Investing
Switzerland faces steady if slowing growth amidst currency and real estate risks

Switzerland is set for sturdy growth of 2.4% this year and 2.0% in 2019, though further Swiss franc appreciation against the euro remains a risk should investors turn again to the currency to hedge against tensions in global trade and EU politics.
For the updated rating report, click here.
Switzerland’s credit profile reflects its exceptionally strong fundamentals, low levels of debt and sound fiscal management.
Switzerland furthermore benefits from a strong external position, effective financial policy settings and highly developed capital markets, underpinned by the safe-haven status of the Swiss franc.
The Swiss currency however constitutes a potential source of economic uncertainty. The depreciation of the franc against the euro at end-2017, alongside strong external demand, drove the economy’s buoyant growth in the first two quarters of 2018 at 3.2% YoY. In line with the Federal Government’s and IMF’s estimates, Scope expects GDP growth of 2.4% for 2018 due to the continued strong performance of its main trading partners and robust domestic demand, supported by investment and favourable labour market trends, before flattening out to 2.0% in 2019, as the global economy slows down.
The main risks to future growth stem from international trade tensions and regional political uncertainty, which could create renewed safe-haven pressures on the Swiss franc. This has been amply demonstrated in the past, triggering the SNB’s heavy currency intervention leading to a quadrupling in the size of the central bank’s balance sheet since the financial crisis.
On the domestic front, Swiss banks’ exposure to real estate, with mortgage lending accounting for around 85% of total domestic bank lending, is a source of potential economic instability given elevated household loan-to-income ratios, up 10 percentage points since 2013 to around 50% in 2017. Risks are somewhat mitigated by Swiss households’ ample financial assets, amounting to 370% of GDP.
In addition, while Scope is confident in continuing constructive relations between Switzerland and the EU, also with regards to concluding a new bilateral framework agreement, two key potential strains could emerge, given:
- First, the right-wing Swiss People’s Party’s collection of more than 100,000 signatures (to be validated by the Federal Chancellery) necessary for a national vote to discontinue the existing free movement agreement with the EU. A similar referendum in 2014 took place, though the Swiss parliament later voted to ensure new legislation conformed with EU rules.
- Second, the status of the Swiss stock exchange within the EU. In December 2017, the EU granted a one-year stock-market equivalence to Switzerland, while the Federal Council adopted a contingency measure, under which, if no extension is made by December 2018, it would require EU stock exchanges to apply for permission to trade in Switzerland.
Scope currently rates Switzerland at AAA with a Stable Outlook. This publication does not constitute a credit rating action. For the last credit rating action release, click here.
Investing
What finding Alice has taught us about the pitfalls of no will

ITV’s latest television drama Finding Alice has been a necessary diversion during these endless winter weeks of lockdown, but it has also provided a useful warning about the far-reaching consequences of a person’s sudden death, particularly when a will has not been put in place.
Following the story of Alice, played by Keeley Hawes, who finds herself in difficulty when her partner of 20-years Harry dies suddenly, the drama brings into sharp focus issues around inheritance tax, intestacy rules and rights for unmarried couples.
Lawyers are hoping the circumstances depicted on the programme will act as a wake-up call to the 50% of UK adults who do not have a will.
Carol Cummins, Private Wealth Team Leader, with national firm Clarke Willmott LLP, said: “Finding Alice is a really useful case study in what not to do if you wish to ensure your family is taken care of following your death.
“Harry and Alice were unmarried and Harry had not made a will which means he died intestate. As a result of this, Alice will inherit nothing as of right, except any assets they might have owned in joint names. In fact, the couple’s daughter, Charlotte, along with a secret son George are entitled to their father’s estate under the intestacy rules. Any assets they do receive are potentially liable to inheritance tax.
“Then there’s the matter of the brand new ‘smart’ house the couple have just moved into. Alice, expects to inherit the property but discovers that in order to protect his assets against his many creditors, Harry gave the
house to his parents just before his death.
