Why people paying fee for custody or wealth management , when you can buy low fee index fund etf by yourself ?

[Martin Everson]

denniz07 said:
By the way, if you would have to choose ONE private bank, which would it be? I mean there is UBS, Julius Baer, Pictet, BNP Paribas, and so on.
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BNP Paribas.

denniz07 said:
How about this strategy. Let's say you have a net worth of 10MM$
1. 2MM to Swissquate
2. 2MM to SAXO
3. 2MM to INKB
4. 4MM to some private bank
Click to expand...

Sounds ok

denniz07 said:
On the broker side, you would pay much fewer fees and if something goes wrong, you would have still access to your money.
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You do realize you can have a private bank account and buy investments via a discount broker like IBKR and DFP them to your private bank. That way you don't pay crazy trading fees. However your still likely to pay anything from 0% - 0.25% for custody fees annually.

denniz07 said:
Maybe I read too much here, but it seems there are cases where bank accounts are blocked until you prove your source of wealth, and that might take a lot of time and energy.
Click to expand...

This would have been established from outset. Your more likely to be blocked once in a while if you deviate from what you initially said to bank, do high risk payments or live in a medium to high risk country.

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[JohnnyDoe]

denniz07 said:
How about this strategy. Let's say you have a net worth of 10MM$
1. 2MM to Swissquate
2. 2MM to SAXO
3. 2MM to INKB
4. 4MM to some private bank

By the way, if you would have to choose ONE private bank, which would it be? I mean there is UBS, Julius Baer, Pictet, BNP Paribas, and so on.

The reasoning behind it. On the private bank account, you would get some advice. But guess the advice wouldn't be any different if you had all the money in the private bank account. On the broker side, you would pay much fewer fees and if something goes wrong, you would have still access to your money. Maybe I read too much here, but it seems there are cases where bank accounts are blocked until you prove your source of wealth, and that might take a lot of time and energy.

PS: I'm not trying to optimize everything. It is ok, to pay a bit more for a good service. Actually just searching for a solution to sleep well.
Click to expand...

Since you are going totally random, you will do better at literally throwing darts.

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[denniz07]

JohnnyDoe said:
Since you are going totally random, you will do better at literally throwing darts.
Click to expand...

Lol, actually just looked up the "biggest" brokers. Excluded derigo, since it is bounded to a currency. It is not about fees in that case, since they are all much cheaper than private banking. It is more about having a "backup" if something goes wrong with the account. Got a lot of question from every broker

IBKR - still pending
Swissquate - pending as well
SAXO - more responsive maybe they will be the fastest one

Martin Everson said:
You do realize you can have a private bank account and buy investments via a discount broker like IBKR and DFP them to your private bank. That way you don't pay crazy trading fees. However your still likely to pay anything from 0% - 0.25% for custody fees annually.
Click to expand...

Didn't though about it, but don't see any benefit if the fee in IBKR is 0%. Actually, the plan is just buying some long term ETF's and trying not to touch it.

Martin Everson said:
BNP Paribas.
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Thanks a lot for the hint! Will try to onboard. Got rejected from julius baer. Actually they apologized, since they said that the compliance is just not ready.

 

[rowena]

denniz07 said:
How about this strategy. Let's say you have a net worth of 10MM$
1. 2MM to Swissquate
2. 2MM to SAXO
3. 2MM to INKB
4. 4MM to some private bank
Click to expand...

The custodian structure already protects you from risks. You can simply go with 1 private bank and 1 broker.

denniz07 said:
By the way, if you would have to choose ONE private bank, which would it be? I mean there is UBS, Julius Baer, Pictet, BNP Paribas, and so on.
Click to expand...

No one of them. They're highly focused on selling bulls**t wealth management products. Go with a bank that is focused on self trading like Standard Chartered. Even if SC fails, your assets will return to you.

denniz07 said:
On the broker side, you would pay much fewer fees and if something goes wrong, you would have still access to your money.
Click to expand...

Not really.

denniz07 said:
Maybe I read too much here, but it seems there are cases where bank accounts are blocked until you prove your source of wealth, and that might take a lot of time and energy.
Click to expand...

If you have $10M without a source of funds then you're already in trouble. It doesn't matter whether it is a bank or broker. It is only a matter of time.

 

[troubled soul]

rowena said:
No one of them. They're highly focused on selling bulls**t wealth management products. Go with a bank that is focused on self trading like Standard Chartered. Even if SC fails, your assets will return to you.
Click to expand...

If somebody want only self-directed option without AUM fees ? Is It possible ?
Like person account at USB and use only self trading platform without paying custody fees?

