5 Reasons to Open a Swiss Account

Want to move some of your money out of the US, so you’re diversified globally?

Switzerland remains one of the most popular destinations to do just that.

How much money do you need to create an investment account in Switzerland?

That’s a question that comes up constantly in my consultation service. And the answer is changing…

For years, I’ve recommended several Swiss investment managers who specialize in American clients. “Specialize” is the operative term here: thanks to Congress’ discriminatory attitude toward Americans who invest or live abroad, taking on American clients is almost as complicated these days as serving Russians. Swiss firms who do so must go through an extensive regulatory compliance process with the US government, know IRS rules back to front, and maintain absolute adherence to US reporting rules.

All that requires a degree of specialization that justifies creating a company just to handle us Yanks. As you can imagine, that’s an expensive exercise. Swiss firms who do this business have overheads that others don’t.

For more than a decade, the smallest account balance Swiss investment managers would handle was $500,000. Last week, it rose to $800,000. As the CEO of one firm explained to me, since their profits come from a percentage of assets under management, it simply isn’t possible anymore to provide investment services to Americans for less than that.

Note that this requirement includes Americans who have residency rights in Europe. Even if you live in Switzerland itself, that blue American passport you have is what makes you a more expensive client to serve. By contrast, people without US citizenship can invest for far less.

This is not the end of the story, however.

One thing many people I speak to don’t realize is that their investment balance doesn’t have to be spare cash. It can come from their retirement savings.

For example, let’s say you have an IRA with $1.5 million worth of assets. No major IRA custodian in the US will let you invest that money offshore. But a niche group of IRA providers offer self-directed IRA products (SD-IRAs) that let you do just that.

Swiss investment managers know this. That’s why all the ones I work with have strong relationships with US IRA custodians who offer self-directed options. If you approach one of these Swiss companies, they can help you organize a rollover of some or all your existing retirement funds to one of their US partner custodians. You don’t really have to do anything yourself.

In this way, Americans with reasonable retirement savings can easily open Swiss brokerage accounts. The question, then, is why should you?

Here are five reasons.

1. Geographic diversification. A Swiss manager can build meaningful exposure to European, Asian, and emerging-market companies rather than defaulting to a US-heavy portfolio.
2. Currency diversification. Assets denominated in Swiss francs, euros, sterling, and other currencies reduce reliance on the US dollar and provide some protection if the dollar weakens.
3. Reduced single-country risk. Holding assets outside the US limits exposure to its political decisions, fiscal problems, banking system, and (often insane) market valuations.
4. Access to different investment opportunities. Foreign markets offer industries, dividend strategies, infrastructure investments, and companies that are poorly represented—or unavailable—in US markets.
5. The Swiss Way. A typical US wealth manager asks, “How can we generate competitive returns in dollars?” A traditional Swiss wealth manager asks, “How can we preserve purchasing power across currencies, markets, political systems, and generations?”

That last point is critical. The American wealth management mindset is to make the biggest returns possible. If you’re lucky, that manager will adjust those returns for risk. By contrast, the Swiss are all about preserving and growing wealth in a way that avoids catastrophic losses.

For example, Swiss managers will usually focus on inflation plus objective. Americans, on the other hand, measure themselves against a US-focused stock market index benchmark. Their incentive structures reinforce this. American wealth managers get rewarded if they beat the index, even if the following year their clients’ fortunes evaporate. Swiss managers are often compensated based on multiyear performance.

Of course, “Swiss” doesn’t automatically mean conservative, independent, or superior. Some Swiss banks are aggressive sellers of proprietary funds, structured products and expensive investment mandates. Fees can be higher, and a prestigious name on the building doesn’t guarantee good portfolio management.

Nevertheless, dollar for dollar, I’d put my money in Swiss hands rather than American nearly every time. The fact that they’re asking for a bit more of that money to get started doesn’t change my mind one bit.

If you’d like to take advantage of the opportunities of Swiss investment, book a consultation with me, and let’s get started.