When the pandemic burst onto the scene – throwing our established habits, social interactions and way of working into disarray – who would have predicted that the Swiss wealth management industry would not only weather the storm but emerge from it stronger than before? Clearly, though, the sector has remained strong, as shown by 2020 results.
The same was true during the 2008 crisis: at the time, the doom-mongers predicted that Swiss wealth management would see an inexorable decline. With the disappearance of banking secrecy and the proliferation of new regulations, the fate of private banks appeared to be sealed.
And indeed, the last decade has brought a narrowing of margins in Switzerland’s financial centre, along with growing consolidation. However, whereas the industry was widely expected to weaken, the reverse has happened. Private banks have made huge efforts to adapt, comply with new rules and develop new sources of growth, and those efforts have paid off.
Still in pole position
According to the Boston Consulting Group, in the space of ten years, financial assets have almost doubled at global level and some markets have seen exponential growth. Assets entrusted to wealth managers by Middle Eastern and African clients have doubled, among Eastern European clients they have increased by a factor of 2.5 and for Latin America clients they have tripled.
Despite competition from other financial centres, Switzerland is continuing to capture almost a quarter of that wealth, and it has bolstered its position as the world’s premier centre for cross-border wealth management.
Having dealt with the Covid-19 crisis in a relatively orderly way, although its economy has not escaped unharmed, the country has again confirmed its status as a safe haven in the eyes of clients from regions that have been hit hard by the pandemic or are seeing geopolitical tension.
Today, Switzerland is well placed to maintain its leadership when the post-Covid rebound takes place. Productivity gains have enabled some banks to improve their cost/income ratios, and now that most of the regulatory compliance work has been done, they once again have potential to invest.
Savings rates have surged around the world because of economic support measures and reduced spending during lockdowns. Some studies put the amount of cash that has been accumulated at USD 5,500 billion, a windfall that will mainly serve to drive the economic recovery. However, not all of this liquidity will be injected into the real economy, at least not immediately, and for wealth managers this presents opportunities, particularly in terms of fulfilling their responsibilities.