BUILDING NEW LIFE IN SWITZERLAND

Thriving

You are now fully settled and even greet your neighbours with “Bonjour” “Gruetsi” or the occasional “Buongiorno”. Now might be a good time to review your overall financial situation, especially if some of the questions below remain unanswered. As Financial Planners our job is simply to:

1. Help you reassess your Future Financial Goals (protecting your family, saving for your children, securing your retirement, buying a property)
2. Understand your current path
3. Build a plan for you to help you achieve those goals
4. Help you Implement the plan
5. Keep you on track and assist you with your questions on an ongoing basis.

Email, call or meet us face to face (we can keep our distance, and just wave)! We would welcome the opportunity to bring you clarity to your situation.

In Switzerland, like any developed western country, the emphasis over the past years has shifted from Financial Optimisation to Tax Optimisation. With financial markets increasingly complex and volatile, financial crises have increased uncertainty around growing one’s assets. Tax savings are legal means to grow your assets without carrying investment risks. With the right tax advisor and financial advisor, tens of thousands can be offset from your tax bills on a yearly basis. It’s easy when you know how.
Find out exactly what all this means for you personally.

“Ignorance is bliss”, but at the same time “ignorance of the law is no excuse”. Too many foreigners plainly assume because their properties abroad are taxed there (rental income tax property tax) they do not need to declare it in their Swiss Tax Returns. Whilst if as late as 2017 it would have been difficult for the Swiss Federal Tax Authorities to know if you have assets in a foreign country, now with the AEOI (automatic exchange of information) it no longer is. You must declare your entire worldwide assets. This said, there are many opportunities available to lower your taxable income.
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This is the story of a letter that comes to your home once a year (by legal obligation) from Axa, Swisslife, Helvetia, Zurich, or another workplace pension provider out of the 1’550 pension foundations in Switzerland. It is your second pillar pension statement: there are a lot of numbers and very few clear explanations. You place it carefully in a file or drawer, with the intention to revisit the document at a later stage “when you have more time”. But his scenario repeats itself every year. Sound familiar? Your workplace pension is the foundation of your financial planning and a crucial resource which allows you to understand your potential for tax-efficient savings, how well you and your family are protected in case of death or disability, and how generous your employer contributions are. Employers often considers themselves generous, but the figures don’t lie. Also, once you can read your statement and understand it, you will be able to do so every year (unless you change company as the layout and information provided can be significantly different).
Find out exactly what all this means for you personally.

