Wealth Management in Switzerland 2009

Table of Contents

OVERVIEW

• Catalyst
• Summary
• Methodology

EXECUTIVE SUMMARY

• Switzerland is at the center of changes in the international wealth management business
• Swiss investors have acted more defensively over the past months
• There are important differences in Swiss HNW attitudes that wealth managers need to cater for
• Wealth managers need to consider the overlooked area of advisory services and step up the frequency of their client contact

SPECIAL FEATURE: THE END OF AN ERA IN GLOBAL WEALTH MANAGEMENT?

• Switzerland is at the center of changes in the international wealth management business
  • Economic circumstances are driving a re-examination of global wealth management practices
  • Increasing wealth in non-Western markets is fuelling growth in wealth management in those countries and in the process creating a more competitive international wealth management landscape
• UBS has been damaged by a number of difficulties but is still standing
  • There is no doubt that the image of UBS has been tarnished by the bank' s troubles
  • Wealth managers in Switzerland do not believe that UBS has been irretrievably damaged
• There are unique opportunities for wealth managers to profit in this new environment
  • These opportunities should be explored at the same time as wealth managers work to lift brand, image and reputation
  • Wealth management opportunities in a downturn need to revolve around boosting the company profile
  • The onshore market for wealth management remains significant and unaffected by challenges to the Swiss banking model
  • The structure of the wealth management industry in Switzerland may be set to change
  • Expansion abroad is a key strategy for developing the wealth management business
  • It is the end of an era for wealth management but there is still a leading role for Switzerland

SWITZERLAND' S WEALTH

• Swiss households play it safe but still manage to increase their net financial assets through savings growth
  • The financial assets of Swiss households increased at a slower rate during 2007
• Swiss household balances have moved away heavily from equities and mutual funds
  • Swiss households show an inclination toward more safe investments
  • The Swiss Exchange lost less value than other European exchanges in 2008
  • Wealth Data in 2009

THE SWISS HNW INVESTOR

• Swiss investors are cautious and need guidance from their wealth managers
  • Swiss investors are most likely to have cash holdings as their financial investment
  • Over the next two years, investors will cautiously start to return to asset classes currently out of favor
• Swiss HNWs demonstrate an appetite for risk but are demanding in terms of the standard of wealth management service
  • HNWs exhibit an above average appetite for risk but are more confused about the impact of the market turmoil on their investment portfolios
  • Swiss HNWs are demanding in terms of standard of wealth management service
• Faced with uncertainty, Swiss HNWs want to understand their investments
  • Clients are clearly seeking guidance from their wealth managers

THE SWISS WEALTH MANAGER' S VIEW

• In two years' time, HNWs will still need some guidance from their wealth managers across a range of investments
  • Several fundamental products and services will be in demand from HNWs in the next two years
  • Within an overall desire for guidance from their wealth management service, Swiss HNWs are still likely to be seeking less risky products in two years' time
  • There are three key areas where wealth managers are focusing their resources in two years' time
• Wealth managers must pay attention to brand, image and reputation, and develop personal relationships with clients as these are the key drivers of HNWs' choice of wealth management service
  • Wealth managers can proactively enhance their level of personal service to help the image of the firm
  • Wealth managers in Switzerland see personal relationships as their biggest strength and service quality as their biggest weakness
• Swiss wealth managers need to convince clients that the company is financially sound, and give them several points of contact
  • The key to increasing share of wallet is to assure clients that the company is financially sound
  • Wealth managers need to give clients several points of contact within the bank in order to be successful at retaining HNW clients
• Wealth managers in Switzerland are more likely to talk their clients daily than other European wealth managers, with investors mostly wanting to talk about the performance of their portfolio
  • Swiss clients are being contacted by phone more frequently than in other countries
  • Swiss wealth managers are also good at getting in front of their clients
  • Overall portfolio performance is mostly what Swiss HNWs want to talk about when they speak to their wealth manager