 

[rowena]

azb1 said:
If somebody want only self-directed option without AUM fees ? Is It possible ?
Like person account at USB and use only self trading platform without paying custody fees?
Click to expand...

Not possible especially with UBS.

 

[denniz07]

In the context of FTX default. Is there a way to get proof of custody from banks? Like the bank really holds my ETF in custody. I mean we are not in crypto here and I would assume that UBS and co do their job. There are a lot of small private banks, how do you know that the ETF or Stock is really bought and isn't lent out by the bank?

 

[wheelspin]

denniz07 said:
In the context of FTX default. Is there a way to get proof of custody from banks? Like the bank really holds my ETF in custody. I mean we are not in crypto here and I would assume that UBS and co do their job. There are a lot of small private banks, how do you know that the ETF or Stock is really bought and isn't lent out by the bank?
Click to expand...

read their terms and condition. They have fully to disclose if they borrow your funds or not.

 

[denniz07]

wheelspin said:
read their terms and condition. They have fully to disclose if they borrow your funds or not.
Click to expand...

what if they lie?

 

[Martin Everson]

denniz07 said:
In the context of FTX default. Is there a way to get proof of custody from banks? Like the bank really holds my ETF in custody. I mean we are not in crypto here and I would assume that UBS and co do their job. There are a lot of small private banks, how do you know that the ETF or Stock is really bought and isn't lent out by the bank?
Click to expand...

Good question. Best way is to bank with a bank that is a prime broker and have the assets registered directly in your name. This can be done for i.e European ETF's by your private bank acting as your sponsor to hold funds in your name rather than street name. Most super rich do it this way for obvious reasons. That's pretty much only way you can guarantee the funds are unencumbered and there.

However this opens an issue with the actual ETF itself. ETF's often do stock lending. They may not even hold the stock they say they do and instead hold collateral given in exchange for the loan of the stock to a third-party. Think along lines of FTX giving your assets to Alameda research and getting some collateral back in return. A lot will depend on quality of the collateral given etc....lol.

https://www.etf.com/sections/features-and-news/securities-lending-good-etf-investors
P.S Thats why I was always a bond investor and never an equities investor. Once you understand how it all works you really know how much of a house of cards it all is.

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[denniz07]

For anyone interested so far. Just my exprience with UBS so far. The only bank I'm kind of onboard. Not even sure if it is "private banking", but if the "director" of wealth management takes time. It should be it.

What I liked:

• They really take time for you and you get fast appointments
• They offered some good fix term deposit conditions. Could selelct the bank with the highest rate for a month. The bank was kind of solid, as far as I understand
• They offered a GOAL Kick-In product. Like tet's say you want to buy apple and a limit price of 20% lower than the current price. Then you can get kind of a contract where you get pretty high interest. If the stock falls under 20 % than you have to buy. Guess it is fair, if I want to buy it anyway.

What I didn't liked:

• They offered kind of strange Redeption Forward contract to transfer USD to CHF. I said I want to wait a bit. But they really tried to sell it. I highly doubt that this is the right way to do it. With some weird kick and strike price. Didn't want to get into it.
• They indroduced their msci swiss funds. Pretty sure that there are better products.

Some other exprience from Rotshild. Not on board yet. They kind of constructed an example portfolio for me.

• Some selected US stocks like MSFT, LINDE, Amazon, Nike with about 2% weight. Not sure why to do this..
• Some selected Swiss stocks like Roche, Nestle, and so on. Weight was pretty high for them like 5%
• Some selected Europe stocks like Ferari - but low positions
• Funds/ETFs: SPDR S&P U.S. Energy Select Sector UCITS, SPDR S&P U.S. Industrials Select Sector UCITS, iShares Core SPI ETF, iShares MSCI World Health Care Sector ESG, Invesco S&P 500 Equal Weight Technology ETF, Veritas Asian Fund, JPM Global Emerging Markets UCITS ETF ESG
• Rotshild products...: Cert ZKB on Rothschild & Co Swiss Small and Mid Cap Conviction, LongRun Equity Fund

Also here. It may seem like a nice selection. They kind of showed the exposure to europe, swiss, usa, asia and so on. Good overview. BUT it is really unlcear, how high the fees are. If the funds are really good, or if a competitor might be better. Also maybe not exprienced, but I would say a portfolio with 1-4 ETF's could get the same return.

 

[Jerry1911]

denniz07 said:
Also maybe not exprienced, but I would say a portfolio with 1-4 ETF's could get the same return.
Click to expand...

