We keep this article up to date. The last update is from the year 2023.
Private banking providers are considered secretive and discreet. In fact, they are so secretive that it is almost impossible for non-customers to find out what private banking services cost. Banks that do not have their roots in private banking, such as cantonal banks or Raiffeisen, are relatively transparent. Their fees for private banking services are also available on the internet and can be compared if necessary. However, as there are often many price components, the effort required for a proper price comparison should not be underestimated.
But what about the real specialists in private banking, i.e. private banks and independent wealth managers? In this article, we want to shed some light on the subject. We will limit ourselves to the core of private banking, namely wealth advice and management. The prices quoted relate to assets in the single-digit million range. The higher the client’s assets, the greater the negotiating power vis-à-vis the providers.
What are the most important services that are priced?
- Advice, monitoring and investment proposals
- Wealth management mandate
- Custody account management
- Transactions, i.e. purchase and sale of securities
Advice, Monitoring and Investment Proposals
Various banks now recognize different levels of advice and charge different prices for it. So there is not only different fees for advice versus “execution only”, but also for more or less advice. The advisory prices reflect these different intensities. In addition, advisory prices depend on the amount of assets invested and sometimes also on the client’s risk appetite. The price tends to be higher for less assets under management and higher equity component. The differences are enormous, with prices on the market ranging from 0.2% to 2% p.a. It therefore depends very much on how intensive the advice and monitoring should be, how much the assets to be invested are and which investment strategy is chosen. Prices also vary greatly from provider to provider.
Recently, “all-inclusive” price models for advice have also emerged. The prices include advice, portfolio monitoring and transactions. The advantage for customers is transparency, as they know in advance what they are paying. The costs of these pricing models also vary greatly, ranging from 0.5% to over 2%.
Independent wealth managers usually have a much simpler and clearer pricing structure than private banks. Standardized prices for different asset levels and investment strategies are common. However, there are various independent asset managers who only offer wealth management and not investment advice. A common price for the advisory services of asset managers is around 1% for a volume of 500k to 1million and decreases with increasing asset size. “All inclusive” price models are not common with independent wealth managers, as custody account management and settlement are not in the hands of the wealth managers, but with custodian banks. Clients of wealth managers receive preferential prices from custodian banks for custody account management and transactions.
Wealth Management
In the case of wealth management, one price component is usually omitted compared to advisory services: the intensity of the advice and monitoring. The reason for this is that the bank or wealth manager assumes full responsibility for the custody account. In the case of private banks, however, prices vary considerably between different asset levels and risks taken. You can expect a price range of between 0.5% for assets of around 10 million and a conservative strategy and up to 1.5% for lower assets and an equity-heavy strategy.
Here too, independent wealth managers have simpler price structures than private banks. The statements made in the section “Advice, monitoring and investment proposals” also apply to wealth management. Attention should be paid to the level of performance fees. 10% is okay, but not more than 20% if you also pay a fixed wealth management fee. Performance fees without a high-water-mark are questionable.
Custody Account Management
As mentioned above, custody account management at private banks can be included in the advisory or wealth management costs if you opt for an “all inclusive” price model. If you choose a model with individual prices, custody account management normally costs between 0.15% and 0.4%. The amount of the costs depends on the size of the custody account and, in some cases, the number of securities deposited. For once, the differences between the banks are rather small.
If you choose an independent wealth manager as your partner, special conditions apply at the custodian bank, as mentioned above. A fee of around 0.4% must be expected for custody account management and transactions.
Transactions
The most astonishing price differences can still be found today in transaction fees. While discounters have shaken up the market with favorable standard prices (“flat fees”), a percentage brokerage fee is still common in the banking world. This is heavily dependent on the size of the transaction and the type of securities traded. The range in which these prices usually move is huge: between 0.15% and 1.5%. Transaction costs can vary by up to a factor of 5 for the same provider for the same security due to the size of the order. The differences between providers are also large. Accordingly, there are huge savings opportunities for investors here.
Minimum Fees
While minimum fees are rather unusual for independent wealth managers, they are standard for private banks. Minimum fees can be charged for very different services: Advice, wealth management, custody account management and even account management. The amounts range from a few thousand to tens of thousands of francs per year. Their main function is to deter smaller clients. For example, anyone who concludes a mandate for over CHF 2 million at a one per cent asset management fee will pay CHF 20,000 per year. A minimum fee of CHF 15,000 may look like a lot of money, but it has no effect. However, if you steadily deplete your assets as you get older, you may end up paying the minimum fee over time. Then either goodwill from the provider is required or you should change providers.
Even private banks today often waive a minimum fee for account management. So if you want to avoid these CHF 2,000 to 3,000 per year, which are often charged, you can easily do so by switching providers.
Conclusion
Hardly any private banking customers choose their provider on the basis of a detailed price comparison. In private banking, price is one of many possible decision criteria. A lack of transparency is basically a protection for the providers, because clients who pay too much usually don’t know it. With this article, we would like to give you a basis for comparison. But be careful: even if your prices are well within the ranges mentioned, you may be paying much more than you realize. One trick that is unfortunately often used is to advertise relatively favorable prices, but then fill the customer accounts with products that contain hidden costs.
If you are unsure whether you are being treated fairly by your provider, FinGuide can help you to find out and, if necessary, guide you to a fair partner. However, FinGuide’s scope of advice goes far beyond the price comparison: FinGuide will find the right provider for you, taking into account many other criteria such as the returns generated or the scope of the advice. You can find more information on our homepage.
