Having assets managed is expensive. But many people don’t know enough or are too lazy to compare fees – and the banks take advantage of this.
There is a lot of complaining, but many people in Switzerland are doing extremely well financially. A house, a few hundred thousand francs in cash, and you belong to the upper middle class. This includes a few people: According to an analysis by the consulting firm Deloitte, around a quarter of the Swiss population is in this comfortable situation. They have assets of between 200,000 and 2 million francs. And the number is increasing.
These people, often over 50 years old, are extremely interesting for banks. Although their assets are often invested in real estate, their cash reserves increase significantly after retirement due to inheritance or payouts from pension funds. These small rich people or “affluent customers” are potentially lucrative because their money needs to be managed. In addition, many only start thinking about their finances when they are about to retire and overestimate their knowledge.
UBS mandates cost many times more
Banks therefore offer asset management mandates starting from a few hundred thousand francs. These are financial products through which money is invested in a diversified manner on the stock market, in shares, bonds or funds. The customer can take on the investment themselves or leave the entire process to the bank. The bank then charges fees for this.
The prices for such mandates vary widely. According to an analysis by the comparison service Moneyland, a Manage Advanced mandate at UBS costs several times more than an ETF mandate at Sparkasse Schwyz. On average, the flat fee is 1.3 percent of the investment amount per year, although additional product and other bank fees may apply.
However, the costs are often “window prices”. Anyone with a somewhat larger fortune can obtain concrete offers and negotiate, says Benjamin Manz, head of Moneyland: “If you simply stay with your main bank without comparing, the banks have no incentive to lower prices.”
The prices also vary greatly because the mandates are different. It is often unclear which advisory services are included and which are not. The lack of transparency is systematic. “Many asset managers do not want their prices to be published. It is not in their interest,” says Manz. In addition, there are thousands of providers. There is no chance of keeping track of all the offers.
Will CS customers be downgraded?
The wealthy customers of the former Credit Suisse are in a special situation. Not much has changed in their everyday lives so far. The CS logo still appears in the app or on account statements. But since the legal merger, they too have been customers of UBS – for some ex-CS customers, this means change.
At CS, both affluent customers and millionaires were served in the high-end private banking. Now, with the merger, a certain reclassification is taking place. Anyone who was considered affluent at CS may be demoted to a normal customer at UBS, depending on their financial situation – instead of coffee and chocolate on Paradeplatz, it could mean queuing at the branch.
UBS does not say at what level of assets ex-CS customers must have to qualify for private banking at UBS. The bank limits itself to saying that it wants to offer customers the service that suits their needs, “accordingly, private customers are not classified exclusively according to the size of their assets,” but various factors are taken into account, it said in response to a query.
Former CS affluents would also benefit from more products and services, for example in the area of succession planning. However, they will only enter the new banking world in the course of next year with the migration to the UBS platform. Then the switch to the UBS app will also take place. Affected customers will be informed early on about upcoming changes to their current mandates. Prices have not changed since the integration, writes UBS.
However, UBS – and previously CS – has a reputation for being one of the most expensive providers in Switzerland. In asset management, but also in pensions and day-to-day business. One market observer describes it like this: “CS was already expensive, UBS is even more expensive.” For Benjamin Manz, it is no reason to change banks straight away if it is expensive in one area. You have to decide depending on the product. Not only the mandate, but also the quality of the online banking or the advisor play a role.
Nevertheless, the inclusion of CS affluent customers in UBS is unlikely to shake up the market. “The cost-conscious are probably no longer customers of the big bank today,” says Manuel Rütsche, Head of Asset Management at VZ Vermögenszentrum. He therefore does not expect a wave of switching, even if the move to the UBS world would be a reason to question one’s own situation. Customers may be satisfied and perhaps have a nice advisor, “but they often don’t even know which financial products the bank has booked into their portfolios,” he says.
No idea about bank fees
The banks can also rely on customers being slow and the hurdles for switching being high. If ex-CS customers end up in the UBS app or are informed about new rates by letter, this could be a reason to look for other offers, says Andreas Dietrich, banking professor at the Lucerne University of Applied Sciences and Arts. The problem, however, is that people often don’t even know the price of financial offers. 90 percent of people don’t know how high the costs and interest on their own accounts are.
“People worry more about holiday costs than about bank products, even though they could save a lot more there,” says Dietrich. Many people believe that they are price-sensitive. But because they have no idea what prices they are paying, they don’t even notice when something changes. In addition, the banks’ pricing models could fill a book; outsiders would hardly understand them, says Dietrich. The banks have little incentive to simplify their tariff structures. Especially not when it comes to lucrative mandates.
According to investment expert Rütsche, this lack of knowledge also applies to funds or accounts in the 3a tied pension plan, which are much more common among the population. Here, too, there is great potential for savings given the price differences. There are still many actively managed funds among the 3a products. They usually do not offer a better return than index products, but cost a lot more.
At least digital innovations such as Viac or Frankly have brought some movement to the pension market, notes Benjamin Manz. There are also now successful digital offerings in asset management such as True Wealth, which invest automatically and inexpensively. But these are marginal phenomena. If everything works, the Swiss are happy with their banks, says Andreas Dietrich. High prices are then no reason to look for a cheaper offer. The pressure on bank fees remains low.