In fitness and strength training there is the saying „the best workout plan is the one that you are going to stick with“. While there might me plans that would result in significantly better results in theory, they won‘t work at all if the person doesn‘t enjoy it, is insecure or loses motivation fast.
Not everyone will agree with that but imo wealth below 9 digits (OK maybe 8 depending on the case) can be “self-managed” (with a bit of help, sure) and shouldn’t require anything that your average financial adviser and broker cannot provide (vs the obscene fees that private banks charge).
Fees don’t matter anymore once you’re in the 9-digit zone. Bankers then simply become another necessary annoyance among lawyers, service providers, family offices, corporate trustees, like parasites that feed on the back of larger animals.
There’s also the social aspect: similar to luxury hotels for instance, which above a certain threshold all provide the same kind of services and amenities, the only thing matching the price is the level of exclusivity (the “coma” club).
These fees seem quite high even on the range of private banking fees. CS charge me 0.85% “all in” fee including discretionary active management, custody and brokerage fees. Obviously excluding the TER of any funds in the portfolio, but about 40% is invested directly in the stocks/bonds, and most of the funds are active with lowish TER.
EDIT I did the maths, the weighted TER for all 21 fixed income positions is 0.16%, and for all 46 equity positions 0.18%.
Last 10 years it made sense for me, I didnt have time as I was busy turnining around a couple of businesses = very high risk portion of my investments. I was happy to leave the bank to manage a lower risk lower volatility balanced portfolio. Now I have a look to the pros and cons of DIY, with the help interalia of this site.
The Private Mandate All Instruments. Yes of course it’s discounted and a very low 7 figure sum. Negotiated together with a SARON remortgage. But UBS is fighting hard to get the business back and offering similar discounts. But, I do get the impression the banks publish a “rack rate” and woo you with 50% discounts. I might also just have a very good deal indeed.
Maybe I can use an opportunity and ask a question that wasn’t answered for me yet.
How easy it is as a regular person with a wealth of, say, 500k+ , get an access to shares of index funds (CS, Swisscanto) reserved for qualified customers? What would be other associated fees, like custody or management?
Indeed my thinking is heading towards a blended approach with more equities in the mandate (and alternatives - tbc) and get weighting of yield at super low cost in ETFs.
Alternatively “replicate” the mandate via ETF so the blended cost is lower, plus overweight along some thematic/sector topics that I believe in too.
At Swissquote at least some CS QB index funds seem to be available but with the note ‘Mindestzeichnung: 5’000’000.00 CHF’. I don’t know whether that’s a fixed requirement to get access to the QB fund class or whether that’s up for negotiation.
I wouldn’t expect any additional fees. Or did you mean the ZB fund classes? Those are reserved for institutional investors, as far as I know. I wouldn’t expect those to be directly accessible to private investors at all, at least not for anyone investing below 8 digits.
Just discovered https://volt.vontobel.com/ which is definitely not mustachian, but likely fees are lower than standard private banking. (It seems to be sub-1% all inclusive of TER + management)
(in case anyone wonders what the landscape looks like, I think people had thread about Alpian too before)
Haven’t followed the whole discussion, but I’m curious: What’s the value added of private banking compared to cheap DIY index investing?
Given that 99% of active management underperforms, I don’t buy into the idea of “access to exclusive investment opportunities” - that’s just marketing BS to me, trying to make me feel special (which I already do, no need to pay 1.25% for it ).
That’s more about Private Equity and other alternative asset classes to which you only have access to when you reach a certain portfolio size of a few millions/10s of millions.
In the future I can envisage hiring a bank to look after my finances and help with “inter-generational planning” once wealth grows and death or senility are imminent !
I‘m currently supporting a family member who inherited a securities account in a large bank (not in Switzerland) where she is served by Private Banking. Being neither interested nor motivated or very literate in financial things has kept a six-figure sum in cash/equivalents for the last (more than) ten years. Didn’t do or decide anything, basically.
I suggested asking her private banking advisor about index ETFs for EM bonds and global stocks, and recommended a particular global stock ETF that‘s actually offered by that bank‘s asset management division. 0.25% yearly expense ratio.
She quickly received a reply from her private banking advisor to prefer actively managed funds instead. And a counterproposal for two mutual funds at 1.45% and 1.61% yearly charges, respectively. Though that’s of course only after (not taking into account) upfront fees.
Had and voiced exactly the same thought as @xerox5003 yesterday (just not with VT in particular):
Would be fun to have these two investment proposals run head-to-head.
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