Swiss banks court rich Americans a decade after tax drama

[ZURICH] Ten years after a booming business with discretion-minded US clients cost Swiss banks billions of dollars and put an end to Swiss banking secrecy, the world's private banking hub is looking to reestablish ties with American customers.

Facing a highly competitive and largely saturated Swiss market and sluggish growth prospects in Europe, Swiss money managers are now courting wealthy Americans who might be seeking to invest some of their cash abroad. More billionaires hail from the United States than from anywhere else.

Vontobel, for example, is to buy rival Lombard Odier's international portfolio of US-based clients with 1.2 billion Swiss francs (S$1.65 billion) in assets under management as it expands in the region.

That will boost the 2.4 billion francs Vontobel's own North American-focused Swiss Wealth Advisors now manages.

"North America is one of our focus markets in which we intend to achieve above-average growth," Georg Schubiger, head of Vontobel Wealth Management, said on Friday.

The bank aims to manage 5 billion Swiss francs for US private banking clients, Chief Executive Zeno Staub said.

UBS, Switzerland's biggest bank and the world's largest wealth manager, has maintained a large US presence even after US$780 million in settlements with US authorities over undeclared assets US clients had held with the bank.

It books onshore business for North American clients in offices in New York and across the country, accounting for roughly half the bank's wealth management business.

UBS, like other Swiss money managers, is looking to court US expats as well. After merging its North American and international wealth management businesses this year, it sees opportunities with US customers living and booking money abroad.

The bank is expected to announce more details at an investor day on Oct 25.

Size matters now that special regulations from US authorities - particularly the Foreign Account Tax Compliance Act and also from the Securities and Exchange Commission (SEC) - have made offshore business with American customers more complex.

"As a rule of thumb, you need about US$2 billion in managed assets, which is quite a lot for small banks in a single market," Ralph Kreis, director of consulting firm AlixPartners, said.

Business below that threshold is worthwhile only for institutions focusing on a specific segment or particularly profitable customers, he added.

Many banks have faced challenges in building or rebuilding business with US customers, Kreis said.

This has dissuaded major private banks -including Switzerland's second-biggest, Credit Suisse, and third-largest listed bank, Julius Baer - from offering wealth management services within the United States.

While the US domestic private banking market is largely dominated by local players like Morgan Stanley, Bank of America Merrill Lynch and Wells Fargo, Swiss banks see lucrative opportunities in courting Americans seeking to do safe business offshore.

Very wealthy individuals tend to diversify their assets over several regions, and Swiss banks see a role in offering tax-compliant investment opportunities in a stable country with a crisis-proof currency.

"We offer a safe haven," said Vontobel manager Patrice E Humbel, responsible for the US market.

"Two-thirds of our customers have European DNA. They are Germans, Italians, French or Swiss who are first-, second- or third-generation US citizens."

Above a certain size, banks need a licence from the SEC to be able to offer investment products to US citizens.

"In Switzerland, there are about 40 to 50 firms with this licence," AlixPartners' Martin Buechel said.

That number has roughly doubled over the last four years, said Anne Liebgott, a consultant who provides information for Americans seeking Swiss wealth management services.

For practical and regulatory purposes, many banks separate their US business into distinct units that operate independently and offer tailored products.

Geneva-based private bank Pictet said it now manages US$6.2 billion in assets out of its Pictet North America Advisors division, while UBS subsidiary Swiss Financial Advisors said it manages around 5 billion Swiss francs.

REUTERS