the economic and financial crisis on the jurisdiction. Research undertaken by the SBA has found:

• Global wealth climbed to USD109.5 trillion in 2007 from USD99.6 trillion in 2006. Private banking assets held offshore account for USD7.3 trillion. The amount of HNWI assets amounted to USD40.7 trillion in 2007.
• At the end of 2007, AUM in Switzerland (securities holdings in bank custody accounts) reached CHF5.4 trillion, which is more than ten times the Swiss GDP. Due to the bear market, this figure decreased to CHF4.1 trillion at the end of October 2008. In 2007, AUM grew by 8%. Swiss banks’ global AUM are estimated at a total of about USD10 trillion.
• Because of the turbulence on financial markets, 2007 wasn’t as profitable as the record years 2005 and 2006. Cost-income ratio increased from 59% in 2006 to 65.8%, and after-tax return on equity dropped from 21.5% in 2006 to 6.8%. Due to the financial crisis, earnings are assumed to be considerably lower in 2008.
• Swiss wealth managers offer a wide spectrum of sizes and business models. At the end of 2007, Switzerland counted two global players (with each over CHF1,000bn AUM and over 10,000 wealth management staff), 9 large players (CHF100-1,000bn AUM and over 1,000 staff), 51 medium players (CHF10-100bn AUM and over 100 staff) and 79 small players (CHF1-10bn AUM).
• Swiss wealth managers - especially big banks - have aggressively expanded their international franchises. Branches held abroad and the number of staff abroad grew to 317 and 130 respectively. The stock of capital investments abroad has risen in the past decade by a factor of 6 to almost CHF87bn at the end of 2007.
• The stock of banks’ capital investments in Switzerland in 2007 grew by more than 10% to CHF36bn. This shows that banks still use Switzerland to strengthen their client base and operations. The Swiss wealth management centre still stands for reliance, privacy and know-how.

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