What You Need to Know About Swiss Banks with Jamie Vrijhof-Droese

Jamie Vrijhof-Droese joins Blake on his podcast today to find out what you need to know about Swiss Banks and offshore banking.

Blake:
Jamie, thank you for being on the show with me today. Pleasure to see you over Zoom it was nice seeing you a few weeks ago when I was out in Zurich. How’s everything over in Switzerland?

Jamie:
Absolutely! Everything’s going very well. We had a super hot summer. So, I’m quite relieved that we move into the more well, a little cooler time of the year. So can’t complain. How about you? How was the end of your trip?

Blake:
Zurich was great. And I will definitely be back there before too long. But I’m glad you like the cold weather. I enjoyed it a little bit; I like the heat. So, I’m gonna be staying close here in Florida for the wintertime. But maybe next year, come summertime, I’ll come to visit you again. So, when we met, we talked a little bit about offshore banking. As you know, I set up offshore trusts primarily in the jurisdiction of the Cook Islands. And then we’ll usually open up a Swiss bank account. I’d like to hear a little bit from your side through the advantages of using a Swiss bank account.

Jamie:
Yeah, absolutely. I mean, there’s a variety of benefits, one of you have already mentioned in the sense of as a part of an asset protection structure. So, it’s very important to distinguish that we are not attorneys. So, we work together with people like yourself, who know that area better than we do. But if you have the asset protection structure, maybe you can add to that from your side and your experience of things, it will add an added layer of protection if you have the account offshore.

And there are very popular and well-known countries for those asset protection structures to have the structure set up there. But those jurisdictions might not necessarily be the best choice for banking. So, Switzerland, and also Liechtenstein, generally Central Europe are typically very well-known jurisdictions for banking, there’s a variety of reasons for that, we can also get into that later on. But on top of the asset protection, there are also other areas that can be beneficial for clients.

There’s also the level of privacy protection, but there’s also the investment side of things. So, the US tends to have quite a strong home bias, they’re by no means the only country, most countries have a strong home bias, where they focus mostly on the markets that are close to them from a cultural perspective, but also from a geographical point of view. So, we are very similar, we very well understand and know the Swiss market and the European market. So that’s where we tend to have our investment focus.

And that can be very, very beneficial if you have a certain amount of wealth to just internationally diversify your money, and have it invested in different areas of the world. And then of course, also, with everything that’s going on, politically speaking, it can’t hurt to have a little bit of money outside in a safe jurisdiction, where it will not be affected by any domestic developments.

Blake:
Very good. Yes. Cook Islands seems to be the best jurisdiction for the asset protection trust laws, but it’s a better banking system in Switzerland. You mentioned privacy, can you talk a little bit more about that? I know that there was a time when there were numbered bank accounts, I think those days are behind us. But what type of privacy benefits do you get by using a Swiss account?

Jamie:
Yeah, absolutely. No, you’re fully right with that. And I think it’s an important distinction to make. So, there’s not going to be any privacy towards the IRS. So, in terms of taxes, or the government, if you so will there will be reporting there, it will not affect your taxes either positively nor negatively. So, you’re not going to pay more or less taxes. But in the US the culture of bank secrecy and also the legal framework of bank secrecy is not as strong as it is here in Switzerland.

So, in our country, we started banking in the Middle Ages, and we have done so for a very long time. And from the very beginning for over 100 years. This thought and this culture of privacy was very ingrained in us and a little over or about 100 years ago, it was also put into the law. So, it is illegal for a banker to give information out on the beneficial owner of the account or anything like that, and that is taken extremely seriously. There is a caveat, if there is a court order that is legitimate, then the Swiss will uphold that.

But at the same time if you have any nosy family members or neighbors or any kind of people that want to pry any information out of your account that is not going to be possible at this point and also, I think that’s another point that you can speak more towards is frivolous lawsuits. So, you will be less likely to be a target if your wealth is less visible so your wealth will not be visible to anyone who’s just curious to see if you are a good target or not if part of your money is in Switzerland.

Blake:
Absolutely and I talk about this with my clients, one of the best things you can do to reduce the chances that you get sued is don’t display your wealth. And America which is a very litigious society, a lawsuit has almost become the badge of success. If you’re successful enough, you can expect to be sued. So share your wealth with your financial advisor, with your CPA, with your attorney, but beyond that, keep quiet about these things is one of my recommendations. So, I know that I’ve had clients who’ve opened up Swiss bank accounts. But there’s this rumor that you cannot open a Swiss bank account if you’re a US citizen. Do you know why this misconception is out there?

