There are so many issues right now for clients and we have a
duty as a private bank to address these topics and come up with
possible answers.
Our position with regard to US citizens and
securities is a good example of this and has attracted some media
attention in recent months – we advised all of our clients to sell
their US securities because of concerns of the regulatory risk with
regard to the US Estate Tax Act.
Go deeper with GlobalData
American inheritance tax is levied on the
‘estate’; that is, the physical goods, such as property, goods and
chattels, and securities. If they are US securities, then they are
liable to tax, regardless of the final domicile or main place of
residence of the deceased.
US securities are basically defined as
securities issued in the United States, such as the stock of
American companies like Apple, General Electric or Pfizer and US
funds and US bonds, in particular Treasury bills. American
inheritance tax law makes specific reference to both US citizens
(including, particularly, US citizens resident abroad) and
‘non-resident aliens’. These latter are foreigners with no
permanent residence in the United States; in other words, all
non-Americans in possession of US securities!
Indirect exposure to the
US
If you have clean portfolios, you
are no longer exposed to this kind of risk. This does not mean you
lose exposure to the US equity market, because you can substitute
that for indirect exposure through ETFs and mutual funds.
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By GlobalDataOn top of that, there are questions over
whether it is a good idea to have a strong exposure to the US
market. There are other regions in the world that are more
attractive, so we have increased exposure to other markets,
including Asia and Latin America.
People are seeing from this situation that
Wegelin is a little different and has adopted a clear view on the
US. We have been heavily criticised by some of our colleagues for
taking this stance, but we’re standing by the decision and counting
on the fact that having a first mover advantage is better than not
adopting a clear position. My view is that for the very small
number of US clients we have, there has not been a huge impact on
the business.
There is talk in the industry that a few of
the banks in Hungary are not QI banks, meaning some clients may go
there, and there are others in Dubai and in Moscow. But still,
there are only a few banks left in the world now who are dealing in
this kind of way.
Family office launch
We recently opened up a family
office services and advisory unit in Lausanne which Pascal Cettier
is in charge of. There used to be a team of four people there and
now we have 10. We are making good progress in terms of assets and
they have many client interviews, so I’m pleased to see the
progress we are making. It’s really an interesting concept in that
we are not operating our own family office, but we have a dedicated
team working for family offices.
There are so many conflicts of interest if you
try to offer these as a bank. The main conflicts obviously are
selection of products. If you are in the UBS family office, then I
guess sooner or later you will use their products. It may even be
the case that they are the best products, but there is the
suspicion that if you are being put into them, this is a biased
opinion. There is also a case for manager diversification.
If you are at a family office you should
diversify investment managers, maybe one to Pictet, one to an Asian
bank. If you are an in-house manager at UBS then it’s more than
natural that you end up with UBS as your own and unique investment
manager or a disproportionate share to what you would do if you’re
independent. There must be a reason to have an in-house family
office and that reason is because they would like to do business
with you.
There is no official threshold for the family
office business at Wegelin, although the industry standard is CHF50
million ($49.7 million). The case for us is different in that we
are not a family office but we’d like to have family office
clients, so if they give us CHF5 million or CHF10 million that’s
fine for us. ’
Dr Adrian Kunzi, a managing partner at Wegelin
& Co.