Correct. I would never invest in any of those stocks/ETFs myself and I'm pretty sure no one else here would either. Just go with MSCI World, S&P 500 or build your own portfolio as someone here already mentioned (one decent blue chip from each industry).

Last edited: Nov 23, 2022

 

[denniz07]

Jerry1911 said:
Correct. I would never invest in any of those stocks/ETFs myself and I'm pretty sure no one else here would either. Just go with MSCI World, S&P 500 or build your own portfolio as someone here already mentioned (one decent blue chip from each industry).
Click to expand...

Exactly. I mean on the other hand, maybe I'm missing something. Like the right structure for TAX and so on. Like what to do with withholding taxes. Maybe in that kind of stuff a private bank could really help, to avoid stupid mistakes. But anyway, guess execution only might make sense. Although expensive. Like pictet 0.3% custody fee and something like 0.7% execution fee. Maybe this is the way to go. So far maeki-baumann might onboard me. They have a bit cheaper execution fee. But still not sure if it is worth it, since they are small and the risk of default is higher.

 

[Jerry1911]

denniz07 said:
Like the right structure for TAX and so on. Like what to do with withholding taxes. Maybe in that kind of stuff a private bank could really help, to avoid stupid mistakes.
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Perhaps they could help with estate planning as Martin mentioned earlier. When it comes to taxes, however, I think it's better to just directly talk to a tax attorney.

 

[backpacker]

denniz07 said:
anyway, guess execution only might make sense. Although expensive. Like pictet 0.3% custody fee and something like 0.7% execution fee. Maybe this is the way to go. So far maeki-baumann might onboard me. They have a bit cheaper execution fee. But still not sure if it is worth it, since they are small and the risk of default is higher.
Click to expand...

Go with "execution only". Once you have been a client with the bank for a while and get a better feeling about their internal procedures you can still switch to wealth management.

From my point of view it is sufficient to pick a handful of blue chip stocks (leaders in each sector) and just keep them (buy-and-hold). Start searching in markets which do not have dividend withholding tax (e.g. UK registered companies that operate globally / US companies that fall under the 80/20 rule / globally or regionally operating large Brazilian or Hungarian companies if you like high volatility ....).
Only if you have something very exotic in mind (i.e. investing in markets or sectors that are difficult to access) an ETF or mutual fund might make sense. Note that even the relatively low fees of an ETF will eat into performance over time.

For the main part of your portfolio choose bonds. That is the strength of Swiss private banking. Fees for bond purchases are very low, the bank makes its money with custody fees. So, a private bank is a good partner for OTC bond trading (mostly cheaper than Swissquote).
You should actively ask for the private banks' offering with regards to fiduciary deposits. The offered counterparty should be a well known international bank, at least A+ rated. This option should be available for both call and term. This way you also reduce risk significantly since you can spread your money easily and do not hold too much cash with your own bank.

Out of curiosity: What fee structure did Maerki Baumann offer (custody fees in specific)?

Last edited: Nov 24, 2022

 

[denniz07]

backpacker said:
OTC bond trading
Click to expand...

Actually just wanted to buy and hold strategy. Was not sure about bonds. Would maybe buy iBoxx $ High Yield Corporate Bond ETF

backpacker said:
You should actively ask for the private banks' offering with regards to fiduciary deposits
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Exactly, this is what UBS offered. In my case they choose Sumitomo MITSUI, hope it goes well, although they are not A+ but for a month it is fine I guess. 4% intrest rate - 0.375% fees.
But here again, I guess an IB01 ETF might even be better. Yield would be kind of the same and risk is lower, since the ETF invests in Tbills. Of course doesn't make sense with the high execution fees.

backpacker said:
Out of curiosity: What fee structure did Maerki Baumann offer (custody fees in specific)?
Click to expand...

Custody
< CHF 500'000 0,50 %
< CHF 1'000'000 0,40 %
< CHF 5'000'000 0,30 %
> CHF 5'000'000 0,25 %
Additional 0,3% for digital or metals ex. gold.

Execution fees stocks and bond's nearly the same. Percentages in Switzerland / Foreign.
< CHF 50'000 1,00 % 1,25 %
< CHF 100'000 0,90 % 1,15 %
< CHF 200'000 0,80 % 1,00 %
< CHF 500'000 0,50 % 0,60 %
< CHF 750'000 0,30 % 0,40 %
< CHF 1'000'000 0,25 % 0,35 %
> CHF 1'000'000 0,20 % 0,30 %

Actually I liked Maerki Baumann, they were kind of fast. Just a bit small and systematic not relevant compared to UBS.

