Analytical Diaries

What do concepts like the German Quirin Bank, the UK Vestra Wealth and the Swiss Vermögenszentrum have in common? They sprung from a team of frustrated but energized employees who held a strong belief that Private Banking could follow a win-win paradigm. And these once conformed and good corporate citizens took to the markets and founded banks 3.0 – financial advise that only combined expertise and long-term wealth creation with transparent and value-based fee structures.

All of the big players in Swiss Private Banking and most of the mid-sized cantonal and union banks are beginning to see the trend. However still most strategists and product managers within the global firms believe that the current regulatory Swiss situation needs to be exploited further. With no MiFID rules to protect their clients most Financial Services in Switzerland still earn big bucks from retrocessions, kick-backs and hidden return structures that are in the end payed by the clients – either via high fees or via degraded performance on their portfolios. And back in the days where tax evasion was the primary reason for Swiss clients to value discretion over performance that practice didn’t raise many eyebrows. But with the Financial Crisis still colorful in every taxpayers memory and the lobbyists back in their rage against stronger control the market is going to bring the change eventually.

Both UBS and Credit Suisse are preparing off-the-shelf total return products for the lower esteemed client segment – it has been around always for the top level segments – and it only takes a medium to long-term oriented investor to kick-off a true customer oriented bank and a new growth story could begin. I personally know of whole teams of engaged and capable financial advisors that would flock to such a new opportunity. “Combining my expertise with the real feel that I do something good for my clients, would completely turn-around my business self-esteem”, says a UHNI banker during a quick coffee chat off Paradeplatz.

There’s still some time to bring about this model in a genuine Swiss model, but time is going fast. Already recent studies have identified the young independently rich as the ideal client segment that would jump to such a transparent and performance oriented fee model at once. Over 50% of the people questioned during the recent Cisco Wealth Study are considering a change in their banking relationship and would prefer a pure consultancy based approach.

And as another twist in the story social networks and special investor communities gain ground as well. What the German FIDOR Bank as pioneered seems to be another model around to stay. Where the old English Gentlemen’s Club was the place to obtain and share financial advise amongst equals, where tennis courts or golf courses took over that role in the past, social networks gain more and more traction to share and research and discuss investment opportunities. Banks beware and rethink your revenue strategies. The turnaround from the big bad ugly to the young open and flexible model might take a lot longer than you think.