The answer to the question of the best private bank in Switzerland is not “Bank ABC” or “XYZ Bank”, because every client has different needs. We therefore examine the assessment criteria here and examine what you should look out for when choosing the best Swiss private bank for you.
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Are Returns or Costs More Important When Choosing a Private Bank?
What services do private banks offer? Most investors cite the returns achieved as the most important factor: Is the best private bank the one with the best performance? This brings us to the first question: how do you assess the performance?
- Private banks do not publish their returns on their website. One way to remedy this is to look at traded funds. Those private banks that also offer their investment strategies as investment funds must publicly disclose the returns. However, the majority of private banks do not offer such products, so the returns are not publicly available.
- The assessment of the performance achieved always depends on the risks taken. High-risk strategies offer higher long-term returns than conservative investments. Only if you know the level of risks can you assess the performance. Risk figures are also only publicly available if investment strategies are offered as investment funds.
- The risk/return ratio is usually calculated using the Sharpe ratio. However, the basis for calculating the Sharpe ratio is not available to outsiders. This figure must also be requested from the bank.
It is almost impossible for outsiders to assess the performance achieved by a private bank, as the necessary information is not available.
In recent years, the focus has increasingly shifted to costs, and that is a good thing. However, a one-sided focus on costs means that providers with low costs and returns look too good. The costs of wealth management are the price for a service and this can vary greatly in terms of quality. The net return, i.e. the return after deduction of all costs, is relevant for assessing the performance of a private bank.
What Scope of Advice Does a Private Bank Offer?
The differences in the scope of advice offered by private banks are huge. It is therefore important that customers are clear about their needs before choosing a provider. Frequently requested advisory topics are
- Real estate advice
- Tax advice
- Pension advice
- Inheritance planning
- Management of private and business assets
Simpler issues can usually be covered by the bank's own advisors. External specialists are called in for more complex issues. The rule of thumb is: the larger the bank, the broader the scope of advice. Small providers sometimes concentrate almost entirely on wealth management and advice. Is the best private bank the one with the widest range of advisory services? For most clients this is not the case, as experience has shown that the need for advice is limited to one or two special topics.
What Does Fairness Mean for a Private Bank?
There is usually a considerable asymmetry of information in the banking business: Much more information is available to the advisor than to the client. In this situation, there is always a risk that clients will be sold products that are good for the seller but not for the buyer. Fairness and decency are therefore required on the part of the bank. The best private bank must master the balancing act between client interests and bank interests.
Private banks that maximize their profits cut back on fairness. They give their advisors incentives to place as many high-margin products as possible in client portfolios. Our experience shows us that family-owned private banks pay more attention to fair business practices than listed banks. Owner-managed banks have a longer horizon, as they do not have to present their shareholders with a profit increase every quarter. Long-term thinking leads to a greater focus on customer interests than short-term profit maximization.
Are There Publicly Available Rankings of Private Banks?
Yes, there are, but their significance must be assessed in a differentiated manner.
- BILANZ: Every year, the magazine BILANZ reviews around 80 banks in the investment business on the basis of a specific client’s needs. The assessment is very detailed and mainly covers professionalism, costs and the transparency of the specific offer. The limitation of the informative value is mainly due to two factors:
- Can the quality of a private bank really be judged on the basis of its approach in a single case?
- The returns achieved by the banks are not taken into account.
- firstfive/BILANZ: firstfive is a company that specializes in the verification and assessment of performances. The best asset managers are recognized each year in BILANZ on the basis of firstfive data. The data from firstfive is watertight as it is based purely on facts and figures. However, so far only universal banks and independent asset managers have taken part in these comparisons. Private banks are keeping a low profile.
- Awards: In banking, various awards are presented for special achievements. The business model for most of these awards is to offer awards in return for payment. Often the use of fee-based advice or the placement of advertisements also helps to win an award. Awards should therefore be treated with the utmost caution, as most of them are not meaningful.
Conclusion
There is no such thing as THE best Swiss private bank for all clients. Individual client needs must be taken into account when making a selection. If you are considering becoming a client of a private bank, insist on the following information:
- Disclosure of net returns over several years in several risk classes.
- Is there an external audit of these return figures? Or are the strategies managed as investment funds?
- What is included in the reported costs and what is not? Are additional wealth management or advisory fees charged for proprietary products? What margins apply to foreign currency transactions?
- Are all advisory topics that are relevant to you covered?
- How are client advisors' bonuses determined? Can potential conflicts of interest arise from this?
If you want to make things easier for yourself, find your best private bank with FinGuide. We put our expertise to work for you and have already gathered all the essential information about the best private banks.
Tested Private Banks
FinGuide has reviewed various private banks and most have not passed our due-diligence test. So far, five have qualified for the FinGuide platform.
Globalance Bank: Globalance Bank in Zurich is a pioneer in sustainable investments. No other bank has focused so consistently on sustainability.
Helvetische Bank: Helvetische Bank in Zurich combines the flexibility and agility of an independent wealth manager with a banking license and fair conditions.
Maerki Baumann: Maerki Baumann in Zurich is 95% family-owned and has a correspondingly long-term focus. Among private banks, it is the pioneer for crypto investments.
Rahn + Bodmer: Rahn + Bodmer in Zurich is the oldest private bank in Switzerland, owned by three families with personal liability and a long-term business horizon.
Reichmuth & Co. Privatbanquiers: Reichmuth in Lucerne, Zurich and St. Gallen is the epitome of entrepreneurial action; the partners are liable for the bank with their personal assets.
