May 27, 2010 - Phil Hodgen

Swiss financial services in slow fade — even Reuters can see it

Mainstream media is catching up.  Here is an article from Reuters noting that trust services will not be a growth industry in Switzerland.  The quoted article tells you one place the business is going — Asia.  (Hint:  Swiss banks are really good at this “migrate to Asia” thing!)  (And anyway, most banks are multinational, anyway; country branding is increasingly irrelevant IMO).

Reasons given for the slow fade:

  • Trusts are complicated and clients find them hard to understand (meh! this is just the self-important priesthood speaking condescendingly of the laity, who have perfectly good brains capable of understanding this stuff);
  • Trusts are expensive to set up and operate (look at cost/benefit, not just cost);
  • The technical problem that Switzerland is a civil law country and trusts are common law entities (meh, a COMPLETE red herring because the trusts I work with are established and governed under non-Swiss law and it is only the humans administering the trusts who sit in Switzerland);
  • Clients don’t like to relinquish control over assets, and this is required in many (not all) trust situations (a truth, but again remember “loss of control” is a cost, and you should consider what you buy for that — tax savings, ensuring transfer of wealth to heirs, protection against in-laws and outlaws, predators and creditors).

All of those reasons were true last year, ten years ago, and fifty years ago.  So what’s changed?

The reasons not given for the migration of business away from Switzerland:

  • What about the broader implications of the big brush-up between the United States and Switzerland about UBS accounts?

Oh, FFS.  Wake up, Reuters.

There are an enormous number of Very Smart Swiss Brains.  They’ll keep busy for the rest of their lives.  They won’t have much (or any!) U.S. business, because the United States is systematically making itself toxic for non-U.S. business and investment.  Protectionism through non-tariff trade barriers (in the form of domestic tax enforcement attitudes) is the Policy du Jour in Washington, DC.

But the nominal base of operations will increasingly be elsewhere in the world.  And you, like me, will start to see and work with highly efficient trust officers (frequently Swiss!) sitting in very un-Swiss locations.

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