Many clients are currently seeking security in a volatile macroeconomic environment and place great value on the solidity and stability of their bank. This presents a real opportunity for Switzerland and its banking sector, particularly for private banking, writes Serge Fehr in his article for finews.first.
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Since 2022, investors have had to navigate an investment environment that combines geopolitical instability, threats to the performance of financial assets, the fight against inflation, and the challenges posed by the new interest rate cycle. Markets generally anticipate these events, which means that they are already reflected in asset valuations.
Yet we are not immune to surprises, as in the case of the Swiss National Bank, which, contrary to expectations, was the first bank to lower its key rate, or an unprecedented US presidential race. This has left many investors and clients uncertain about their investment decisions.
Against this backdrop, it is hardly surprising that clients are feeling anxious and lacking perspective. At present, they are seeking security in this volatile macroeconomic environment, and attach great importance to the solidity and stability of their bank. This is a real opportunity for Switzerland and its banking sector – and particularly for private banking.
«There is one notable fact, however»
Firstly, our country offers first-rate political, financial, and regulatory stability. A country that has proved time and again that it can absorb many challenges, some of them very complex, and then bounce back.
Secondly, the Swiss financial center is unbeatable by international standards in terms of its financial expertise, reputation, solid business models, ability to adapt and offer services, and, finally, the know-how of its professionals – whether they are working for a private client, an institutional investor or a company.
In addition to the security and stability offered by Switzerland, the objective pursued by clients – of private banks in particular – remains unchanged: to preserve and grow their assets over the long term. There is one notable fact, however. Even if most of them choose to delegate their investments, they still want to understand the process and where growth and performance come from.
«Almost 80 billion francs worth of assets will be transferred over the next five years»
Their financial knowledge is increasingly advanced, and they need to know that there is a highly sophisticated analytical process behind their portfolios. The technical nature of their questions also encourages bankers to redouble their efforts and aim for systematic and sustainable excellence in the support they provide – something that also helps to build trust over the long term.
While the challenges posed by the investment environment are (hopefully) more short-term, from a longer-term perspective, one of the major opportunities for private banking is the retirement of the baby boomer generation and the overall context of wealth transfer to future generations.
Reflecting a society undergoing profound transformation, some studies indicate that almost 80 billion francs worth of assets will be transferred in Switzerland over the next five years as a result of retirements and company transfers. As for the transfer of wealth through inheritance, it is estimated that more than 200 billion francs will be inherited by Millennials and Generation X over the same period.
«They have already discussed the subject of retirement with their banker»
But how prepared are the baby boomers for this monumental transfer? According to a Lombard Odier study conducted in 2023, more than 80 percent of high-net-worth individuals surveyed have already discussed the subject of retirement or are very interested in doing so with their banker to assess the consequences.
In this clear acknowledgment of the need to consider the impact of ceasing to work, another observation must be made: most company directors and senior managers remain so involved in their professional activities that they neglect these essential questions at a time when they should ideally be addressed.
In this clear acknowledgment of the need to consider the impact of ceasing to work, another observation must be made: most company directors and senior managers remain so involved in their professional activities that they neglect these essential questions at a time when they should ideally be addressed.
«A task that seems tailor-made for private banking»
In this unprecedented momentum, the private banking sector undoubtedly has considerable strengths. In contrast to an over-standardized offering, private banking devotes substantial effort to listening carefully to its clients' objectives, followed by an in-depth, detailed analysis of each individual's situation, to offer tailor-made, high-value-added solutions. The interpersonal relationship of trust between client and banker is at the heart of this process.
The ultimate aim is to guarantee the stability of wealth to pass it on while delivering performance. This requires meticulous planning covering the entire estate. Because without planning, there can be no wealth management. A task that seems tailor-made for private banking.
Serge Fehr as a Limited Partner and Head of Swiss Market for Private Clients at Swiss private bank Lombard Odier.
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