The coronavirus crisis has generated renewed interest in investment as a topic. After the initial stock market crash in the spring, many investors have been left wondering whether the real financial crisis has only just begun. Many Swiss bank customers do not feel confident investing on their own, and choose to make use of the wealth management services offered by the banks which they are used to banking with. But a new analysis by independent online comparison service moneyland.ch shows that going with your existing bank is not always a good idea.
moneyland.ch examined the costs of Swiss wealth management – including asset management, financial advisor services and up-and-coming digital asset management.
The cost analysis by moneyland.ch accounted for major Swiss universal banks and cantonal banks, as well as robo advisor digital asset management services.
The results: Fees charged by conventional asset management services are still high. Conventional banks are, on average, more than twice as expensive as digital asset management services, states moneyland.ch CEO Benjamin Manz. It is true that robo advisors do not provide in-depth personal financial consultation, but it is worth noting that many conventional banks also only offer standardized wealth management products.
High fees for conventional asset management
The average fee for investing 250,000 or 500,000 Swiss francs using a classic asset management mandate with the highest possible stock component is equal to 1.4% of invested assets per year across the analyzed banks. That means an investor with 250,000 in managed wealth would pay 3500 francs per year in asset management fees. The average costs of investing 1 million francs is 1.37% per year – or 13,700 francs.
It is important to note that these flat fees do not cover all costs related to managing your wealth. You may pay various taxes, costs related to foreign currencies, stock exchange fees and investment product fees in addition to the asset management fee.
This is particularly notable in the case of standard asset management which makes use of investment funds. Investors often pay two fees – the wealth management fee and the fund fees (TER). The TERs of funds used by the asset management service can easily be as high as the asset management fee.
Private banks specialize in asset management and generally only offer their services to high-net-worth individuals. These banks offer customizable solutions and typically do not publish their fees. However, their fees are often even higher than those of the retail banks included in the analysis.
Major cost differences between asset managers
On average, asset management mandates are expensive. However, there are major differences between banks, as the interactive asset management comparison shows. For example, if you invested 250,000 francs using the ETF mandate from the Sparkasse Schwyz, you would pay 1875 francs per year. If you invested the same amount with the Manage Advances mandate from UBS, you would pay 5000 francs per year – more than 2.5 times what you pay with Sparkasse Schwyz.
Fees and rankings can vary depending on the investment strategy you use and the amount you invest. A conservative strategy with no stock component and investment capital of 250,000 francs would cost the most at the Basler Kantonalbank, at 3250 francs in fees. Migros Bank and Bank Cler are also expensive, with fees totaling 3000 francs per year. The most affordable option for this type of investment is the ETF mandate from the Sparkasse Schwyz, with fees totaling 1750 francs per year.
Because fees vary depending on your investment profile, taking the time to compare services based on your individual needs is worth it. The interactive and transparent Swiss asset management comparison on moneyland.ch is a free and simple tool which you can use to compare asset managers based on your investment needs.
Digital asset managers are notably cheaper
Digital asset management services are significantly cheaper than conventional wealth management services. Digital asset management services are often referred to as robo advisors. The term is somewhat misleading because most of these service providers do not offer any consultation at all.
On average, Swiss robo advisors charge the equivalent of 0.7% to 0.75% per year. That is around half of the average cost of conventional asset management services. Because digital asset management services generally make use of low-cost ETFs instead of costly mutual funds, their total average cost if less than half that of conventional asset managers.
Another advantage of digital asset management services is that many of them have relatively low capital requirements for new customers. You can invest amounts as low as several thousand francs.
As with conventional asset managers, costs differ widely between different robo advisors as well. The most affordable is the True Wealth robo advisor, which charges a 0.5% flat fee (as low as 0.25% with larger amounts of assets under management).
An investor with 500,000 francs of capital to invest would pay 2450 francs per year in fees with True Wealth. The same investor would pay 4800 francs per year for the Vontobel Volt digital asset management service – nearly double the fee charged by True Wealth.
More on this topic:
Compare Swiss asset management services now using the interactive comparison
Swiss robo advisors compared
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