Swissquote, the Swiss online brokerage, reckons it is breaking new ground by launching an online private bank. We ask its CEO about the venture.

The wealth management industry cannot ignore the online revolution and Swissquote, the internet based financial services firm based in the Alpine state, is determined to be at the cutting edge of developments.

A few weeks ago, local Swiss media reported that the bank was embarked on private banking via the online route, which naturally piqued WealthBriefing’s interest as to what such an offering could do for high net worth clients. Private bank clients rank privacy highly and there remain niggling question marks in some minds, perhaps, as to how secure the online world really is.

Marc Bürki, Swissquote’s chief executive and co-founder, is confident his firm will offer something new and distinct. He believes that taking private banking online is a logical progression for financial services as the internet continues to transform business models.

“It’s basically the next step of online banking. It started years ago with online payment, then online brokerage (execution of stock transactions) and finally the online industry is attacking the business of online wealth management,” he told WealthBriefing in a recent interview.

As far as Mr Bürki is concerned, the fact of the private banking venture being totally online is its unique selling point: “The client remains basically the pilot-in-command”, he said.

Swissquote is certainly not the only bank to embrace the online private banking model: HSBC Private Bank, to choose one example, gives clients online access to their accounts. But Swissquote might just be the first purely online brokerage to branch out into wealth management in the hope that such a low-cost model catches on. Swissquote is certainly no novice as a company: it has been a listed financial firm on Switzerland’s SIX stock exchange since May 2000 and now employs 227 people.

Why now?

So taking an online-based financial brokerage and trading firm to the wealth management space seems logical, given how private banking has been a relatively stable area of financial services in recent years, compared to some other areas. But an obvious question, perhaps, is why now? The internet is no longer in its infancy, so why has Swissquote taken the plunge when the financial services sector is in ferment due to the economic turmoil?

“It is the next growth segment for our industry,” says Mr Bürki. “The entry level to offer such services is however higher that in the traditional online brokerage business.”

He also moved to assure would-be clients over any security concerns about online banking. “It is more secure! Nowadays every bank has some kind of online access. So you had better trust a specialist in online banking who is able to keep pace with the development in this sector.”

Second quarter

The firm is preparing to launch its online service by the second quarter of 2010 and the basic systems for the project are already in place, he said. The target audience for the online private bank will be Swiss residents. To sell services outside the country, a bank would need a foreign licence, he said. However, if the venture takes off, then Swissquote may look further afield.

Cost considerations are important. Mr Bürki said such an online service will be significantly cheaper than the traditional model: “As we have a leaner and less staff extensive we can massively reduce the fees for the clients. A client will therefore pay only a third of what he would pay at a private bank.”

Swissquote will not stipulate a minimum sum of assets for a client to gain access. Client segmentation will be made though the service level on offer and the fee structure with a quarterly fee charged to the account. The exact fee structure has yet to be finalised, however.

Mr Bürki reckons his bank is out front of the pack in taking private banking online in this fashion, but he acknowledges that the private banking sector is “moving fast”.

Many clients may still prefer face-to-face contact, and feel that the online world does not quite fit with their requirements of a private bank. But Swissquote is clearly determined to make a success of its venture. It will be interesting to see how its move works out.