3 Investment Plan B Lessons Learned in Switzerland
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Contents
- What Makes Switzerland Unique?
- If You Signed up For My Notes from the Field Series...
- 3 Big Trends from my Recent Trip to Switzerland
- #1: Politics has turned against free and open markets
- #2: The US already has de facto capital controls
- #3: Planning is now highly personalized and driven by experts
- Next Stop: Vienna, Austria
- Need Help?
One of the best things about spending time outside your borders is the opportunity to see things differently. You not only get the value of shaking up your routine, you also get exposed to new ideas and different perspectives.
When it comes to investing, I appreciate the Swiss perspective because of their international experience and expertise. That’s hard to match anywhere else.
What Makes Switzerland Unique?
In short, it comes down to a few key factors.
First, Switzerland is an island of pragmatic capitalism surrounded by a sea of socialism… and somehow, they’ve not only managed to survive, but thrive in this environment. As big parts of the world shift further to the far left or far right, there’s a lesson to be learned there.
The country is still the place you go when you want the safe place to hold your assets. They attract wealth from all over… not just the US.
During my visit, I had the opportunity to learn the latest asset protection strategies being used by Latin Americans, Asians, Africans, Middle Easterners, Western and Eastern Europeans too.
And although many of those insights might not be directly relevant to me right now (we work almost exclusively with US clients), it helps me understand the bigger picture… a picture that, sooner or later, will affect our US clients.
In this article, I’m going to share a few of those insights…
Recommended Reading:
If You Signed up For My Notes from the Field Series...
… you will have already heard some of the following. But I’ve also tried to add a bit of nuance I haven’t covered before.
So with that said…
3 Big Trends from my Recent Trip to Switzerland
#1: Politics has turned against free and open markets
It’s become a global phenomenon. Claudia Scheinbaum’s victory in Mexico (very lefty). France’s decision this past weekend to give a big parliamentary election victory to a far-left coalition. Even Britain’s new (centre-left) Labour government wants to tweak the way free markets are supposed to work.
While globalization has its costs, 30 years of it has raised billions out of poverty and raised the standard of living all over the world. But the pendulum has swung the other way. Globalization and free trade are in reverse.
Not only is this going to make many people poorer, but it will make it harder for the average investor to benefit from a system that has served them very well for decades.
Rather, moving forward, the big gains will come from connections. And generally, more wealth equals better connections equals better opportunities.
That may be unfair, but that’s how it seems to be shaping up.
#2: The US already has de facto capital controls
So does Canada for that matter. In fact, many supposedly “open” countries make it hard to move capital outside their system.
How? By piling up on the legal and regulatory paperwork needed to take on foreign investors. KYC (Know Your Client) and AML (Anti-Money Laundering) Compliance issues make it harder to open foreign accounts in the first place.
There’s foreign reporting compliance that American clients must agree to before a Swiss bank will take your money. This increases costs to the bank but also to you in the form of extra accounting fees.
It’s very difficult to put outside cash into the system. Bring a pile of paper currency into a bank and you’ll see what I mean.
Licensing and regulation for service providers has tightened up greatly, further adding to costs.
And structures — especially foreign structures — mean yet even more paperwork and compliance.
The result of this “death by paperwork” has been three-fold.
First, many banks won’t deal with Americans any more for any price. They don’t want the hassle.
Second, the banks and asset managers that stayed in the game have had to raise the minimums they need to take on an account. In Switzerland, it’s rare to find anyone to take on your business for any less than $500,000. And even then, the “preferred minimum” is usually $1-2 Million.
(It wasn’t that long ago that $250,000 or even $100,000 was the standard. Mark opened his first Swiss bank account in the 1980s with just $2,000.)
Third, all this compliance puts off investors. Not long ago, a client of ours wanted to set up a Swiss investment account using his (US) trust. The trust owned a domestic (US) holding company. The investment would have been made from the holding company.
The application forms added up to 106 pages.
Now, I don’t want to scare anyone off. But you’d have to be blind not to see the troubles in our country and the threat to your wealth. It makes a lot of sense to get at least a portion of your wealth outside the US — even if just precious metals that come with lower minimums.
But the trend is clear… more compliance, more rules, higher minimums.
As is usually the case, existing accounts get grandfathered in. It’s the new ones that have to put up with all the rules.
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#3: Planning is now highly personalized and driven by experts
In my third installment of my Notes from the Field series, I wrote:
When I first got into this business almost 15 years ago, I (naively) bought into the idea that there was a “best” of anything. Best passport, best residency, best bank etc.
But a person’s situation matters more. There are only things that are “best” for them. And even then, it’s not really “best.” It’s more what’s “best for their situation right now.” Things happen and life changes. Parents pass, children grow up, grandchildren are born. On the regulatory, tax, and compliance side of things, rules come and (if we’re lucky, sometimes) go. Income and assets ebb and flow.
The best planning (and advisors) are constantly adapting to the new situation. A good plan has to be flexible enough to change as time goes on. It can’t be static or it becomes less useful or even useless.
I can tell you for a fact that there are a variety of banks that will accept US clients — we’ve helped them do it. But if you contact them directly, they may deny it (or just ignore your inquiry entirely.)
There are international brokerage services that will let you trade on your own account — an industry that was mostly closed to US clients entirely a decade ago. But you’re unlikely to ever find them.
I know of a legal way to avoid most foreign reporting requirements on bank accounts and foreign holdings that would normally fall under FATCA reporting requirements. It’s just that the structure required to do it has to be built around you. There’s a lot of compliance issues. It’s not cheap. And there’s simply no way to buy one out of the box.
We’ve worked with people who have been able to get residency to European countries in a matter of days instead of months.
None of these opportunities are available to the general public. You get access to these through companies like ours — where we get to know you, present you to a service provider, and use our reputation with them (and the provider’s trust in our own due diligence processes) to get the accounts opened.
This points to the larger trend — off the shelf offshore planning rarely works anymore. Every plan has to be highly customized to fit your needs. Because it’s not just about the plan; it’s about the connections needed to implement that plan.
Yes, information services can make you aware of the options out there. They can help you understand the pros and cons of different options. But the Plan Bs that work in today’s market are crafted and executed by experts to fit your needs.
Next Stop: Vienna, Austria
As you read this, I will very likely be in meetings with private banks and private storage vaults in Vienna.
Need Help?
If you are interested in seeing if The Nestmann Group could be your partner in building your own international Plan B, please feel free to book in an appointment with one of our Associates. You can do that here.
About The Author
Need Help?
We have 40+ years experience helping Americans move, live and invest internationally…
Need Help?
We have 40+ years experience helping Americans move, live and invest internationally…
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