03/01/18

FATCA: Swiss Advisers on Life After.

(International Adviser) -- Five years after the US introduced stringent regulations that required foreign financial institutions to report the assets of US-domiciled clients, Swiss IFAs tell International Adviser the move has created greater specialisation across the industry and is still having an impact.

In February 2013, Switzerland signed an agreement with the US to adopt the Foreign Account Tax Compliance Act (Fatca), which came into force under Swiss law on 2 June 2014.

Fatca, which was implemented by the US in 2010, requires all non-US financial institutions to search their records for US domiciled clients and report their assets and identities to the US Department of the Treasury.

Opportunity to specialise

Anne Liebgott, who founded a platform that connects US expats with SEC- registered financial advisers called americanswelcome.swiss, says the implementation of Fatca meant many Swiss financial institutions ended their dealings with US clients.

“There are still a number of financial institutions that just do not want to deal with the processes of Fatca” Liebgott said.

She said a major development of Fatca was that only Swiss financial advisers registered with the US Securities and Exchange Commission (SEC) can now provide cross-border services to US domiciled clients without restrictions.

"It is pretty simple – either you comply or you are out of business," - Oliver Hohermuth.

Daniel Zurbruegg, a Swiss SEC-certified financial adviser from BFI Infinity, agreed that Fatca has resulted in Swiss IFA’s having to specialise if they want to maintain dealings with US clients.

“I think it [Fatca] created a reaction in that firms either specialise on US business or they simply don’t do it anymore.

“The reality today is that with increasing regulation and complexity, it is impossible to serve ten markets at the same time,” Zurbruegg said.

He said firms that have specialised are now much better positioned and equipped to deal with US clients.

“We certainly regard our firm as being modern and well positioned, kind of the new version of Swiss private banking,” he said.

Oliver Hohermuth, director at Reyl Overseas, says he would describe Fatca as an “enhanced reporting requirement” rather than a regulatory overhaul.

“It is pretty simple – either you comply or you are out of business,” Hohermuth said.

“As an SEC-registered investment adviser, we have been operating under the law as defined by the U.S. regulator from the beginning,” he said.

Jurisdictional diversification

Strong performances by US markets and the dollar has meant there has been little incentive for potential US clients to look offshore at present, Zurbruegg said.

“However, this is going to change significantly next time the dollar is diving and US markets are getting under pressure,” he said.

A more common reason, Zurbruegg said, for US-domiciles to move assets offshore at present is for jurisdictional diversification.

“Jurisdictional diversification is probably one of the most important reasons why people decide to work with non-US banks and investments advisers.

“The changing political climate has certainly been a strong driver for that,” he said.

Future prospects

Both Hohermuth and Zurbruegg agree that regulatory changes brought in by Fatca are still having an impact on the Swiss financial services industry.

“The change is still on-going and the process of adopting to the new environment is by far not over,” Hohermuth said.

While Zurbruegg said he thinks Switzerland is still in a transition period from the “old school model of private banking to the new standard”.

“Switzerland is still an excellent place for banking and asset protection, its political stability is second to none. However, in order to be successful it is essential to combine the key points that we have in our favour with the new opportunities that technology offers,” he said.