After a surge in compliance headcount, wealth planning now seems to be the new growth area for Swiss banks. Although the business is not new – like compliance before it – wealth planning has become increasingly important in recent years, boosted in particular by moves towards tax transparency, legislative changes, falling financial returns and increased client demand for this kind of service.
Wealth planning looks at all legal and tax issues that may affect a client's wealth. "A Knight Frank study concluded that the two factors that affect wealth the most are death and taxes," says Bertrand Binggeli, Co-Head Tax and Wealth Planning at UBP. His team has tripled in size in the last five years and now consists of 15 people, with six in Geneva and the rest divided between Zurich, Hong King and Singapore. His aim is to "ensure the best possible legal situation for clients to preserve and pass on their wealth".
When clients decide to move to a new country, get married or retire, those decisions can have a major impact on their wealth. For example, if a client decides to retire to Portugal, the decision must not be based solely on the ordinary cost of living, but also on the tax regime including inheritance tax and taxes on investments. Situations can quickly become complex. "Today's clients want us to adapt to a new environment in which family members live in different jurisdictions, and that will be even more the case with the next generation."
Things are complex enough if a family is split between two jurisdictions, never mind several, and especially given increasing legal instability. Tax arrangements that have been left untouched for decades, such as the double tax treaty between Switzerland and France on inheritance tax, are being scrapped almost without warning. This sometimes leads to punitive tax rates. There are plenty of examples. Belgium's version of withholding tax was 15% for a long time, but has now been increased to 30%. Similarly, a Swiss resident owning a property in London was not previously liable for inheritance tax if it were left to a relative in direct line. Today, the tax rate is 40%.
As a result, Bertrand Binggeli must work with his international partners constantly in order to monitor developments, anticipate changes and give the best advice to clients, since tax is increasingly eating into their returns. "We focus on after-tax returns. As well as key life events such as marriage and inheritance, we also look at all tax issues relating to financial transactions. That includes choosing the best time to make an investment, or the best vehicle. Tax can seriously affect returns, both for international clients and those resident in Switzerland."