ZURICH (Reuters) – Swiss personal financial institution Julius Baer (BAER.S) is shifting extra clients to a pricing system that expenses them a fixed payment for its providers as a part of a wider business effort to buffer towards uneven revenues.
In the previous, Swiss personal banks didn’t put a fixed price tag on their advisory providers for rich shoppers, however charged charges based mostly on transactions carried out for them.
These transaction charges have been as soon as the first supply of revenue for a lot of wealth managers, however banks at the moment are shifting away from setting charges for particular person transactions within the wealth administration enterprise. This is partly to meet new European Union guidelines referred to as MiFID II but in addition to shield them from occasions when shoppers are reluctant to commit to transactions.
“We are replacing volatile transaction fees with more stable advisory fees, and that certainly also benefits shareholders,” the group’s head of advisory options, Philipp Rickenbacher, advised Reuters in an interview.
Switzerland’s third-largest listed financial institution is looking for to shift extra clients over to the fixed charge pricing scheme launched in 2015. This is called a mandate mannequin, which replaces the earlier system that was based mostly on the frequency of transactions undertaken for patrons.
“We want to shift our customers worldwide over to mandate models,” Rickenbacher stated. “Probably not 100 percent (of clients), but certainly above 80 percent. Even 90 percent would be very feasible in the future.” To date the share of consumers within the new system has elevated to round 70 %.
Commission and payment revenue now contributes round 60 % of the financial institution’s working revenue.
At bigger rivals resembling UBS (UBSG.S) and Credit Suisse (CSGN.S) which have a better proportion of ultra-wealthy shoppers, mandate penetration stands at roughly a 3rd of wealth administration enterprise, in accordance to the banks’ monetary statements.
Roughly 50 % of Julius Baer’s shoppers have advisory mandates which give the client with the ultimate say on whether or not to proceed or not with an funding.
An extra 15 to 20 % are signed on to discretionary mandates, through which they delegate ultimate funding selections to the financial institution, to be executed based mostly on their basic preferences.
Its remaining 30 % of consumers both function largely independently, with the financial institution appearing as executor of requested trades, or maintain contracts predating the launch of Baer’s new mandates mannequin in 2015.
The mandate construction, through which clients’ rights and obligations are clearly set out, has additionally eased implementation of latest investor safety guidelines beneath MiFID II, Rickenbacher stated.
“The contractual framework allows us to implement requirements under MiFID II in our advisory process and ensure we meet the obligations,” he stated.
Writing by Brenna Hughes Neghaiwi. Editing by Jane Merriman