Over the holidays, I got to talk with someone from my extended family who told me he received a windfall about two years ago (around 250k) and invested it with one of the big Swiss banks with a wealth management mandate. He’s already 71, doesn’t need that money and wants to pass it on to his two children when he’s passed away.
A few months ago he started realizing how expensive that solution is (1.25% per year, excluding TER). So he wants to do something about it.
He has no knowledge about investing or what actively and passively managed funds are. So asking him to open a Swissquote account and buy index funds would not be something he’d feel comfortable doing. He wants things taken care of and isn’t interested getting to know the world of investing.
What would be the “least shitty option” here? A robo-advisor like TrueWealth? You simply open an account, answer a few questions about situation and goals, transfer all the money to a Swiss bank account, and you’re done. It would basically be the same thing he has today, just with massively lower fees.
They are always option even in the same bank. Some banks are offerings indexed funds with lower cost.
He could also buy an ETF on the market through the bank. He could simply remove the mandate and keep the fund.
Maybe when next talking to the bank client advisor, complain a bit about the high fees and ask to be moved to lower fee products. Withstand the bank’s almost certain to be expected talking points about those higher fee products generating higher returns.
If the person wants to put in a little extra effort: get offers from competing institutions with the explicit ask to want to lower fees. The person can still go back to the original bank and show them the competing offers and ask for something more reasonable at the original bank.
I’m not up to date but I would search among the likes of Selma or Truewealth. VIAC and Finpension are developping solutions for taxable investments so they might become an option in the future (VIAC apparently in 2024).
5 out of 6 stock funds invest in more or less the same Swiss companies, Nestlé alone is about 10% of total portfolio value, Roche and Novartis surely take up not much less than 10% each as well
The biggest problem I see is lack of diversification in international stocks.
It is possible to invest everything in just one fund from the same Raiffeisen, if he prefers. After that, no intervention is needed if his goal is just to keep these money growing for a foreseeable future.
Any big Swiss bank will be happy to sell him their shitty funds.
The problem seem to be rather to convince him to have a more diversified holdings.
Furthermore, it should be possible to deal with e.g. Swissquote like with a traditional bank. For example, they have an option of placing orders by telephone calls, with completely non-mustachian fees.
P.S. I will add Vermögenszentrum as a potential financial advisor. Should work for him.
Why not consider the Rio investment solution from the same bank in this case? It’s a cost-effective digital robot, providing a more affordable alternative while maintaining the current banking relationship if satisfied.
Another question would also be to know the performance achieved during this period. While the fees may be high, if the results are positive, why replace someone who has their habits?
I don’t think so. When I told him that I see this as a problem he reacted in a “oh ok, so let’s change that” way. As I said, he’s a total noob, so it was most likey just a inept bank client advisor who just asked “global or Switzerland” without explaining. Most people (with the same level of knowledge) would probably pick Switzerland in this situation.
This crossed my mind as well. I don’t know if he does the rest of his banking with Raiffeisen as well (likely, hence why he brought the windfall to them). If he doesn’t, why not switch to another bank/product entirely? Rio still has a 0.65% management fee, and their semi-passive index funds have a whopping 0.77% TER. Only marginally better than what he has now.
It appears that the fund management fees range between 0.2% and 0.3%. It is true that thematic funds have higher fees, around 0.6%, according to information from the bank’s website.
In this way, and with non-thematic funds, the fees are still 60% lower, which is an improvement over the current offer. However, there is room for further optimization by completely changing banks or by using digital solutions.
Then I must have looked up the wrong funds under “Anlagezielfonds”. But I can’t find in what funds Rio actually invests. Very intransparent. Why do they need to hide this?
Apparently, they seem to be using Vontobel funds based on online research. However, the exact details of these funds remain unknown.
I find this lack of transparency unfortunate and don’t understand why these pieces of information are being concealed from clients in this manner.
It’s not the best solution, but he can simply keep the current funds and stop the mandate.
I wanted to say that he could also ask to buy a low cost ETF at Raiffeisen but they charge 1% per transaction…
Also if you take another bank, transfer the ETFs to the new bank, do not sell the with Raiffeisen
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