“This is a transfer for inheritance tax purposes and the house clearly exceeds the value of the nil rate band which can be given away without a tax bill (£325,000 currently). As the recipients of the gift, Harry’s poor parents face a large IHT liability.
“It seems that Harry did not take any advice before making the gift because a reducing term insurance policy held in trust for his parents could have provided them with the money to pay the tax bill if Harry died within seven years of the gift.
“In not taking the short amount of time it requires to write a will, Harry has negatively impacted on his partner, children and parents – the very people he would have wished to take care of.”
The programme also shows that Harry has left behind a raft of debts, many connected with his building company. This raises a whole host of issues for the administration of the estate. However, Alice will not be liable for any of Harry’s debts and nor would she be if they were married. If the business is a limited liability company, and it has incurred debts it cannot pay, Harry’s estate will not be liable for these unless Harry had given a
personal guarantee in his capacity as a shareholder.
So what advice would Carol have for Alice, if she were a client?
“Alice’s situation is certainly a complicated one and she should definitely be taking the advice of a good lawyer.
“A deed of variation within two years of Harry’s death could, if George and Charlotte agree, re-direct their entitlement to Alice (providing both children are over the age of 18), but inheritance tax would still be payable even if the estate is re-directed to Alice because Alice and Harry were not married.
“It might therefore be advisable to put some of the assets into trust for Alice and the children. This would not reduce the tax due immediately but could help to reduce the tax bill when Alice eventually dies as the assets in trust would not be part of her estate.
“All of this could have been avoided by having a will in place. Harry could have protected his parents by including a provision that his estate should pay the tax on any failed gift and the bill should not fall on his parents.
Instead, Harry’s parents are trying to sell the property to raise funds to pay the tax.
“Once Harry’s parents have paid off the tax, they intend to give the balance of the sale proceeds to Alice. They should consider their own inheritance tax position on this gift, especially as they are not young and have a daughter who may not be happy to find that her parents’ nil rate bands had all been used in a gift to Alice.”
Clarke Willmott has recently launched a new campaign to encourage people to pledge that they will make a will this year. The #GoodWill campaign asks people to take steps to safeguard their family’s future wealth.
The firm is aiming to assist people looking into making a will by developing a free, online ‘Which Will?’ tool that prompts the user to think about what is important to them when making a will and recommends
which wil best meets their needs.
Clarke Willmott is a national law firm with offices in Birmingham, Bristol, Cardiff, London, Manchester, Southampton and Taunton.
Investing
Estate planning for wealthy celebrities or UHNWIs

By Sean Sheridan, Client Director, ZEDRA Isle of Man
Estate planning often gets pushed aside…sometimes with disastrous knock-on effects for a family. With today’s evolving regulatory environment, future planning can be challenging and often daunting.
Despite inevitable obstacles, there are ways to minimise the burden to enable even celebrities to have future generations enjoying the benefits of their wealth. In this article we explore why estate planning gets overlooked, and why it’s so important to protect prosperity and interests.
It’s easier to put off estate planning than you’d think – even for people like celebrities or UHNWIs who have earned significant wealth. For example, it’s thought that the great Diego Maradona passed away without leaving a Will or other plans for his assets, despite recent years of ill health. There were already reports of a contested estate just weeks after his funeral. Michael Jackson, Prince, James Gandolfini and Philip Seymore Hoffmann all passed away with various issues with their estates, despite having amassed fortunes.
It’s not disorganisation or a lack of desire that stops people planning their estate. In fact, often the last thing people want is to leave family or loved ones having to deal with probate and complex legal affairs at an already difficult time. Many people simply put off estate planning, thinking they will have time later…whenever that is. Alternatively, they may not comprehend how challenging it can be to untangle an intricate estate, and what legal rules there are that surround how an estate will automatically be divided amongst heirs and spouses if forced heirship laws apply. Equally, many people may not know that some loved ones may not get any assets or be looked after if provisions aren’t made in advance.