APPENDIX

• Definitions
• The drivers of growth in the wealthy population
  • Income growth (combined with inflation, changes in GDP by sector, household savings rates and debt levels)
  • Investment returns (market capitalization, interest rates and bond yields)
• The following measures are not, in themselves, drivers of wealthy population growth
  • Market capitalization
  • GDP
• The following measures are not drivers of wealthy population growth except under very restricted circumstances
  • Primary residence value growth
  • Inheritance
• Methodology
  • Wealth Management Market Leaders Survey 2009
  • Global Wealth Model
• Definitions
  • Western Europe
• References
• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: Wealth managers' views of UBS' s wealth management services
• Table: Wealth managers' views of UBS' s wealth management services
• Table: Wealth managers' views of UBS' s wealth management services
• Table: Wealth managers' views of strength and weaknesses of UBS' s wealth management services
• Table: Personal disposable income per adult in Europe, 2004 - 08 ($)
• Table: Household savings rates as a percentage of disposable income, 2004 - 08
• Table: Swiss household balances, 2007 - 08 (€ m)
• Table: Market capitalization of European and US stock exchanges, 2004 - 08
• Table: What proportion of your HNWs' portfolios is allocated to the following five asset classes?
• Table: HNWs' portfolio allocation now versus in two years' time
• Table: HNWs' portfolio allocation by product area now versus in two years' time
• Table: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)
• Table: HNW attributes on a scale of 1 to 4 (1 = very low, 2 = somewhat low, 3 = somewhat high, 4 = very high)
• Table: What are HNWs demanding today?
• Table: In two years' time, how much demand do you expect from HNWs for the following product areas?
• Table: What product areas will your wealth management service focus most resources on in the next two years?
• Table: What will determine HNWs' choice of wealth management service over the next two years?
• Table: What are your company' s biggest strengths and weaknesses today?
• Table: What is the most effective means of increasing share of wallet today?
• Table: What is the best way to retain clients today?
• Table: On average, how often do your relationship managers speak by phone to each HNW client?
• Table: On average, how often do your relationship managers speak in person to each HNW client?
• Table: When speaking with clients, what do they most want to talk about today?

FIGURES

• Figure: UBS' s brand, image and reputation has suffered as a result of the turbulence
• Figure: UBS is perceived as having a more limited product range but is stronger in its advisory service
• Figure: UBS' s wealth management operation is most let down by the quality of its relationship managers and their depth of relationships with clients
• Figure: Switzerland consistently has one of the highest savings rates in Europe
• Figure: Swiss household balances have moved heavily away from equities and mutual funds
• Figure: The Swiss Exchange lost a lower percentage of its market capitalization than other European exchanges
• Figure: The majority of HNW wealth in Switzerland is invested in the ' cash or near cash' asset category, with this accounting for 25% of all investments
• Figure: Over the next two years investors will move away from those assets currently more in favor
• Figure: In 2011, the majority of high net worth assets in Switzerland will be invested in the ' Equities' category, with this accounting for 23% of all investments
• Figure: HNW investors in Switzerland have a lower risk appetite than the average European HNW investor
• Figure: There is a lower risk of HNW clients in Switzerland leaving to find another wealth manager than the average European HNW investor
• Figure: In Switzerland, HNW investors' greatest demand is for simple, transparent investments
• Figure: In two years' time, the greatest demand amongst HNW investors in Switzerland will be for infrastructure funds, with 23% of HNW investors demanding this category of product
• Figure: Wealth managers in Switzerland will be focusing most of their resources on direct equity investment in two years' time
• Figure: HNW investors in Switzerland are most influenced by brand, image and reputation in their choice of wealth manager
• Figure: The greatest strength of wealth managers in Switzerland is their personal relationships with clients
• Figure: The best way for wealth managers in Switzerland to increase share of wallet is to convince clients that the company is financially sound
• Figure: The best way for wealth managers in Switzerland to retain HNW investors is to give the client several points of contact within the bank
• Figure: In Switzerland, wealth management relationship managers speak to clients by phone approximately once a week
• Figure: In Switzerland, wealth management relationship managers speak to to clients in person approximately once a quarter
• Figure: The majority of clients in Switzerland want to speak to their wealth manager about the performance of their overall portfolio