When changing job, especially if it happens quite regularly, your pension does not always automatically follow you, particularly if you have been working for small to mid-sized companies. There are easy steps to make sure everything runs smoothly – don’t worry, your pension is never lost and in the worst-case scenario a call or email to the 2nd Pillar central database will turn up any misplaced pension. Also, you should not assume there is only one option when changing employers. Multiple solutions are available to you, especially if you have been lucky enough to build up a significant pension pot above the mandatory contributions. Taking control over your pension, reducing management fees, bringing transparency to the management of your pension, and reducing taxes on exit, are several of the options available to you depending on where your next job takes you.
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You have now been in Switzerland for a while, worked for several employers and every month you can see 5.275% has been religiously deducted from your pay check. Bar the salary certificate you receive every year for tax purposes you have not been made aware of what this deduction entitles you to. You are entitled to unemployment benefits, disability benefits and pensions benefits, but when and under what circumstances? And how do you access these benefits when appropriate? And more importantly, how much are you entitled to? Also, wouldn’t it be comforting to have a summary document confirming your entitlements already acquired?
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Annual account fee, annual platform fee, Custodian Fee, Transaction Fee, Investment Management Fee / Account Servicing Fee; these are only some of the fees relating to having an investment account.
Entry fees (front-end load fees), Exit fees (back-end load fees), Annual Management Charge, Administration Charge, Performance Fee; these are some of the fees related to having an investment in the form of a mutual fund. Investing through your bank in mutual funds can cost you dearly (and their subsequent performance by no means always justifies them). Investing DIY on a budget platform through ETFs might leave you exposed if you lack time to manage your portfolio and/or experience. The right balance might well lie in the middle depending on your objectives. Finding the right vehicle for you is the first step, followed by the right investment mix – but first and foremost, you deserve transparency on what you are paying for and for what reason.
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Switzerland’s home ownership rate is around 35% (60% in the UK). Whilst many dream to own their own home, it is not an easy goal to achieve. The country has put many rules in place to protect itself against property bubbles – and it is working: 80% maximum loan to value, a 33% affordability rate, a 5% fictitious interest rate for calculation purposes, conservative property valuations from the banks, maximum 65% loan to value to remain by the time the mortgage holder is 65 years old (or within 15 years of purchasing the property). Withdrawing funds from a Swiss pension has been used (and sometimes abused) by citizens to help achieve property ownership but steps have been taken to restrict this approach over the past few years. An affordability calculation is the basis for granting a mortgage. The processes used by banks and insurance companies are practically identical. Even though interest rates are currently low, a long-term average rate of between 4.5% and 5.5% is generally used when calculating the maximum mortgage. The purpose of this professional pessimism is to protect prospective homeowners against putting too much strain on their finances and to take account of difficulties that may arise from changes in the market environment.
Whilst accessing the property ladder has become much harder, the dream is still within reach with proper planning. You cannot escape from reality, but you can control it.
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Being able to pass the test of the “affordability ratio” is only the first step. Choosing which bank is best able to provide the service, support and above all the lending rate that will make the difference is the next step. You also must consider whether a fixed rate, a variable rate, or a SARON (ex-Libor) rate with or without cap / floor is the most suitable option for you. Understanding the risk and making this decision for yourself in an informed way is paramount. Too often your “bank advisor” (who advised you initially) has left the bank and you are left with the consequences of your decision. Advice is not about telling you what to do but helping you understand the positives and negatives of each option available so that you are able to make up your own mind. Proper and responsible guidance is needed to go through this process.
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Firstly, congratulations – when you reach this stage, it means you are part of the select group of property owners in Switzerland (a third of households). Your “home sweet home”, in addition to providing you with security and a sense of belonging, can now also be used as an effective means by which to reduce your tax burden. Below are some of the main ways you can reduce your tax burden through your property: from 60% (and above) valuation for wealth tax purposes, the use of third pillar A and B for indirect amortization, the deduction of interest repayments from your income tax, the deduction of “maintenance work” from your taxable income each fiscal year, the deduction of “house improvement work” from property capital appreciation when the time comes to resell. Unfortunately, you also have to consider the “fictitious” rental value of your property, calculated by the canton and considered as income (often far lower than the reality of the rental market). As you can see, there is much you can do but also challenges to deal with.
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What is your ultimate objective? Do you require liquidity and easy access? What is your investment horizon (2 years, 5 years, 10 years) What is your tolerance for risk? (which is rated by looking at your attitude to risk and the expectations you have for your investment returns). What is your capacity for risk? (which is based on your current financial situation and the time frame over which you want to invest). What is your overall experience in investing and knowledge of investment products. These are questions that must be answered before considering any investment. Once the risks and opportunities have been fully explained and you go into them on your own terms and the strategy set-up, finding the appropriate platform and portfolio is the easy part of the job.
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As a parent, taking care of our children is our priority. Making sure we provide them with the education they need to succeed in life as best we can is our duty. Imagine:

• you save on a monthly basis for your child / children
• you deduct your savings from your taxable income (therefore reducing your taxes)
• you are guaranteed to never suffer from negative growth (you might not earn much more than 3%, but you will never lose money)
• your next of kin are guaranteed the desired savings total at maturity in case the worst happens to you (death or disability).

Such solutions do exist in Switzerland and can be provided to parents committed to their children’s future. You can even finance it with allowances received by the Swiss Government (child allowance).
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There are more than 70 authorized healthcare insurance providers in Switzerland, and we are only talking about basic healthcare coverage, with many more offering supplemental private coverage. Each has variations in pricing, coverage and deductibles. Choosing health insurance for yourself is difficult, and more so when insuring the entire family. To top it all, basic healthcare premiums are planned (planned or expected?) to double by 2040. The pace of inflation in healthcare insurance over the past years has been disconcertingly steep (with dental care a separate category of coverage ). It is important to pick the right healthcare provider early on as you benefit from a better pricing structure as a loyal client than by switching regularly. Is it time to review, or not?
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You first arrived in Switzerland on your own, then your family joined you. You moved home, you got a promotion, had a new baby and your life began to settle in Switzerland. Does this scenario seem familiar? Over time, you have accumulated many different policies from different providers – you pay your premiums regularly but you have never revisited your level of coverage because you don’t have time and frankly it’s a little boring. It’s in the back of your mind, on your “to do list”, but you never find the time / motivation to actually get around to it. The industry has evolved significantly over the past couple of years and the power of the internet has provided wonderful tools to manage your insurance portfolio efficiently and with “minimal headache”.
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Company level: In Switzerland, Wealth Managers dealing exclusively with investments tend to be regulated by an SRO (Self-Regulated Organisation), under the authority of FINMA. Financial Planners have a wider scope to consider when advising their clients, such as pension planning, education fee planning, insurance needs, mortgage advise and wealth planning. Financial Planners tends to be regulated by both SRO (for Anti-Money Laundering purposes) and directly by FINMA (they have their own FINMA number). In both cases (Wealth Management and Financial Planning) Professional Liability insurances must be put in place to protect clients from being given incorrect advice.
Individual Level: all recommendations provided must be provided / approved by a member of the organization holding Swiss IAF, Direct FINMA Registration (as a Registered Adviser), AFA certification, and a CICERO number.