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BFI Capital
September 3, 2019

Swiss Wealth Management: The New Environment for US Clients


Secret numbered accounts, code words, bank statements tucked away inside a newspaper, 50,000 dollars in an envelope, diamonds hidden in a tube of toothpaste…the cloak and dagger style of Swiss banking we know from the movies, actually was prevalent amongst those US account holders keen on avoiding their US tax obligations.

While only a small fraction of the Swiss banking industry, US client engagement received worldwide attention in 2008 when the IRS began their crackdown on tax cheats. In the following years, Swiss banks paid billions of dollars in fines to the US for enabling Americans to avoid their tax obligations and consequentially asked all their US clients to close their accounts and move their funds elsewhere, wary of more damaging legal battles with the US Department of Justice.

FATCA, the Foreign Account Tax Compliance Act, a unilateral US tax law aimed at curtailing potential tax evasion by US taxpayers, came into effect in 2013, ensuring that all foreign accounts and investments held by US taxpayers are disclosed by foreign banks. The implementation of FATCA entails high administrative and financial outlays for financial institutions and almost all of Switzerland’s 253 banks opted out of serving US clients, as legitimate as their banking needs may be.

Swiss banks not only dropped tax cheats, but also were not keen on US expatriates, living and working in Switzerland, as the paperwork built up along with potential penalties for letting a non-compliant US client slip through the net.

...and after

In 2009, Switzerland adopted a white money policy. In 2018, Swiss banking secrecy, as a presumed support of potential tax evasion, was dropped when Switzerland joined the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.

Times have changed and so has the environment for US clients.

Nevertheless, Switzerland did not lose its competitive advantage. Due to its long-term political and economic stability (AAA-rating with a stable outlook) and state-of-the-art financial services industry, and respect for privacy, Switzerland still remains the global leader for private wealth management in the new, transparent world. Swiss banks and independent asset managers manage 27.5% of cross-border assets worldwide.

In times of heightened volatility and uncertainty,Switzerland is considered a safe haven for assets from around the world.

In 2016, Suzan LeVine, the United States Ambassador to Switzerland in Bern at the time, sent a letter to many of the Swiss banks asking them not to shun US citizens wanting to open accounts in Switzerland. A few heeded her request and made it possible for American expats in Switzerland to open and maintain a Swiss bank account for regular banking activities, such as receiving salaries, making payments etc. However, for wealth management purposes, Swiss banks require that a Swiss SEC-registered investment advisor is involved.

The Swiss SEC-registered investment advisor enters the scene

Previous to the massive crackdown on US tax evaders, there were only a few Swiss wealth managers registered with the Securities and Exchange Commission in the United States as an investment advisor. Most of them were fund managers and institutional client advisors. Five years ago, the number had risen to 30 and today there are over 60 Swiss wealth managers registered with the SEC, focused on providing US private clients with international and geographical investment diversification.

These forward-thinking Swiss wealth managers established relationships with leading Swiss banks, happy to open custodian accounts for US clients when a wealth management mandate is established between the US client and a Swiss SEC-registered wealth manager.

These Swiss banks have added the mechanisms of FATCA to their banking operations and also deliver accurate bank statements for a correct and timely FBAR reporting of foreign financial accounts and the fulfillment of US tax obligations.

Swiss SEC-registered investment advisors come in all shapes and sizes, from big banks with US-focused affiliates, to entities backed by their Swiss private bank parent companies. Family offices and larger and smaller independent wealth managers have also registered with the SEC and work with US clients on an individualized and personal level.

There have always been legitimate reasons

for US persons to hold assets in Switzerland.

Several of the Swiss advisors also work together with US custodian banks, providing their wealth management expertise, while leaving funds in the US, thereby avoiding FATCA, FBAR and tax reporting issues required for foreign bank accounts. A few Swiss wealth managers are also able to serve Canadian clients due to the proper registrations with the Canadian authorities.

There have always been legitimate reasons for US persons to hold assets in Switzerland and many Americans dutifully fulfilled their reporting and tax obligations as required. Holding some funds outside of the US banking system is considered a prudent strategy by many investors, reducing geopolitical risk. Gaining access to the perspectives of globally experienced Swiss wealth managers is often sought after by internationally savvy investors and having access to funds abroad anytime is another reason for holding funds in Switzerland.

Gaining the attention of US clients

Recently, Reuters, Bloomberg, the Financial Times and the Wall Street Journal reported that Swiss banks are gearing up in an effort to bring in US clients. The hunt is on with powerful statements filling the articles: "attractive target," "aiming to attack," "moving back into battle," "sharpening focus," "gearing their growth strategy," "intending to achieve above-average growth," and "wanting to grow over proportionally".

Swiss SEC-registered investment advisors range from aggressive hunters to more toned-down wealth managers offering individualized wealth management solutions geared to the American investor's individual set of circumstances with emphasis placed on discreet personal relationships and individually designed solutions.

Independence is key as they are not obliged to take any particular in-house investment, product or service into consideration, their sole obligation is to their clients. Personal, long-term relationships are nurtured and chosen strategies continuously monitored on an individual basis to meet changing needs and circumstances.

No disguised language or cloak-and-dagger rendezvous, wealth management activities with a Swiss SEC-registered investment advisor are now openly and readily available to US investors domiciled in the United States and around the world. While a trip to Switzerland to personally meet and greet wealth managers and custodian banks is a great way to mix business with pleasure, Swiss asset management can be easily accessed without leaving home.

,>> Read more here.

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