Privacy
For UHNWI a properly planned estate can also mean more privacy for family at a challenging time. Many HNWI will choose – along with advisors – a structure that will allow for maximum confidentiality and will keep the details of the estate and any beneficiaries private. Information about beneficiaries of an estate becoming public can also make them a target for press or other unwanted attention. As structures which allow for both discretion and succession planning, trusts can be very popular for this reason.
Beneficiaries
Trusts also allow for settlors to stipulate the conditions under which beneficiaries may have access to or be given money from a trust.
Trusts allow the settlor the ability to lay out one or more conditions. For example, a settlor could put aside assets in trust to support beneficiaries but not make all the assets available to them at once. This might be to support good governance or simply to protect beneficiaries from some of the hazards associated with wealth, as perceived by the settlor.
Practically, this means a settlor and their advisors might look at different conditions for a trust’s assets. For example, beneficiaries might only receive a lump sum every 10 years. Alternatively, they might get a monthly pay-out, similar to a salary. The settlor might wish that funds are paid out to beneficiaries for the sole purpose of paying for their college education or to purchase a property.
Corporate trustees like ZEDRA ensure that the settlor’s wishes are met, and the assets of the trusts are used in the way the settlor would like and as laid out in the trust deed.
Planning ahead
Planning ahead with advisors is vital – especially for anyone with a complex assets and interests that span various geographies may be complex in terms of nature, like IP rights.
Expert advice that’s tailored around an individual’s personal situation is a must, so thinking ahead is crucial. It’s never too early to make sure you’re planning your estate and making sure loved ones or important causes will be looked after when you’re gone.
Investing
Dollar edges lower as investors favor higher-risk currencies

By Stephen Culp
NEW YORK (Reuters) – The dollar lost ground on Friday as market participants favored currencies associated with risk-on sentiment over the safe-haven greenback.
Risk appetite was stoked by better-than-expected economic data and expectations that U.S. President Joe Biden’s proposed $1.9 trillion coronavirus relief package will come to fruition.
“The dollar’s down against other currencies but not by a whole lot,” said Oliver Pursche, president of Bronson Meadows Capital Management in Fairfield, Connecticut. “I expect the dollar to be where it is now at the end of the year, and the main reason for that is while I see some signs of improvement in the economy, monetary policy is going to stay where it is.”
“I don’t think the dollar is underpriced or overpriced,” Pursche added.
For the week, the dollar slid about 0.2% against a basket of world currencies, the euro was essentially flat, and the yen lost more than 0.5%. But the British pound advanced more than 1.1% against the dollar, its best week since mid-December.
Bitcoin continues soar to record highs. The world’s largest cryptocurrency was last up 6.6% at $54,961.67, hitting $1 trillion in market capitalization.
Its smaller rival, ethereum, was last up 0.7% at $1,953.28.
The digital currencies have gained about 89% and 1,420%, respectively, year to date, leading some analysts to warn of a speculative bubble.
“One concern I’ve always had (about cryptocurrencies) is how susceptible they are to manipulation,” Pursche said. “But they’re going to continue to gain legitimacy.”
“While it’s great that Tesla made an investment in bitcoin, I’m more intrigued by Blackrock and other major investment firms taking a hard look at cryptocurrencies as a viable investment.”
The Australian dollar, which is closely linked to commodity prices and the outlook for global growth, was last up 1.21% at $0.7863, touching its highest since March 2018.
The New Zealand dollar also gained, closing in on a more than two-year high, and the Canadian dollar advanced as well.
Sterling, which often benefits from increased risk appetite, rose to an almost three-year high amid Britain’s aggressive vaccination program. It had last gained 0.27% to $1.40.
The euro showed little reaction to a slowdown in factory activity indicated by purchasing manager index data, rising 0.21% to $1.2116.
The yen, gained ground against the dollar and was last at 105.495, creeping above its 200-day moving average for the first time in three days.
(Reporting by Stephen Culp, additonal reporting by Tommy Wilkes; editing by Jonathan Oatis)