Jamie:
Yes, it started about 10 years ago with the introduction of FATCA, the Foreign Account Tax Compliance Act that was introduced under Obama that went with all these very ugly disputes in regard to the tax situation back in the day. And that has led to this misconception of now it’s illegal or impossible for Americans to open up a bank account in Switzerland. And that’s just absolutely not true. It’s not true from an American point of view, but it’s also not true from a Swiss point of view.

It is absolutely valid and legal, there’s a variety of reasons that we’ve already spoken about to do. It is, however, the case that some banks in Switzerland choose not to do business with the US or with American clients because it has in the past 10 years gotten more and more strict and stringent in terms of the regulatory requirements. So, there’s more documentation that you have to do. A lot of banks are also a little bit worried about everything that has happened with the US that they just say it’s a high risk for them to work with people from the US. So, they voluntarily choose not to do that. But I would say about 25 to 30% of Swiss private banks are absolutely capable, willing, and happy to work with American clients, what’s important to know there is that you have to go through an avenue that makes it compliant.

So, the easiest way to do that is to work with a registered investment advisor here in Switzerland that is registered with the Securities and Exchange Commission in the US. And that’s usually also the requirement for the private banks here in Switzerland that the client comes through a company that is specialized in working with American clients, they don’t really want to work with Americans directly. But if it comes through an investment advisor, then that’s absolutely possible to do. It’s legal to do so. And you don’t even have to travel to Switzerland to do that. It’s possible to do it through correspondence.

Blake:
Very good. Thank you. And you said about 25% of Swiss banks still take American clients? What was the percentage that you said?

Jamie:
Yeah, I would say I don’t have the actual statistics. But I would say about 25 to 30% of Swiss private banks are working with Americans.

Blake:
Okay, very good. So and as you mentioned, when placing clients with the bank, US citizens pretty much have to go through registered investment advisors, such as yourself, can you explain the difference between what you do and what a bank does? And then also maybe speak to any guidance you have on selecting an investment advisor.

Jamie:
Yes, absolutely. So, the bank has a banking license, it’s a financial institution, there are very strict requirements here and system, I’m sure also in the US on liquidity that they have to hold, like safety measures that they have to follow. In order for them to custody the money. We are a small family-owned company, so we don’t have a banking license. And we don’t aspire to get one anytime soon. So, we’re five people here, and we are reliant on private banks to custody the money.

So what we do is, we get a limited power of attorney on the existing bank account in the name of the client or the structure, which however, is set up, we help with the setup, we make the introduction to the bank, we help with all the paperwork, and then we help work on an investment strategy with the client and his or her family and make sure that it’s implemented correctly. So, we will take care of the communication, administration, investing, all the regulatory side of things, but we don’t hold the money ourselves. So, it’s, like a triangle relationship.

We have the client, the bank, and the asset manager, but usually, the asset manager is the direct contact person for the client, so they don’t really have to deal with the bank, unless they want to, of course.

Blake:
What are some of the banks that you work with?

Jamie:
Well, it depends on which bank I would recommend depends very much on the situation of the clients.

Blake:
How many banks do you work with?

Jamie:
Yes, so we currently worked with about five banks, I would say three here in Switzerland, and two in Liechtenstein. And I can give you some, like a little framework how we choose to bank. So of course, the first question is, do they work with Americans? Do they also have experience? I mean, them wanting to take on Americans is one question but the other is, do they really have the expertise and experience that is needed? Does everyone speak English? Are they capable of providing US tax savings?

Things like that. Then the other question is how is the government of the bank, we personally like family-owned and run banks because they usually have a longer-term horizon, and they also have a higher level of safety and security usually least because they take less risk. They don’t have to report to shareholders once a quarter. So, their incentive for exorbitant growth is less there. And then the last thing that we look out for is just personal fit. Do we feel that the people there are competent?

