Updated 2024 (with respect to regulation of independent wealth managers)
FinGuide was once again invited to contribute an article to the SonntagsZeitung financial guide on the topic of investment. This time we chose independent wealth managers as the topic. What a bank offers in terms of investment is generally known. In this article, we have therefore compiled some information on why independent wealth managers could be an interesting investment partner.
For most people, investing money means banking. But what do the more than 2,000 independent wealth managers actually offer their clients?
Independent wealth managers (IWMs) get their name because they are not affiliated with a particular bank. There are over 2,000 IWMs in Switzerland, ranging in size from one-man operations (most of them are indeed men) to managers of several billion francs.
How Do Independent Wealth Managers Work?
IWMs manage their clients’ investments, but leave the processing (custody account management, purchases and sales) to a bank. Clients grant their wealth manager a power of attorney and usually have little contact with the bank. IWMs work with several custodian banks. Clients can choose which custodian bank should manage their custody account.
The regulatory supervision of IWMs was redefined in 2023: IWMs are monitored by the Swiss Financial Market Supervisory Authority (FINMA) via so-called supervisory organizations. The associated requirements for IWMs increase security for customers.
Advantages for Customers
Many clients see their bank advisors as product salespeople. This is unpleasant for clients, as banks which sell their own products primarily focus on their own gains. IWMs offer an independent alternative. However, it is important to take a close look here: A very large number of IWMs have also developed their own products and are therefore incentivized to offer these to their customers.
IWMs are often organized as partnerships. This means that the relationship managers are not employees, but entrepreneurs. This can be advantageous for clients, as their counterpart can make their own decisions. Wealthy clients are often entrepreneurs themselves and prefer a contact person with whom they can speak as equals. However, in the case of larger IWMs, the relationship managers are often also employees, as is the case with banks.
The majority of IWMs manage assets under one billion francs. This enables them to invest in small-cap companies without moving the share price. Options strategies are also possible for small volumes, which are not available to large banks.
Costs and Returns
While investment clients of banks only have to deal with one provider, clients of IWMs have to pay fees to both the wealth manager and the custodian bank. However, banks offer special conditions to IWM clients. The higher the volume of an IWM with a custodian bank, the better the conditions. So, if customers follow the bank recommendation of the IWM, they get a better deal than if they choose their own custodian bank.
Experience has shown that you also have to look closely at the IWMs to identify those that generate good long-term returns. Some IWMs have developed investment strategies that enable them to outperform most banks. Others, however, lag behind their peers year after year. It is advisable to look at those IWMs that follow a clearly defined investment approach and are successful over several years.
Choosing a Provider
It’s not easy for clients to get an overview given the multitude of banks and IWMs in the market. For this reason, the selection is usually based on contacts and recommendations. If, however, you prefer to choose your own wealth manager based on facts and figures, you can turn to FinGuide since 2017. FinGuide continuously reviews private banks and independent wealth managers. Only the best of these are selected to make it onto the FinGuide platform. Clients can enter their requirements online and are then supported in selecting the right provider. FinGuide’s advice is free and yet independent. FinGuide is remunerated by the wealth managers. This remuneration is exactly the same for all private banks and IWMs.
In addition, clients can withdraw from the advisory process at any time if they do not receive the desired added value. FinGuide has thus created a value position in which customers can only win. The service is available free of charge to investors with investable assets of CHF 500,000 or more.
The original article (in German) in the SonntagsZeitung of February 27, 2022 can be found under this link as a pdf file.
Which provider is right for you? Find out by visiting our homepage.
