The Swiss financial center is globally known as a center of competence in wealth management and private banking. Markus Hill spoke for FUNDBOUTIQUES.COM with Markus Schwingshackl, Centro LAW, about trends in the industry, family offices, wealth planning, lawyers’ role in this segment, and the increasing importance of alternative investments, art, and digital assets. Additional topics such as criminal defense, startups & blockchain, the passion for street art, design, and creativity were also part of the conversation.
Hill: You work as a lawyer in the areas of wealth planning and family offices. What’s your assessment of the wealth management and private banking industry today?
Schwingshackl: I would say the industry is in transition, facing new and more demanding client expectations.
For a long time, wealth managers were the one-stop-shop for all wealth-related needs of affluent clients. Their private banking service could do everything, although without the option of specialization.
Meanwhile, wealth owners have access to an abundance of information, leading to higher expectations regarding offerings and services. They are used to obtain services from various specialized providers in other areas and industries, seamlessly combined in a single user interface.
Wealth management has been a few steps behind, and many wealth managers do not yet comprehensively offer such ecosystems to provide a similar customer experience.
Wealth owners expect and demand a high level of service and accessibility within a coherent framework that they can define and control. Technology makes it possible for wealth owners to outsource the management of individual asset classes to different service providers and maintain an overall view of investment performance and the data required for decision-making.
In addition, the entry barriers for alternative investments have become lower in recent years, so modular and customized platforms can be built for individual wealth management.
Hill: What other changes result from this evolving situation?
Schwingshackl: Wealth owners sometimes see their wealth manager as a mere custodian of their assets, mainly differentiated by soundness and lending capabilities. But I would not write off the importance of wealth management.
In addition, there’s a wealth owners’ desire and tendency to replicate as much as possible of the wealth management value chain or internalize it within their framework. This can be, for example, in-house private equity or venture capital teams or a private trust company.
From there, it’s just a short step to the family office as a management unit for providing personalized financial services to an entire family.
We can also say that more wealth owners are taking control of their assets in their own professional structures, to which various service providers and product suppliers contribute under their coordination and supervision.
The role of a wealth manager is still essential to preserving and protecting wealth. On the one hand, leading wealth managers are building their own platforms and marketplaces for external services, and on the other, family offices quickly reach their limits when it comes to regulation.
Wealth managers are taking the steps they need to provide a more seamless service. They are looking to expand their data storage and security services and develop new offerings with corresponding customer benefits. The transition means a more valuable and responsive service for wealth owners.
Hill: Given the availability of information and offerings for wealth owners, why would they need a wealth management lawyer?
Schwingshackl: That’s an excellent question. Lawyers are in a similar position to wealth management since customers question the correlation between the value and price of services.
This is increasingly being countered by transparent pricing and individual package solutions, flat fees, and bonus models. I prefer such models over the standard hourly rate, as it takes on results-based risk with my customers. Furthermore, it is essential to generate added value for customers besides legal and tax advice.
Let’s take as an example how my firm offers added value through a multi-stage, structured process in wealth planning to create an individual framework:
We start by assessing the family’s history, values, and vision. This may seem esoteric at first glance, but it is modeled on the product design of technology firms who have clear ideas about the specific benefits of their offering, the problems they solve, the way they do it, and a sharp customer focus.
It’s called customer-centricity, and this approach is ideally suited for wealth planning.
How? The related needs and expectations are identified based on a family’s history, values, and vision. These bring the necessary clarity to the purpose of wealth and engage the whole family to last over time. They also determine the optimal environment for the individual services by projecting negative experiences into the positive ideal, helping wealth owners to develop a vision for their wealth and a concrete framework for their unique wealth management setup.
However, as a lawyer, I also work with advisors such as governance experts and investment strategists. In addition to coordination, my task is to consider all circumstances and findings to derive the concrete legal and tax implementation.
The entire process takes place in a virtual, cloud-based project management environment that does not require emails and provides clients with real-time visibility into tasks, costs, and current status.
We don’t just preach platform thinking. We put it into practice as a law firm by acting as a network of independent experts.
Hill: What is the resulting legal and tax implementation for wealth plans and family offices?
Schwingshackl: The above principles and findings are tested in a value proposition. Specifically, all services are challenged based on their benefits and possible substitutes.
The example of a family office can illustrate the use of the value proposition. If wealth owners were to focus their family office solely on themselves and their own needs, they would risk that family members don’t accept the services as desired and look for substitute options.
Wealth plans and family offices are created with an absolute focus on the best performance in realistic, highly individualized areas with the entire family’s involvement. This also means that if there is no prospect of outstanding performance, we look for the best provider in the market to integrate into the structure.
