Ain’t no mountain high enough to keep Swiss regulated wealth managers from the US taxpayer market
The US authorities' post-financial crisis clampdown on overseas tax evasion sparked a deeply troubling period for Swiss wealth managers. Despite the headline-grabbing backdrop of indictments, closed banks, government-brokered negotiations, and ongoing market ructions, however, Aite Group research identifies a significant growth in the number of Swiss wealth managers that have registered with the SEC in order to serve US taxpayer clients in line with US authorities' demands. These firms recognize the huge potential value of serving the US taxpayer market and have made a strategic investment in the tools, knowledge, and processes needed to pursue the opportunity, according to Aite Group's new report, Offshore US Private Wealth: Switzerland's Compliant Re-Engagement.
The report is based principally on quantitative analysis of March 2013 submissions to the SEC. Aite Group supported that quantitative data-gathering and analysis process with secondary market research across various other resources, such as market-sizing studies, government updates, and a small number of primary research interviews with Swiss RIA firms and other private-client professionals.
With US$14.1 billion in assets under management (AUM) garnered so far, the market has grown significantly in a few short years but has reached just 0.07% of all North American high-net-worth household assets. This research identifies five areas of opportunity where this sector can pitch its proposition and further grow its asset base. Aite Group believes a collective segment AUM of US$50 billion should be the mid-term target, while in the long term the segment should aim high, for US$100 billion.
While Switzerland has been in US authorities' firing line since UBS was indicted in 2008, that difficult period, still not all played out, is winding toward a conclusion. Switzerland's US-compliant wealth managers, prepared and eager to re-establish their jurisdiction's reputation, have a potentially unique opportunity to forge an internationally market-leading position: As a result of the painful process it has been through with the United States, Switzerland is now the leading compliant international offshore center for US private wealth. It must take advantage of that opportunity, as well as the internationalization of the US investor, before others join.
"While Switzerland's ongoing entanglement with US authorities over past tax-evasion misdemeanors has caused pain to many in the Swiss market, a core group of Swiss-based wealth managers realized and acted upon the resulting opportunity. In line with the new model of engagement, they obtained SEC-registration as investment advisors and collectively have a weight to potentially turn this hugely negative period into a long-term positive for Switzerland’s wealth management sector," says Stephen Wall, senior analyst in Wealth Management at Aite Group.
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