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2020 has been a year of challenging moments in wealth management. From a pandemic to a recession, and Brexit. For investors, these challenging moments are represented in asset price volatility, ultra-low interest rates and an uncertain financial market.

By Christophe Lapaire, Head Advanced Tax Services,  Swiss Stock Exchange

As we approach and sail past these various milestones, how are investors expected to fare over the next couple of years? Although markets seem to be coming back on track, both private banks and wealth managers globally still have big questions around what they can do to ensure performance in investment portfolios.

Christophe Lapaire, Head Advanced Tax Services, Swiss Stock Exchange
Christophe Lapaire, Head Advanced Tax Services, Swiss Stock Exchange

With that in mind, many private banks and wealth managers are starting to carry out the act of utilising tax optimisation. Helping them to stay prepared for any more upcoming uncertainty.

The impact of unexpected changes in our ecosystem on tax optimisation

Many private banks, investor clients or wealth managers may be aware of the benefits that it brings, however, not all have the capability to utilise it. Outdated technologies and manual processing within their infrastructure are not ideal for delivering tax optimisation services.

That said, due to regulatory changes that have cropped up around unexpected situations such as the pandemic and the following recession, some businesses have been pushed to update their technologies, now putting them in a better position to deal with current and potential uncertainties.

The private banks and wealth management firms that have been utilising tax optimisation view it as integral to the overall investment offered as it helps to reduce tax charges to a minimum by using the advantages of the law, without violating tax laws, whilst reclaiming all foreign withholding taxes.

Effective tax optimisation

Although tax optimisation benefits all, it is not necessary for every country as many provide capital gains exemptions. However, the tax performance of those countries that do not, will suffer, impacting any and all portfolio’s that are not optimising effectively.

Effective tax optimisation is essential if you want to manage and reinvest funds easily, whilst not being impacted by the worst of any tax leakage. Taxation requirements are not always uniform within countries and this lack of expertise can also lead to incurring tax that should have been avoided or mitigated.

Tax optimisation should be seen as integral and those who do not jump on-board sooner rather than later risk falling behind to the private banks and private managers that do.

There’s no ‘one size fits all’ answer

Nonetheless, tax optimisation is not always the answer for every private bank or wealth management firm. They all have different systems and infrastructures and there is no ‘one size fits all’. Without those up to date systems in place, some of these processes would have to be done manually, and this can end up being incredibly labour intensive.

Wealth management providers that offer tax optimisation services must make sure that they have the appropriate setup to report their clients’ tax information. Fortunately, it’s not the end of the road for those who don’t have the right software for maximum efficiency as they still have the option of using tax reclaim services – such as the Swiss Stock Exchange’s advanced tax service. This will help them to be sustainable and create savings without increasing labour levels, generally at an affordable cost that brings value to their clients.

Within our current climate, investors are continuously seeking out innovative solutions for tax optimisation and the private banks and wealth management firms that have the capability to offer it will be the ones that investors go to. Unfortunately for the providers without these services, the risk of falling behind and losing clients to companies that do provide them is great.

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