A paradigm shift?

Credit Suisse announced a change in the pricing of its wealth management services a week ago. Practically speaking, the large bank will lower its transaction fees (commissions related to stock market orders) and decouple them from its advisory fees. This may not seem like a significant change at first glance, but in my opinion it is a significant paradigm shift in the world of banking (wealth management) in Switzerland. Why?

First of all, because prices are falling! The second largest Swiss bank has understood that it must fight against online brokers, which are less expensive and attract a young clientele, who obtain their information and advice from a multitude of sources (including certainly dividendes.ch!). Credit Suisse also needs to start distancing itself from a negative image, tainted by the various scandals of tax evasion assistance and overpaid bankers. By lowering transaction fees and allowing clients to choose a level of advice whose price will be linked to their intensity, instead of pricing based on a percentage of assets under management, Credit Suisse allows pricing linked to the actual use of advisory services. The client pays for what they consume. We are not yet at a lawyer-like logic with an hourly rate, but this is going in the right direction. Why is this so important in my opinion? First, because if the client wants advice, they pay. Which implies that the one who doesn't want it doesn't subsidize the one who wants a lot. It's fairer and more transparent. This removes (a little) the specter of the conflict of interest so present in any relationship with a banker: of course, you might say, if the bank earns less on transactions, it has an incentive to push its client to carry out more, on the other hand, the value of each transaction decreasing, the bank will become more objective and qualitative in its advice, that's what we can hope. The bank's objective is of course also to compensate for the drop in turnover with a larger volume of clients.

Wealth management has always been a significant source of revenue and profit for major Swiss banks, and one that is much less volatile than investment banking. Credit Suisse is therefore taking a significant risk, but one that is undoubtedly in keeping with history. It remains to be seen whether competitors will (be able to) follow such a change.