On the contrary, to me it seems that the tax efficiency of Avadis is very bad, at least with regards to US stocks, compared to VT or VTI.
Their strategy funds contain the sub-fund “Avadis Fund Aktien Welt ESG 30% US-WHT”, i.e., because their funds are domiciled in Switzerland, they lose out on 30% of dividends on US stocks and these 30% are not recoverable at all. The net dividends/distributions are lower because of that but that doesn’t make it tax efficient overall.
With regards to US stocks, VT and VTI are as good as it gets for Swiss residents. The US gets 15% (can’t be avoided) but you get a full tax credit for that in Switzerland as long as your relevant tax rate here is sufficiently high. Irish-domiciled ETFs such as VWRL are not quite as good but still much better than Avadis (15% US WHT instead of 30%).
For non-US stocks the situation is different but overall I still expect Avadis (or any other global fund domiciled in Switzerland) to be significantly worse¹ than VWRL, even ignoring the much higher Avadis TER.
“Avadis Fund Aktien Welt ESG 30% US-WHT” is also fully hedged to CHF, which is something I wouldn’t want.
¹ With regards to tax efficiency of global stocks. This doesn’t mean that the overall fund performance will be terrible but the tax inefficiency will be a continuous drag on performance.
Avadis and Findependent are good for people that would otherwise not keep up the manual investing discipline. Better a savings plan that costs a TER, but money that builds up on the account and some random trading here and there. Many people are too lazy to stick to an investment plan - or they are not resilient enough to follow through no matter what market noise. IF you are willing and capable to trade yourself, I would not go with Avadis and Findependent.
Findependent is relatively expensive and I would trully only recommend it for people that otherwise don’t invest. Avadis however is much better. On paper, their solution is very expensive but when you have a look at their track record - it is actually very good. Not the case when you invest in shares only but if you do balanced investments - it is very difficult actually to beat the Avadis 60% strategy.
So long story short - not only have a look at the TER. Performance is a matter of TER, efficiency of the funds and investor behaviour/rigour. There, Avadis can offset the loss on TER quite a bit.
Personally, I am a DYI investor (for 22 years already) but still I do have some Avadis funds. I mainly use them for the implementation of tactical re-balancing and for month-by-month purchases. Meaning I buy Avadis funds on a monthly basis and then once per year, sell them again and convert the funds to ETF.
Avadis uses actively managed funds. Over some periods they may beat passive funds by more than the management costs (and the US WHT drag due to the fund domicile), but you can’t rely on that.
Quick comparison of the 60/40 factsheets of Avadis and findependent from end of June, checking the average return for the last 5 years. Avadis had 2.72% p.a. and findependent ‘Grow’ had 3.5% p.a. The findependent return figure might be before the deduction of their management fee (as that’s variable) but that would be a maximum drag of 0.44% p.a., lower for larger investments. And as another reference point, Viac Global 60 had 4.1% p.a. (net of all fees but with the 3a dividend tax advantage).
This is just a random period but it is a 5 year average.
Overall, Avadis seems reasonable for an all-in-one solution, better than most if not all strategy funds offered by traditional banks. However, not necessarily better than findependent or investart (0.3% p.a.).
To be honest, I do not trust Findependents’ 5 year reports. They are about to become a credible wealth managers - 2 years back they were not yet. Just to give you a sense: Two years ago, I had asked them when they re-balanced… whether it was based on a % deviation or based on pre-defined re-balancing dates. Their response was that they re-balance whenever they think it was the right time to re-balance. Clearly, they learnt fast and already something like 1.5 years ago implemented a passive re-balancing rule (which is based on specific dates and certain minimum deviations). But the conclusion is - I trust / recommend them going forward but I don’t trust them with regard to their reported, past performance.
Comparing Avadis 60% with VIAC 60% is as well not a fair comparison as VIAC actually uses 65% shares (5% out of which are REIT) and as VIAC gets preferential Tax treatments. That difference is quite big.
When you only compare available (aka non- 3A) fire and forget investment solutions for a balanced portfolio - I see Avadis as a very strong player. There may be some small benefits with some robo-advisors here and there, but at the same time robos (like findependent) come with the down-side of trading fees, FX fees, reduced transparency and more complex tax declarations. Just for the purpose of people that are too lazy to deal with investment - I would still recommend Avadis over any other solution I know but yes, Findependent is pretty much on par with them.
My biggest hope still was that somewhen, we will get a player that has a look at the swiss market and does an offering. My dream was if Vanguard extended its german offering (free investment into their ETF range) and in parallel launched a LifeStrategy UCITS for which the bonds portion was CHF hedged. THAT would be the best there was… hope dies last.
