What to consider when opening a Swiss bank account

Bank accounts in Switzerland are often associated with high fees. As a rule, however, only a few investors know how much they actually pay for their mandate.

Switzerland one of the world's leading financial centres and, with a market share of around 25%, it can maintain its position as the most important financial centre for cross-border wealth management. But do investors also know how much they pay in fees for their mandate (asset management, advisory or execution-only)?

In addition to the fee stated in the contract, banks charge so called entry fees, management fees, performance fees, fund manager fees and upfront administrative fees. And if that is not enough, the banks continue to collect retrocessions (commissions that banks, asset managers and other financial service providers receive from third parties in connection with a client relationship), despite several Swiss Federal Court rulings, which in principle would be due to the investors. 

Investors who assume they are paying around 0.2 % to 0,8 % management fees to their bank are often surprised when they request a price/performance list (income and cost overview) from their Swiss bank. Sometimes the fees actually charged are triple as high as the investors think they are paying.

But what can investors do now? 

In the first instance, new clients should negotiate good rates and ask the bank to disclose all fees, including the so called "hidden fees". They should also insist on the forwarding of retrocessions. A look at the small print is useful here. The bank should make an effort to gain the trust of the investors and in order to be able to make a well-founded decision as an investor, it is important to request full transparency from the bank in advance.

Existing clients, on the other hand, have the option of requesting disclosure of the retrocessions received by the bank for at least the last 10 years and reclaiming them. And experience shows many investors are scared off by obvious waivers, which are signed by agreeing to the general terms and conditions of the banks. Here it is important to be persistent. The criteria for a valid waiver are laid down by the highest courts and are only fulfilled by the banks in the rarest of cases. 

On the other hand, it is often worth taking a closer look at the portfolio statements. If there are more of the bank's own products or also structured products (= most fee-intensive vehicle), it can be assumed with a high degree of probability that the bank has collected hidden fees in order to improve its own profitability.

Finally, each investor must weigh up the advantages and disadvantages of a custody account in Switzerland for himself. However, negotiating skills and perseverance pay off in any case, because in the long run it is enormous to save 0.5 to 1% in fees every year, as the earnings add up annually. And the issue of retrocessions should also be addressed promptly, especially by existing clients, due to the fixed limitation period of 10 years. Considerable additional returns, previously unknown to investors, can be earned here. Companies such as Liti-Link AG support investors from all over the world in asserting their retrocession claims and assume 100% of the cost risk. This option is probably the easiest way to improve your own net return. 

Find further interesting information on retrocessions and investing in Switzerland in this video.