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High net worth Swiss investors are unsettled by the interest rate situation and the developments in financial markets. Many no longer know how they should invest their money, and do not expect to see interest rates rise before the end of the year. The majority of Swiss private banking clients are satisfied with fiscal policy in Switzerland. These are a few of the key findings of the LGT Private Banking Report 2016.
Under the leadership of Prof. Teodoro D. Cocca, the Department of Asset Management at the Johannes Kepler University in Linz was commissioned by LGT to conduct the fourth comprehensive study since 2010 of the investment behavior of private banking clients in Switzerland, Austria, and Germany. A representative number of high net worth investors were surveyed to this end in spring 2016.
Swiss private banking clients do not know how they should invest their money
According to the survey, only 10 percent of the Swiss high net worth investors think that interest rates will rise this year. 40 percent of Swiss respondents say that in light of low interest rates and the uncertainty in stock markets, they no longer know how they should invest their money. Although 37 percent of the Swiss survey participants are of the view that there is no alternative to equities in the current market situation, they have not increased their allocation to equities in the last two years. On average, equity allocation accounts for 44 percent and therefore remains unchanged compared to 2014. The overall asset allocation of Swiss respondents has also remained virtually unchanged. 25 percent of respondents feel that equities are currently overvalued. An even greater number of respondents feels that real estate is currently overvalued in Switzerland (52 percent). On average, Swiss respondents achieved returns of 2.1 percent in 2015, German respondents 5.3 percent and in Austria, 3.1 percent. 30 percent of Swiss respondents were satisfied with their performance (Germany: 65 percent, Austria: 19 percent).
Respondents satisfied with domestic policy and economy
The majority of Swiss respondents are satisfied with their domestic fiscal policy. A large number (58 percent) is happy to be able to pay taxes in Switzerland, and 38 percent are satisfied with the use of taxpayer money. The Austrians are significantly more skeptical in this regard: only 27 percent are happy to pay taxes in Austria (Germany: 35 percent), and only 7 percent of Austrian respondents are happy with the use of taxpayer money (Germany: 21 percent). An average score of 6.7 and 7.0 respectively on a scale of 1 to 10 indicates that respondents from Switzerland have a high level of trust in their domestic policy and their economy. Their trust in the banking supervisory authority and the banks in general is lower (average score of 5.3 and 5.0 respectively). The Swiss respondents are significantly more critical in their view of the European Central Bank (3.8), the global economy (4.0) and the global financial system (3.4).
The Swiss investors surveyed do not feel that the stakeholders in the sector have learned from the debt and eurocrisis. Only 12 percent feel that lessons have been learned from the past. However, only 24 percent expect the eurozone to break up.
Sustainability and returns compatible in the eyes of Swiss investors
Sustainable investments have gained in importance in the last few years. Increasingly, clients would like to invest their assets in environmentally, socially and ethically sound investments. 38 percent of respondents from Switzerland already take concrete ethical aspects into consideration when making investment decisions. 33 percent would like to increase the share of their sustainable investments in the near future. 49 percent of the Swiss survey participants would even forego returns in favor of sustainability. However, almost half thereof, namely 48 percent, assume that returns on sustainable investments are approximately the same as for traditional investments.
Use of technology on the rise, but personal contact remains important
New technological options are also becoming increasingly important in the financial sector: only 15 percent of respondents in Switzerland, Austria and Germany regard themselves as “digital deniers” who do not use online banking in any way. Over half of Swiss respondents like to use the opportunities for information and communication provided by the internet in their everyday lives (64 percent). It is important to 50 percent of Swiss that their own bank offers innovative online services. Around 46 percent can imagine conducting financial activities and investment transactions with their own bank primarily online. 29 percent of respondents have no trouble with the idea of receiving the majority of advisory services from their relationship manager online.
Of particular importance to clients is having access to safekeeping accounts, and being able to access information and place orders from home (Switzerland: 71 percent). Mobile access to safekeeping accounts is significantly less relevant, particularly for Swiss investors (Switzerland: 22 percent, Austria: 47 percent, Germany: 32 percent). The age gap identified in past years in terms of the use of new technologies is visibly diminishing. Nevertheless, a personal relationship remains important in private banking – over half of respondents from Switzerland wish to continue to discuss investment options and place orders directly with their relationship manager (60 percent).
Satisfaction with own bank on the rise
Good news for the banks: in the last two years, the satisfaction of Swiss bank clients has once again risen. A large number (83 percent) states they are satisfied or very satisfied with their primary bank (2014: 81 percent). 60 percent even say they are enthusiastic about their primary bank (2014: 57 percent). The online banks have the greatest number of satisfied clients (96 percent), followed by private banks (90 percent). The lowest levels of satisfaction are attributable to the big banks (78 percent).
Investors’ most important advisory need remains achieving better investment returns, followed by advisory services that ensure discretion, as well as being transparent and comprehensible. For many years now, the former has been one of the key objectives in the provision of banking advice, which, also for many years now, has not been sufficiently met, irrespective of market developments.