YTD Comparison of Avadis vs Findependent vs VIAC (end of July):
Avadis 60%: 6.09%
VIAC Global 60%: 5.9%
VIAC Global Real 60% *: 5.5%
Findependent 60%: not disclosed
*) 92.3% of Viac Global 60% (which equates to 65% shares) and 7.7% of VIAC Cash (0.4% YTD)
Of course, this is just another snapshot / point in time and we need to be aware that this year was better for the asset allocation chosen by Avadis (which is a bit a funny one).
Avadis 60% is 79% passive. The remaining 21% are (if I remember correctly): MSCI Emerging Markets (9%), Emerging Markets Debt (2%), and Hedged Corporate Bonds (10%)
Don’t nescecarily agree on MSCI Emerging Markets but Emerging Markets Debt and Hedged Corporate Bonds are for sure investments where Active Investment does make sense (most Bonds actually are worth investing actively). On MSCI Emerging Markets, I can somehow as well see the logic (even though I don’t fully agree) when we have a look at the Tax Situation in India and a few very strange/special corporates in the chinese Investment Universe.
As you say, I don’t think comparing 3a solutions with taxable ones is a fair comparison but if I were to do the comparison anyway, I’d use VIAC’s strategies with bonds nowadays (and consider the time when bank accounts where yielding more an anomaly). VIAC Global 60% with bonds is at 6.4% returns YTD, but since they have 10% real estate (so more of a 70% exposure), that still amounts to something like 5.6% when transformed into a “real 60%” solution (I’ve taken the mean between the Global 60 (pseudo 70% exposure) and Global 40 (pseudo 50% exposure)).
don’t get me wrong, no one of us chatting here falls into the target group of Avadis. We should not become their customers But for a certain segment, I think they are still the best.
Just had a look at Investar and from a risk point of view, think they are still quite a nightmare. Truewealth has its issues as well. My biggest hope is that Findependent continues its journey (they are already fairly good now) and incorporates changes to their transparency, reporting, year end closure / tax reporting… and that they somewhen drop their pricing a bit. THEN, we have another great alternative for people that don’t want to Do It Yourself. Or, my second hope is that Vanguard somewhen wakes up…
Good point, had a look at Viac without Bonds. Personally, I use them with Bonds as well (yet on a bespoke asset allocation). Viac with Bonds certanly is the better benchmark.
When converting real estate to shares, I generally consider REIT as Shares and Swiss RE Funds as 40% Shares / 60% Bonds. That logic would slightly increase the performance of VIAC but they were still pretty much on par.
What we need to consider with Avadis is that they had a great year so far as they mainly hedge shares. Hedging Shares is net-net performance neutral; one year it pays off and the other it doesn’t. Avadis was just lucky this year
Correct, I do automatic monthly bank transfers to Avadis.There is zero trading cost (neither explicit nor implicit). That saves me from monthly investments. I then generally once a year call off the amount from Avadis, and invest it into individual funds.
The only important things:
i) Avadis does manual withdrawals- so I consciously don’t give them more than 1, max 2 withdrawals per year that they don’t face a cost challenge on me as a client. Pluse I keep some assets (20k or so) just so that they have a stable revenue stream from the TER I pay
ii) I respect dividend pay-out dates aka ensure that I receive dividends that I tax. If I kept calling funds right before dividend dates, that may trigger an issue as it could be considered both unfair to other avadis investors and might even constitute tax evasion
Based on your current asset allocation your expected return on wealth is probably ~1.6% due to having a lot of 2P and cash. In 17 years aged 65 you could reasonably expect to have ~1.5M wealth:
Applying 4% SWR rule you could count on ~60k income age 65 (in addition to Pillar 1 AVS).
If you move current 85k BTC and metals and 200k of cash to stocks you could have ~80k income instead of 60k. The trade off is you need to be able to tolerate more volatilty and risk before then.
If this is not enough you could try to save more. For example saving 2k per month instead of 1.5k increases your income to 86k
Once I do these back of the envelope calculations I fine tune asset allocation , risk tolerance etc.
Your second pillar has an expected return of 2.5% (long-term) and about 3.5% over the next 5 years. Compared to 4.5% with shares, this is fairly decent. This of course unless you don’t have a pension fund as such. If your employer selected an Insurance Solution - then you are screwed and you indeed struggle to make the 1%. But that is a very rare case…
Too low - with 450k of Second Pillar at age 48; he will probably have a final P2 balance of about 1M. Therefore, I would forecast about 50k from the second Pillar only. Then you take the remaining 3rd Pillar and Portfolio and on these, you apply the 4% rule…
I’m not very learned regarding pillar 2. The 3 funds I’ve been a part of all had roughly 1%, max 1.25% yield during the last 9 years, though it was a period of negative interest rate and I am expecting a better yield on a longer period of time.
What is the difference between the pension funds as such and the insurance solutions that you mention and how do you know if your employer’s pillar 2 plan is one of the former or of the later?
I would actually want to keep all BTC and metals for diversification. I believe in BTC, after following the developments for some years now. There is never total certainty, but neither is the stock market certain.
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But for a certain segment, I think they are still the best.
