VIAC hidden spreads

So I’ve tried this VIAC thing starting this year. Transferred money first business day of the year, a week later all of it got invested in my custom allocation with S&P 500 and, for lack of better choice, CSIF World ex CH, as my top holdings.

I’ve looked now at how my portfolio’s doing after another week now. Theoretically both of these two funds should have very similar performance as Switzerland is negligible in the world. World has some performance drag due to ex-US but not too bad. Both should be very positive after an extraordinary good week on the stock market. BUT that’s not what I saw on my portfolio report!

  • iShares Core S&P500 delivered +0.73% - ok, should have been >1% but maybe there’s a time lag in reporting
  • But the credit suisse’s fund CSIF World ex CH delivered -0.36% at the same time! For a difference of almost 1%!

Looking into trade details, I was charged whopping 0.90% more than Ausgabepreis for that fund on the day of the trade (according to http://www.fondscontainer.ch/vwdch/fonds_einzelkurs_history.htn?u=125&sektion=ueberblick&i=34089406) which is what caused the loss.

Anyone else feel like they are getting ripped by VIAC/CS here?

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  1. Take FX into account, VIAC displays everything in CHF.
  2. They charge 0.5-0.75% FX fees and 0.1% commission. So with 40% in CHF and 60% in other currencies, you end up with costs of 0.4-0.55%.

But I’m on your side. I’m still not 100% convinced that putting money into the 3rd pillar with such high fees in terms of TER/FX/commission/spread compared to VT will really result in a higher net worth at the end (taking also into account everything tax related).

Viac is the best of all bad solutions that we currently have, but nowhere near perfect.

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Yeah i suppose these extortionate FX spreads is why their S&P returned only 0.7% instead 1+% this week. But that credit suisee crap took a yet another 0.9% bite out of my money!

I’m moving out of Switzerland soon, so still even despite all these shenanigans it’s worth it as i’m saving over 30% in taxes.

But my opinion about viac definitely deteriotated fast now. They’re just as bad as all other swiss banksters. Unfortunately we’re all captive audience here

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Are you 100% sure about that? Could you write to Viac to confirm?

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I’ll need to look up and crosscheck the facts in more detail when I have the time, this was just a cursory first look.

Another thing I just noticed is they executed the CSIF World ex CH trade in USD even though the fund’s currency and Ausgabe/Rucknahme prices are all quoted in CHF according to fact sheet

Sad to see you go, but I guess your plan of emigrating to the US is coming into fruition?

Anyway, thanks for the tip. I personally never invested in any 3rd pillar, even though I have a high income, so in theory it should benefit me the most. I felt bad about it, since everybody was so positive about VIAC. But now I see that the jury is still out on VIAC superiority over “pay tax & buy VT”. I intend to stay long in Switzerland, probably even apply for nationality, so I would say goodbye to the 3rd pillar money for almost 30 years, before being able to pay out.

In the long run I’d expect it to be superior to investing in VT/VTI on IB as you save on dividend taxes recurrently every year, plus you save a lot on income tax in the year you buy in. Income tax savings alone is worth it if you want to take the money out within a few years - be it for emigration or towards own house.

It’s just I find all these transaction costs ridiculous and untransparent, whereas on IB (and pretty much all US brokers) trading costs are neglible today. But this is hopefully a cost you’d have to pay maybe 2-3 times * your capital, not recurrently every year.

What worries me too is the monthly rebalancing. This will result in additional costs due to those high FX fees and spreads.

Is it still worth it? Should we just pay more taxes and invest in VT?

I just wonder how big are the differences. If I invest for the next 30 years, every year the max amount in VIAC, how much better will I be off after that period? For a 5-10 year period the advantage is clear, because of the tax savings. But for a longer period it’s really hard to calculate. And I like to keep things simple and not manage 10 different investment schemes.

If you want to stay that long in Switzerland, you will probably want to buy a house/apartment right? You can take the money out from pillar 3a scheme every 5 years towards your own house’s downpayment or amortizing the mortgage without any strings attached. There’s no repayment obligations as with pillar 2 in case if you sell, so you get to benefit from tax savings while you stay in Switzerland, it’s like a free 20+% return on your money which is very hard to find elsewhere. While the money stays in 3a schema, you have a choice: keep it in cash or invest in stocks, that’s the part you have to decide for yourself whether to go with VIAC or not, whether you want to take the market risk or not…

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That’s a good point about buying the house. But at current prices, I would not even consider it. And I don’t know if I would really like to buy. I’m happy with paying rent.

You should start a chat with VIAC. They are really quick with a response and very competent in their answers - challenge them. As somebody here already mentioned, currently their offer is the best from what I see in the market.

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Let’s try it for 25 years. I will make the following assumptions:

VT return: 6.5%
VIAC return: 5.5% (0.5% TER, tax withholding, rebalancing costs)
Yearly contribution: 6826 CHF (I know it will increase) - 1.00% of that amount (FX fee, order costs, commission, spread)

VT: 413.800
VIAC: 354.200
Taxes saved (25%): 43.000
Paying taxes for withdrawal (6%): 21.000
Additional investments in VT of saved taxes: 103.300
Saved taxes on dividends and wealth: ~22.000

VT: 413.800
VIAC: 501.500

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I arrived at the same conclusion. If you are in a marginal tax bracket of 30%, then you are getting 2048Fr back by investing in a third pillar. Invest this and even a 1% difference in fees between Pillar 3a and normal investment accounts + the tax when you take it out (4-8% is a standard range, I think) doesn’t tip the balance in favour of not investing in 3rd pillar.

Of course Pillar 3a locks the money down for a potentially long time, which would be, in my opinion the main reason to not invest in it.

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I think the drag would be around 0.5 - 0.6 only. The US withholding tax will be removed this year for 3rd pillar. The impact is even higher if the 3erd pillar is invested in small-cap and EM with a higher expected return

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You still have 0.50% vs. 0.09% TER. Rebalancing monthly will also lead to additional costs for the whole portfolio due to FX fees, commission and higher spreads. So I will assume 1%/year, if it’s less, great! Makes it even more worth it.

I’ve asked into this round before about rebalancing experiences, but got no response.
I haven’t checked in the last months, but after about a year in Viac I did, and I noticed no monthly rebalancing had actually been done (at the time I had quite a few different holdings (Global)).
I therefore assume they have quite generous deviations before rebalancing, to avoid monthly mini-transactions.

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Yes, the call it “pooling and netting”.

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Thanks for the calculation! Geez, it seems like I’m really dumb not to have invested in VIAC the last two years. I guess I will finally do it. 100’000 CHF of potential cost for not doing it!

Yes, and we don’t know how the law will change. With capital that is already out of that system, you are more flexible. But then again, could they really screw it up so bad that you would become worse off?

Indeed. But as 3a pillar will be more and more important. They probably make this even more attractive by increasing massive the yearly limit (now at CHF 6’826). I don’t expect that they will change the money draw process within 3a, but maybe someday within 2nd pillar. So that you can’t chose to get the money fully out of the 2nd pillar and get paid a pension with the remains of your pension fund.

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