There has been a rush to set up trusts in Switzerland. But the regulatory environment is unclear and not all of these vehicles may be able to survive.
Abacus, Praxis, IFM - these are the names of trust companies establishing themselves in
One thing is clear. The ratification of the Hague Convention on trusts by
Andrew Cleeton of UK accountants Saffery Champness, which also has offices in
Other industry practitioners are less convinced. One issue is certainly staff related. “There is a clear lack of quality staff,” says Glenn Mellor, managing director of IFG (Suisse), a longer established trust company. This seems likely to continue even though there are more people registered to study for the Society of Trust and Estate Practitioners qualifications in the French-speaking part of
Daniel Martineau of Close Summit Trust in
That is why the industry has formed the Swiss Association of Trust Companies to bring together like-minded trust companies who adhere to a set of principals and values. This group does not admit just any applicant and has strict criteria to provide for a form of regulatory environment in the absence of any explicit legal framework. No-one wants excessive regulation, but the almost total lack of regulation in
“The barriers to entry are few and anyone can set themselves up as a trust company in
The Association Romande des Intermediares is a self-regulating body that concerns itself with preventing money laundering among financial intermediaries and trust companies. But it has no intention of getting involved in regulation of the Swiss trust industry and had no comment on the concept when approached by WealthBriefing.
This causes many practitioners to worry about the future reputation of the Swiss trust sector. There is certainly no obvious rush on behalf of the authorities to regulate it. “
It is fairly certain that regulation will come but will the Swiss authorities get to grips with the trust business before there is a problem and the attention of the world’s press is once again on the Swiss financial industry? The relevant Swiss Financial Regulatory body to deal with such issues is the Federal Banking Commission. However, emails requesting comment on potential licensing requirements for trust companies or any intention to regulate have gone unanswered.
One other question remains. How can these businesses all make money? It is a generally accepted fact of life that many trust departments of private banks are not profitable. The future for all these nascent trust companies appears uncertain and the rush to establish them could be followed by a wave of consolidation. No-one in the business wants to go on record as suggesting that the boom may turn to bust but there does seem to be a consensus that the rate of growth is not sustainable. “Of course a number of these companies will fail,” says an anonymous source.
On the other hand, there is certainly a future for trust companies in
Another potential direction is for the Swiss trust business is to move more up-market to become quasi family office operations, adding value and servicing the wealthier end of the market. That would be a logical development given the country’s large slice of the ultra high net worth market. But for now, Swiss based trust companies need the one thing that some of them may be here to avoid – a sound, non-intrusive regulatory environment. The only question is when will the authorities act?