Do we feel that they’re entrepreneurial, that their solutions are oriented? We feel that they also fit from an investment philosophy standpoint. So, there’s banks that have different focuses, some are very keen on crypto, some are very keen on mortgages, for example, some make more traditional investments. So those are the three aspects that we usually look out for when selecting a bank. But which bank is best? Usually depends on the volume of the client, it depends on the preference, which country they want the bank to be in, and some other things.

So, the easiest way to describe which of those five banks we work together with best fit the client is usually determined in a personal conversation.

Blake:
Thank you. And you mentioned this, but I want to dive a little bit deeper into it, what investment options would somebody have, if they’re, let’s say, a US citizen, they set up a Cook Islands Trust, they open up an account through your company, what can they invest in?

Jamie:
Yeah, so generally speaking, like from a regulatory standpoint, your options are no different than they would be in the US. And so, the only caveat there would be passive foreign investment companies, specific investments. So, for example, funds or ETFs, if the money is passively like the revenue is passively generated, then they will have negative tax consequences. I’m not a tax attorney, so best to discuss that with the CPA, but that would be something to look out for.

For our company, our main focus is directing investments into stocks, bonds, precious metals, and foreign currencies. And I know you personally are also interested in cryptocurrency. So that’s also something that some of our custodian banks can provide. It’s something that we can accommodate if our clients have a specific interest or knowledge and experience in that area. But it’s not something that we would from our own side currently put into a discretionary mandate.

So, upon request of the client in specific cases, we can do it. But we don’t usually do it if we have the discretion over the account, because most of our clients wish to have the money into some in terms of capital preservation and not necessarily intense growth. So, the match is not always there, but it would technically be possible.

Blake:
Very good. And thank you for all of that, yes, crypto is a big part of my practice. It’s a big part of the assets that my clients held certainly last year, a lot more so when Bitcoin was on a giant bull run than it is now. But I’m still seeing a decent number of clients with crypto, and I do believe that it’s very much the future of money. Jamie, can you talk to me a little bit about your fee structure?

Jamie:
Yes, so we have a very simple fee structure, it’s percentage based on the assets under management. What percentage it depends on the service level, it also depends on the size of the account, it’s very important for us to be upfront. So, we have an all-in team, that percentage number, whatever it then ends up being is all the fees that we take, there’s not going to be any money taken from any third parties or anything behind your back that you’re not aware of. And then on top of that, but that’s important to note as well, there will also be the fee from the custodian bank, because they of course, also charge something for the custody of the account.

Blake:
And generally, I find that American clients when opening up a Swiss bank account, end up getting pretty comparable rates to what you get in the United States. I think in a lot of cases, they even get lower rates. I don’t want to promise lower rates because I like to manage expectations, but I’ve seen that on the fee side, it tends to be pretty comparable to US bankers, and US investment advisors. But where I see the big difference is the level of service.

The clients who have referred to individuals such as yourself and other investment advisors, we have relationships with, the clients come back and they’re very happy even if they no longer have a desire for the asset protection structure, as far as I know, continue to work with the Swiss bankers going forward. So, with that, that’s another advantage of working with a Swiss bank is the level of service. And just generally, it seems to me that Switzerland has just an entire economy built up around its banking system.

Just every portion of the country just is so crisp and how everything is done, not just from the bankers, but the bus drivers, to the restaurants, to the entire culture is hard to replicate somebody else could pass the same banking laws but what you have in Switzerland is an entire culture that makes you feel very secure about keeping your money there. And I think this is why during panic times, COVID, people rush to the security of Swiss banks. And I don’t know if you’ve seen this, but during times when markets went steady, does your business tick up a little bit?

Jamie:
Yeah, absolutely. I mean, you covered a lot of great points. I mean, I appreciate your kind words about our country and culture. And we do take, I personally, but also, as a society we do take a lot of pride in our services sector, and the way we run things. Before I get into like the uncertainty question, which is a very important part, I quickly want to add to the fees. Switzerland is a lot of great things, but it’s not a cheap country. And yes, the fees are not like a multiple of US fees.

But I would be surprised if they would be lower than in the US. So usually, what we do in terms of expectations, and management is around the same or a little bit higher. And that just is the price for working and banking in Switzerland, the higher level of salaries. And, yeah, that would come with a high level of education and experience. But other than that, I fully agree with everything that you said. And absolutely, the uncertainty aspect is a huge part of our business, what people look for, is to sleep better at night and know that their money is safe and secure. And that’s something that we really excel at.