 

[backpacker]

denniz07 said:
Was not sure about bonds. Would maybe buy iBoxx $ High Yield Corporate Bond ETF
Click to expand...

Bonds make sense if OTC trading fees are significantly lower than stock trading fees.
With a buy-and-hold strategy you buy the bond and only pay the purchase fee. You than cash in the interest over the bonds entire term and later, once the bond matures, you get back the nominal without paying anything.
With a bond ETF it is paramount to pay attention to the management fee! It can be quite a significant drag on your overall performance. And whenever you sell the bond ETF (and at one point you will want to do that) you have to pay stock trading fees for it's sale again.

denniz07 said:
In my case they choose Sumitomo MITSUI, hope it goes well, although they are not A+ but for a month it is fine I guess. 4% intrest rate - 0.375% fees.
Click to expand...

Maerki Baumann should be able to offer something similar. It is actually standard business for private banks to offer fiduciary deposits.
Do take note that the fee is pro rata temporis, so this is always much more attractive than any ETF on Planet Earth under the same conditions is able to produce. The fee should also be inverse to the invested amount, you should be able to get a lower pro rata temporis ”Šfee the higher the amount you deposit into a fiduciary term account or fiduciary call account.

denniz07 said:
Custody
< CHF 500'000 0,50 %
< CHF 1'000'000 0,40 %
< CHF 5'000'000 0,30 %
> CHF 5'000'000 0,25 %
Additional 0,3% for digital or metals ex. gold.

Execution fees stocks and bond's nearly the same. Percentages in Switzerland / Foreign.
< CHF 50'000 1,00 % 1,25 %
< CHF 100'000 0,90 % 1,15 %
< CHF 200'000 0,80 % 1,00 %
< CHF 500'000 0,50 % 0,60 %
< CHF 750'000 0,30 % 0,40 %
< CHF 1'000'000 0,25 % 0,35 %
> CHF 1'000'000 0,20 % 0,30 %

Actually I liked Maerki Baumann, they were kind of fast. Just a bit small and systematic not relevant compared to UBS.
Click to expand...

Thank you for the fee schedule. I think their prices are competitive for the Swiss private banking market.
The only thing what surprises is that, as you say, "... execution fees for stocks and bonds are nearly the same ...". Are you sure? OTC bond trading fees should be much lower than for stocks ... .

Maerki Baumann is a well known Swiss private bank. Quiet. No scandals. Out of the eyes of the general public. That's how it should be with a private bank.
Forget the big players. Too complicated, too much bla-bla, always trying to sell some junk and tons of scandals.
Since you want to invest your money into fiduciary deposits and securities, it is not with the private bank. So, systemic relevance does not really matter here.

 

[JohnnyDoe]

Guys, please remember that all the banks and brokers work in the same way, they always did and they will always do. You are just constantly fooled in slightly different ways.
This is the best explanation:

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@JohnnyDoe ”“ Your #1 Source for Guidance in Different Offshore Fields​

 

[denniz07]

backpacker said:
The only thing what surprises is that, as you say, "... execution fees for stocks and bonds are nearly the same ...". Are you sure? OTC bond trading fees should be much lower than for stocks ... .
Click to expand...

Just took one more look on the pricing. They are the same for T > 365.
You get a discount for short term bonds. Makes sense.
Restlaufzeit 180 Tage bis 365 Tage 50 % MIN 0,20 %, resp. CHF 120.”“/180.”“
Restlaufzeit <180 Tage 75 % MIN 0,20 %, resp. CHF 120.”“/180.”“

backpacker said:
Maerki Baumann is a well known Swiss private bank. Quiet. No scandals. Out of the eyes of the general public. That's how it should be with a private bank.
Click to expand...

Sounds good. I mean the only thing is, they are involved in crypto. Although I'm in crypto, I'm kind of careful with banks who are involved in crypto. Anyway would say UBS is more trustworthy, since more money and systematic relevant.

 

[backpacker]

denniz07 said:
Just took one more look on the pricing. They are the same for T > 365.
You get a discount for short term bonds. Makes sense.
Restlaufzeit 180 Tage bis 365 Tage 50 % MIN 0,20 %, resp. CHF 120.”“/180.”“
Restlaufzeit <180 Tage 75 % MIN 0,20 %, resp. CHF 120.”“/180.”“
Click to expand...

Odd. This is not attractive. It should not be like that.
If you still want to continue your research, check the francophone banks (Genève and Vaud) again. They differentiate between OTC bond trading, stocks and mutual funds.

Last edited: Nov 24, 2022