What is HSBC’s strategy in Switzerland? 

Patrick Brusnahan speaks to Alex Classen, CEO HSBC Private Bank (Suisse) & country head Switzerland, about the state of private banking in the country and what has changed recently

Patrick Brusnahan

What is the state of private banking in Switzerland at the moment? How has it changed in the last year?

Alex Classen

Swiss private banking remains a very solid and attractive brand in the global marketplace. COVID impressively shows how quickly things can turn upside down, and how important it is to have one’s assets in a safe location. Switzerland remains a location of choice for many wealthy clients. We enjoy an almost unparalleled combination of a broad range of investment products and services, a high quality of service, professionalism and discretion, along with economic, political and currency stability.

What are Swiss clients interested in? What products or investments?

Over the past decade, extraordinary developments have forced many clients to rethink how they have managed their personal wealth. The major trigger for this has likely been the Great Financial Crisis and the subsequent monetary policy response by global central banks.

Clients have become much more cognisant of risks and focused on their portfolios and its performance. They are looking diligently at wealth preservation as well as income generation. This stems from the renewed understanding that markets can have extraordinary unpredictability, with a higher focus due to the very low rate environment and spread compression seen in several markets, which has made obtaining yield and return targets much more challenging.

Capital market assumption data clearly shows a steady decline in expected returns across most asset and sub-asset classes. As forecasted return expectations have declined in traditional investments and correlations have converged, investors are also actively seeking exposure to private markets and alternative investments as well as emerging markets.

This has led to greater attention on diversification and asset allocation and for many clients venturing out to, adding to their portfolios, markets and asset classes they had not had in the past. Asset allocation and portfolio construction has therefore become a major focus as well as the acknowledgment by many clients that discretionary mandates need to be part of the solution.

In parallel, other structural trends and shifts have surfaced or become more relevant. These include investment and allocation to opportunities in Chinese capital markets, and the growing importance of sustainability allocations in portfolios. We have seen a trend towards uncorrelated asset classes and private markets, where clients are able to access non-public opportunities which may lead to a better return profile. This trend has also been reinforced by clients who feel public markets have become expensive.

Switzerland has a unique position in the world of private banking, how do you utilise that?

In 2019, banks in Switzerland managed a total of CHF3.7trn ($4bn) of private wealth, some 62% of which was held by beneficial owners domiciled abroad. This means that Switzerland continues to be the global market leader in cross-border wealth management, with a market share of approximately 25%.

This market leadership and Switzerland’s adherence to international tax transparency standards certainly helps attract new assets in a virtuous circle of client servicing and investment returns generation. HSBC’s Swiss Private Banking unit is able to leverage a global network of booking centres and benefit from referrals from other parts of the HSBC Group banking activities.