We’re neutral. We’re no part of NATO, we’re no part of the European Union, we’re very economically stable. And the huge level of our GDP is generated in the financial services industry. A huge amount of people work here. So yeah, I can definitely agree with everything that you just said.

Blake:
And in terms of pricing, I run my business the same way. I tell clients from the start; you can definitely find less expensive people to set up a Cook Islands Trust. Not anybody who does a better job, but we’re definitely not the cheapest, we definitely don’t want to be the cheapest. I really don’t recommend working with the cheapest service provider. Certainly, when it comes to something as important as setting up an asset protection trust or managing your money. So, can you give a little bit of an overview of what is involved in opening a Swiss bank account as far as timing, and what type of information would be needed in order for someone to open a Swiss bank account?

Jamie:
Yeah, I would say a reasonable expectation in terms of timing is three to four weeks, with a plain vanilla standard case. Of course, if it gets more complex, it might take longer than that. The first step is always an introduction meeting, usually, it’s over video, of course, it’s if someone is in Zurich, if I’m in the US, I’m always happy to meet in person. It’s important to have a mutual agreement on working together.

So our business is based on trust, and both sides have to feel that it’s a good match and that we can move forward together. Then we’ll be decided which banks we work together with, which service level, and the fees, all of that is usually determined in a first meeting after just deciding whether or not moving forward makes sense. Then we will need company documentation if it’s a trust or an LLC, something like that, of course, passport copies that have been notarized, things like that also some KYC information that’s sent to know your customer. So how was the money generated? Are you currently retired, employed, or an entrepreneur?

But no worries, we will guide you through all of that we will be very specific in what kind of information we know we need. And with that info, we then go to the bank and ask them to put together the account opening forms, we will add our forms our portfolio management mandate, and things like that, send it to you over by email or present it to you in person if you’re here. You go through everything, sign everything, and we can easily set up a second meeting, if you want to discuss the documents in detail, we provide that back to the bank, and then usually three, or four days they open up the account.

We send the buyer instructions to the client, and the money will be funded once the money has been funded, we’ll set up another meeting to discuss the investment strategy in more detail, and then we will just move into this ongoing communication process where the client has online access to the account if they wish to do that. If they wish to have very regular updates. They will also get quarterly bank statements they will get a bi-quarterly market report from our side. And then, of course, we also have regular conversations to discuss the investment strategy and everything’s still running as the client wishes.

Blake:
So clients do have an online portal where they can go online and check their money daily just as they do if they own the account directly. Yep, very good. And I wanted to thank you for the book you gave me when I was visiting. I did read through that. I think even before I got back to the States. Do you want to mention anything about your book, where somebody who wants to learn more about Swiss banks could find it?

Jamie:
Yeah absolutely! It’s called Swiss Money Secret I co-authored it together with a retired politician in the US who is very well versed in the whole cross-border financial services industry. And I’m happy to provide a free copy to anyone who’s interested I cover politics and systems, I cover a little bit of history, geography, but mostly what sets us apart what makes our financial services industry different than other countries and what is important to know for American investors. So, it’s very precisely tailored toward the needs of American investors who are interested in learning more about Switzerland. We have a digital copy that we can send out very easily. So, if you’re interested, just send us an email to INFO@WHVP.CH and then you can get your own copy.

Blake:
And that leads me to one of my final questions, which is, if somebody wants to get in contact with you, what’s your contact information?

Jamie:
Yeah, absolutely. So, they can start out at our website WHVP.CH

We also have a blog post; you can find that under insights where we talk about a variety of hopefully interesting subjects in terms of Swiss banking and the international financial world. You can also reach out to me directly at my initials JV@WHVP.CH

And we also have a newsletter that you can find on our website under Contact. It’s not selling anything; it’s just talking about our perspective on the market. So even if you are not interested in becoming a client anytime soon, you might still be interested in our economic use on the European market and the Swiss market specifically.

Blake:
Well, thank you, Jamie. I’ve certainly found all this very interesting. Was there anything else that you wanted to go over or mention before we wrap up for today?

Jamie:
No, I think we have covered everything that we needed to!

Blake:
I think we’ve covered a lot of great ground. Well, thank you so much for being on the show. And I’m sure I’ll talk to you again soon

Jamie:
Thank you so much.