Digital wealth managers, also referred to as robo-advisors, are an emerging trend in Switzerland, with now more than a dozen of homegrown options for customers to choose from. Despite slight differences between one another, these providers all promise the same benefits: easy access through digital platforms, and lower costs than traditional wealth managers.
Moneyland.ch, a Swiss online comparison platform, has recently released a comprehensive overview of Swiss robo-advisory services, delving into the different options available and how they compare to one another.
According to the analysis, Switzerland is now home to 13 Swiss native robo-advisors provided by both traditional financial institutions (e.g. Clevercircles by Bank CIC, Digifolio by Basellandschaftliche Kantonalbank (BLKB), and Raiffeisen Rio by the Swiss banking group) and digital-first challengers (e.g. Descartes Finance, Findependent, and Inyova Impact Investing).
These solutions provide somewhat the same services, focusing primarily on passive investment products like exchange traded funds (ETFs). Portfolios are constructed based on a customer’s risk tolerance and investment horizon which are assessed after the investor completes a questionnaire. Portfolios are typically rebalanced whenever the financial market or a customer’s life or goals change.
One of the advantages of robo-advisors relates to the passive role of the investor, who may not want or cannot afford ongoing personal monitoring of their portfolio development. These automated investment services also allow for attractive returns with low starting capital, low fees and without specific investment know-how, which is in contrast to classic investments offered by traditional banks.
Depending on the amount invested and the client’s profile, Moneyland.ch estimates that the cost of using a Swiss robo-advisor can be up to ten times lower than that of the most expensive private banking service.
Looking more deeply into the fees charged by Swiss robo-advisors, the analysis found that all charge a flat fee that’s equal to a percentage of managed assets. This fee generally covers brokerage fees, transaction fees and custodial fees, and varies from one provider to another.
With a flat fee of 0.44% per year, Findependent was found to be the cheapest option. Findependent is followed by Descartes Finance, SimpleWealth and True Wealth which charge a flat fee starting at 0.5%. This fee decreases as the investment amount increases.
Flat fees charged by Inyova Impact Investing, Clevercircles, Raiffeisen Rio, and Selma Finance run in the 0.6%-0.68% range, while Digifolio, PostFinance E-Wealth Management, SaxoSelect and Swissquote each charges 0.75% per year.
Volt by Vontobel was found to be the most expensive Swiss robo-advisor, charging a flat rate of 0.96% per year for an investment of up to CHF 100,000. The rate decreases to 0.8% per year for investment starting from CHF 500,000.
On top of the yearly wealth management fee, product issuer fees also apply. These typically range between 0.14% and 0.3% per annum, but can go as high as 0.6% for some products. Robo-advisors may also charge stamp duties, foreign currency charges, stock exchange levies, product fees, tax directory fees and value-added tax (VAT).
Selma Finance and Inyova, a robo-advisor that focuses uniquely on impact investing, were found to have one of the lowest investment minimum investments at CHF 2,000, though the lowest min. investment on the market currently has Findependent with as little as CHF 500.
The Swiss robo-advisory market in 2022
With more than CHF 600 million in assets under management (AUM), True Wealth is the largest robo-advisor in Switzerland, followed by the Swissquote Robo-Advisor, with CHF 511 million, according to the analysis.
Swiss financial firm VZ Vermögenszentrum operates a digital wealth management offering that currently manages more than CHF 2 billion in AUM. The solution was not included in the analysis because it is not considered as a robo-advisor per se.
AUM in the robo-advisory segment in Switzerland are projected to reach US$5.85 billion this year, according to Statista, which, when compared to the CHF 2.79 trillion domestically managed by the Swiss asset management industry in 2020, is rather negligible.
Further showcasing Switzerland’s relatively small robo-advisory sector, is the low penetration rate of these services. A 2021 survey conducted by Swiss banking technology provider Avaloq, which polled 1,430 investors across 10 countries in Europe and Asia, found that, compared to other markets, including Germany, France and the UK, Switzerland was a slow adopter of robo-advisors, with just 8% of Swiss respondents indicating investing via robo-advisory platforms, against 17% in Germany, 10% in France, and 14% in the UK.
Despite the slow uptake, Statista estimates that AUM in the Swiss robo-advisory sector will show an annual growth rate of 31.13% between 2022 and 2026, and reach US$17.32 billion.