Investment Account for Goddaughter

Hi All,

My goddaughter is turning 1, and I am thinking of gifting her an investment account…nothing big (like a few hundred francs), but something I can contribute to on each birthday so when she turns 18 she will have a nice nest egg :slightly_smiling_face:

I’ve done some research andthe only genuine “gift investment account” options are from UBS and CS, which have crappy and expensive funds.
As a result, I’ve come to the interim conclusion that it would probably make sense to just open an account in my own name and give her a gift when she turns 18 (either in cash or in assets, whatever will be more tax-efficient at the time).

My questions are:
Does this make sense?
What would be the best platform to set up such a small and “static” account, considering that I’d rather have a separate one from the one I currently use (IB)? I looked into VIAC, which looks quite straightforward and with relatively fair fees, but is it only for Pillar 3a? Do I have other “simple” options?

Thank you all for your help,
RD

I know it is not exactly what you want to do, but I’ll would just open a savings account for her which has a high interest (currently a local bank offers 1.5% up to 25 yo). I would then contribute more later after my investments made money(maybe when she turns 18 so she can get her driving licence).

I’ve researched options for such a topic not so long ago.
My conclusion:
All separate accounts just for the child are a relatively big & unnecessary expense & no real advantage. Also it will still officially be in your name (due to tax reasons), so if u should pass away, it’ll be your heirs’ decision to pass on correctly even if it is labelled “godchild X”.
My solution was to buy VT at IB (my account). I have my own positions at IB also of course, but I don’t own VT for myself as I prefer VXUS+VTI. All VT is the child’s. I add to the position and also reinvest the dividends. I document it and also pass on a copy of all this every year or two (a printout of my own spreadsheet). I expect my heirs will honour this “commitment” should I not be around.

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With an 18 year investment horizon, one should try for higher returns than in a savings account IMO.

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A testament would solve this problem.

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I don’t totally disagree with you, most of the money should be invested during those 18 years. What I meant is that is doesn’t make sense to create a separate investment account. And for me it doesn’t make sense to give her X ammount of an ETF now.

Keep the money invested indistinctly on your account, but open a savings account so she can learn what interest means when she will be 12 yo or so. I heard about teens putting most of their christmas and birthday gift on their savings account and then be happy with it. The problem with giving her investments is what would a 18 yo do with 95% of her asset in ETF? Will she sell some of it to pay for a driving licence / first car or whatever ? The best gift you can give her is financial education / responsability. And then you can give her a certain amount of money when she turns 18.

I probably think like that because cash is part of my asset allocation and it allows me to sleep while most of my assets are “risky”. I see it as the base of the pyramide (not in volume but it is necessary to build higher).

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I’ve created an account in the name of my goddaughter at Cash (BankZweiplus).
They offer a “Fondssparplan”-setup for children and youths without any “Courtage/Comissions” and no deposit fee (up to 25’000 CHF) with a reasonly large selection of ETFs to choose from (no US ETFs). It’s surely not as good an offer as with IB, but for what I was looking for, this’ll do the trick:

Jugend-Fondssparplan Cash (not affiliated with them in any way)

Have you tried a linked account on IB? You could do that to better separate it from your stuff, but I’m not sure how it works.

I did the following for my son : invested 10k chf on degiro in IWDA (free etf) because it is accumulating. I dont need to care about reinvesting. We will see in 18 years what is the result of this investment :grinning:

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Could be OK if you have more than 200k in your account otherwise you have to pay the inactivity fees for the extra account which is not worth it if you only fund it with a little amount every year.

can confirm. I found the info

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I did something similar last year for my sons, but I did with UBS (probably a big mistake I know)
I pay an amount monthly, into each son’s custody account, and this then invests into the UBS (CH) Investment Fund Equities Global passive W (TER 0.25%)
Not very exciting product, but low TER.
Im trying to review now the costs I pay for this and being UBS its not easy to find out. I see each monthly trade has a “Transaction price” but I cant see how this price is arrived at. Any ideas. Any other thoughts on what I am doing here? It is madness?

The problem I see with separating out an investment on my personal trading account is that, as the monthly amount is a couple of hundred francs, I would waste a bit each month on trade fees. I suppose I could transfer monthly, and trade quarterly. I just prefer things to be set up and done automatically.

All help appreciated.

Domicile Switzerland, so you have 30% on withholding taxes on US equities. That is an additional cost of 0.33%

You can do it at IB with yearly investments and claim all of the WHT back.

I had received something similar from my dad. The fees were ridiculous, 2% transaction fee every time you make a deposit. And only UBS funds with high TER are available. They also claim there is a management fee of 0.35%, not sure if this is included in the TER.

An extra 0.33 USD of waste (if you use IB, and do it at the same time as your other trades, when converting the bulk from CHF to USD). Isn’t that irrelevant? :slight_smile:

The problem at the moment is: there‘s no interest to write home about, rates are almost zero or, plainly put, not worth to save for.

I‘ll second this suggestion: opening up and making regular payments towards a simple ETF savings/investment plan.

Don‘t overcomplicate things by trying to eke out the last few cents with IBKR, optimizing withholding taxes with U.S. funds. Choose something straightforward that reports to tax figures to Switzerland and is marketed here. Preferably on a Swiss account, though I might venture as far as Germany, if I (and she, more importantly!) speak the language.

Once she turns 18 and/or if anything happens to you prior to that, she (or her guardians) should be reasonably able to handle things on their own.

I have been thinking about the same thing recently. What do people think about using a robo-advisor for ease in this case?

True Wealth or Selma for example. Set up regular payments, tell the grandparents how to transfer money (if they want to) and let the robo handle all the work, and provide the tax statement.

To me, it sounds like a decent chance of return with minimum work to manage, but I’m just a newbie to all this so maybe I’ve missed something important.

Thanks for all your help guys! I will ask UBS how they get to this Transaction Price as this must be where the fees are “hidden”

Its a shame there is not a more simpler product for Children’s Investment somewhere in Switzerland. I would switch into straight away if there was.

@SwissTony We set up investment accounts for our children with Avadis: https://www.avadis.ch

Maybe that’s an option for you to consider as well?

We control the accounts atm, but in the name of our children, one for each. You can choose the asset allocation, very broadly. TER 0.54% for global stocks, no other fees. We pay in monthly, per standing order, minimum required is 50 CHF per account.

It’s the only solution I know in Switzerland where you can have monthly, low payments, overall lowish costs (compared to other Swiss suppliers) and high flexibility, including having the accounts in the name of children.

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I think there is space for a VIAC-style app for this kind of 18-year-max blocked investment accounts.
Even simpler, the investment is fixed, the app just let you put money there for 18years at 5-6% interest.

Care to start a startup? :slight_smile:

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