There are many legal and tax issues to solve, but these should not drive or affect the customer experience. To this end, we bring together leading experts on our platform that can deliver cross-divisional collaboration and solutions.
As a result, family offices and wealth plans are designed and implemented in a multidisciplinary manner, enabling wealth owners to benefit from efficiency gains and always maintain the overview and control. They often also adopt the tools for collaboration and visualization of processes and results.
Hill: What trends do you currently see in wealth management?
Schwingshackl: Alternative investments are constantly growing.
For private wealth, however, there is a dilemma. The entry barriers for funds are high, and wealth owners compete with institutional investors for the best direct private equity deals. These are likely the main reasons wealth owners and family offices are increasingly investing in venture capital.
Founders in future-oriented areas such as technology and healthcare can choose their investors, but they appreciate patient private capital and can benefit from the entrepreneurial experience of private investors.
Venture capital, however, requires specialized teams, processes, and an interconnected network to build a constant deal flow.
Furthermore, digital assets are on the rise. Few would want to miss the crypto rush, and with increasing regulation, the asset class is becoming a serious component of private portfolios.
Blockchain applications create new opportunities to turn illiquid assets into liquidity and trade them on new marketplaces.
In the last decade, our Crypto Valley, which encompasses Switzerland and Liechtenstein, has created over 5,000 jobs in the blockchain sector and opened up innovative perspectives for private wealth management.
Technological developments are also transforming art and collectibles into new investment opportunities. We’ve seen that millennial investors are less interested in aesthetic aspects and more in the potential for value increase. Art purists may frown upon this, but it does not change the transformation of the market.
Blockchain technology allows ownership of artworks and other associated rights to be mapped digitally, merging the physical and digital worlds. There no longer seem to be any limits to the exchange of value and assets.
A non-transparent market is being conquered by millennials and put into great dynamics with short holding periods, impressive increases in value, and new art forms.
These trends show no signs of slowing down and are increasing in importance when it comes to discussions with wealth owners.
Hill: What else interests you besides the areas of family office and wealth planning?
Schwingshackl: Professionally, my activity as a criminal defense attorney provides variety to my work. I am fascinated by the tension between the defendant’s perception and the court’s objective assessment of the events. The focus on white-collar and financial crime rounds off my activity as a lawyer.
I am inspired by founders and entrepreneurs I meet while following private equity and venture capital transactions and advising blockchain projects. As with my clients, there are exciting and unique stories to discover that have common denominators that motivate me: Passion, persistence, and perseverance lead to success.
My son is currently rekindling my passion for street art and design in my free time, and we spend time together in museums and sketching. Due to the current circumstances, I spend even more time than usual in the Alps and am grateful to live in this unique part of our world.
Besides my sports equipment, I like to be accompanied by podcasts and audiobooks with the current focus on biographies and creativity.
Hill: Thanks for the interview.
About Markus Schwingshackl
Markus Schwingshackl is a private wealth lawyer and the founder of the boutique law firm Centro LAW (www.centrolaw.ch) in Zurich, assisting international wealth owners, entrepreneurs, and their families to navigate the complexities of family offices, wealth planning, estate planning, and wealth management.
FAMILY OFFICE CONFERENCE 2022 (FAMCON22)
Keynote Panel with Markus Schwingshackl, Suzanne Lauritzen, Gregor Feichtinger and Marc Blumenfeld about „Family Office Estate Planning: future-proofing family wealth“ at the Family Office Conference 2022. FAMCON22 will take place online on the 28th of February. For information and tickets www.fam-con.com. This year’s speakers and panels will focus on topics such as Family Office Best Practice, Family Office Trends, Family Wealth Structure, Family Governance, The case for AI, AI Authentication of Fine Art, The Metaverse, NFT Investing, Risky Business – Countering Fraud, Philanthropy, Wealth Management, and Estate planning. The event is hosted by Family Office Magazine –www.familyofficemag.com
CENTRO LAW: www.centrolaw.ch
- Wealth Management – Status quo, alternatives and the way forward (Commentary – Markus Schwingshackl, Centro LAW)
- The Single Family Office Investment Committee (Guest article – Markus Schwingshackl, Centro LAW)
- Vienna & Frankfurt – Cosmopolitanism, Family Office, Asset Management & Schnitzel (INTERVIEW – Martin Friedrich, Lansdowne Partner Austria GmbH)
- “Family Office Management vs. Private Wealth Management”, Asset Management, Trusted Advisor, Art, Mittelstand & Digitalization (Interview – Dr. Maximilian A. Werkmüller, LL.M., Professor of Finance and Family Office Management – Allensbach University)