Securing Switzerland’s Role as One of the World's Most Attractive Financial Centers
Switzerland is a great success story in many ways: politically, economically, and socially. It’s virtually impossible to find any other country that has the same stability and competitiveness that we have managed to retain for so long. Still, there’s no suchthing as “perfect”, and Switzerland is no exception.
It is perhaps interesting that whenever something news-worthy happens, especially to the detriment of Switzerland’s reputation, the world media seems all too eager to remind everyone of our imperfections (real or perceived).
For example, here are some headlines from 2023 thus far regarding Switzerland’s financial hubstatus:
- “Analysis: Credit Suisse Collapse Threatens Switzerland’s Wealth Management Crown” –Reuters
- “Will the Swiss Financial Industry Descend into Mediocrity?” – finews.asia
- “Battered Image: Switzerland Needs to Go Back to the Drawing Board” – Swissinfo.ch
- “It Wasn’t Just Credit Suisse. Switzerland Itself Needs Rescuing.” – Wall Street Journal
The Credit Suisse situation was certainly a debacle, and we aren’t trying to say that “bad things” never happen in Switzerland. However, all these headlines are geared toward one burning question: is Switzerland’s long-tenured, world-leading financial hub reputation at risk?
The short answer is “yes”. Any industry’s reputation is at risk unless it can grow, adapt, and acclimate to the conditions and challenges around it. There is always work to be done here. But what is happening “on the ground”? While Switzerland may be portrayed as “down”, we are certainly far from being “out”.
Will Switzerland Persevere?
At the BFI Capital Group, we have been working with international clients, including many Americans, for over 30 years, offering services in wealth planning and management. In that time, we have experienced many changes but have always remained true to our customers and values. As you might expect, we have excellent insight into what is happening in the Swiss banking and financial sector.
This past summer, as these questions and doubts about Switzerland’s “health” as a financial center were raging in the media, we were invited to an event put on by Nebelspalter. Nebelspalter is a Swiss political magazine which was originally founded as a satirical magazine in 1875. The event was attended by many in business and local politics within Switzerland.
Check out the recent Fireside Conversation Podcast about Swiss history, 'Switzerland: The Egalitarian Nation of Entrepreneurs'
What we anticipated was that the Credit Suisse situation, as well as the main points of the aforementioned headlines, would weigh heavily on the minds of the attendees. It could have been a somber event, with many in the industry tending to the massive wounds left by the horrible picture the media had painted.^
Instead, what we found were undaunted, realistic but optimistic Swiss people, proud of their heritage, proud of the great work that is being done and looking forward to the work that lies ahead. The Swiss are usually amongst the first to point out their own problems, but also amongst the first to work on the solutions. The consensus was clear on how attractive Switzerland continues to be for foreign investors, especially at this time of rising global uncertainty.
And equally, we continue to see large numbers of international investors feeling the same aboutSwitzerland.
This optimism remains because the main pillars that Switzerland’s financial sector were built onare still intact, and the fundamental advantages that set it apart from its competitors are more relevant than ever. First and foremost, Switzerland continues to enjoy political and economic stability like few other countries do, thanks in part to its reliable legal system, its sound currency, and its comparatively very low inflation (projected to fall below 2% in 2024).
This stability has a lot to do with the strength and the “safe haven” status of the Swiss franc. Thisis particularly apparent to Europeans and Americans who saw the Euro and Dollar depreciate massively against the CHF over the past decades. At the beginning of the 70s, a dollar was worthCHF 4.20, but today the exchange rate is less than 0.90. This, alone, is certainly a sign that Switzerland has done a lot of things right.
Another rare (if not unique) advantage that the country enjoys, as do those that invest in it, is the high level of respect for personal property rights. We still live by very strict privacy rules and regulations and under a legal and legislative system that is predictable and that renders state overreach all but impossible.
The finance sector still relies on and continues to attract highly trained professionals, well versed in different languages and jurisdictional needs, able to accommodate investors from around the world. Even more importantly, however, Switzerland is a world leader in innovation, particularly in the fintech industry, which helps create more opportunities for investors, more competition, and keeps the services offered ahead of other jurisdictions.
There are numerous stereotypes about the Swiss, but the most prevalent - and probably most accurate one too - is that we tend to be rather reserved and reluctant to talk about our own abilities or express pride over Swiss achievements; some may even wonder how patriotic we really are. But at this event, one thing was clear: there’s still a strong belief that Switzerland remains a leader in banking, private wealth, and wealth protection.
Switzerland will continue to stand out and thrive - against all odds`!
Today, more and more people around the world are looking for security and stability, and this is exactly what our country specializes in. It is precisely what makes Switzerland the most attractive financial center today. This is especially true in private banking, where we have seen a large influx of clients looking for a safe and reliable jurisdiction and sound long-term investmentopportunities.
Still, there’s no doubt that there is room for improvement, and no one is immune to what is goingon in the world economy at any given time. The Credit Suisse fiasco, having now led to the creation of one massive bank in UBS, dealt a heavy reputational blow and it did pose a serious risk for Switzerland. The Swiss banking sector has seen a drop in profits and has shrunk from its all-time highs. In its Global Wealth Report 2023 released this summer, Boston Consulting Group (BCG) still listed Switzerland as the top home of where the ultra-rich like to park their assets but sees Switzerland relinquishing that spot to Hong Kong in the coming years.
Numbers are indicating that slower asset shifts from around the EU and a repatriation of Asian-Pacific assets are taking a toll. And there’s always more work to be done with anti-money laundering regulations and compliance, although some of the biggest finger-pointers tend to be the biggest perpetrators.
Projected growth of top global booking centres - Offshore assets in USD trillions
At BFI, we advise clients in Switzerland as well as international ones, with a focus on North America, the world's largest and, in absolute terms, fastest-growing market in the world. The American market, in particular, has been characterized by challenges in the past, causing many in the finance sector to distance themselves from this clientele. However, we chose the opposite approach: we remained loyal, we developed solutions to these specific challenges and, as a result, we are now a leading company in the field of wealth management for US clients.
This kind of resilience and constant self-improvement is characteristic of many Swiss financial services providers: maybe not the international banking behemoths, but certainly the traditionally Swiss companies, family offices and private banks. This is why we also remain proud of the achievements of our country and, above all, of our financial industry, and we look to the future with optimism.
The unique blend of innovation and stability will continue to play into Switzerland’s favor. And despite inevitable issues, and an overzealous media ready to pounce, Switzerland’s private banking and financial services should remain competitive in the future, provided we continue to defend the values and principles of free markets and classical liberalism.
This writer believes in the continued and unique success story of Helvetia… as should you!