Private Equity: All About The Rolodex
Paul Revere never yelled “The British are coming” on his famous midnight ride in 1775—he shouted, “The Regulars are out,” using a common term for British soldiers.
But if the silversmith were alive today, he would be justified in galloping through the countryside to warn the nation’s richest citizens: The Swiss are coming—and they want you and your money.
Swiss wealth managers largely pulled out of the U.S. market in recent years after UBS was accused of helping clients hide offshore accounts from the Internal Revenue Service. However, some are coming back across the pond because they see enormous growth potential, according to a report issued in October by Boston-based research and advisory firm Aite Group. The report said Swiss managers could target $100 billion in North American assets—seven times what they currently manage.
The exodus began after UBS, the largest Swiss bank, agreed to pay $780 million in fines in 2009 and turn over information on more than 4,000 secret accounts to settle charges it helped clients conceal assets from the IRS. Just last month, fugitive banker Raoul Weil, former head of the wealth-management division of UBS, was arrested in Italy to face U.S. charges relating to his alleged role in the scheme.
Wegelin & Co., Switzerland’s oldest private bank, was another casualty that closed its doors after pleading guilty to abetting income tax evasion.
The U.S. is the world’s leading wealth management market. So, a growing number of advisors have refocused on the U.S. market in anticipation of a landmark agreement reached by U.S. and Swiss authorities in September, the report said. The agreement allows mostly smaller Swiss banks—those not currently under investigation—to disclose hidden U.S. assets and avoid prosecution.
As of March, the number of Swiss-based RIAs jumped to 51, up from 10 in 2007, according to the Aite report, which tracked the number of firms filing as advisors with the Securities and Exchange Commission. The number of Swiss firms engaged in wealth management jumped eightfold, according to the report, Offshore U.S. Private Wealth: Switzerland’s Compliant Re-Engagement.
“The natural conclusion is that the rise is a direct result of the U.S. authorities dictating a new model of compliance,” the report said, adding that some Swiss firms consider the U.S. “a strategically important market for their business, either due to an existing client base or the potential to develop one.”
Switzerland is still the world’s largest private offshore wealth center and will benefit from clients seeking geographic diversification, the report said.
Switzerland attracts $2.2 trillion, or about 26% of the world’s total offshore assets of $8.5 trillion, according to Boston Consulting Group. It is nearly double the size of the No. 2 region: Singapore and Hong Kong.
However, it holds less than 6% of the $780 billion in North American offshore assets, most of which are in the Caribbean, Panama, the United Kingdom and the Channel Islands.
—Joseph R. Perone
Java Lovers Embrace $20K Espresso Machines
Kees van der Westen first encountered espresso as a college student. It was the 1980s, and he was studying industrial design in Genk, Belgium. Like most college students, he valued the dark, acidic shots pulled in local cafes primarily for their caffeine content, not their complexity of flavor, mouth feel or aroma.
That changed after he chose the espresso machine as the final project for his degree. Most devices then in production were boring metal boxes, he says, leaving plenty of room for innovation.
Today, van der Westen’s machines—chrome goddesses whose bodies evoke the lines of classic midcentury American automobiles—have gained a cult following among coffee connoisseurs.
“A Kees van der Westen is pretty much the holy grail,” says Dave Ringwood, head of equipment customization, restoration and design at Olympia, Wash.-based Espresso Parts LLC.
They’re also among the most expensive on the market. Van der Westen’s smallest, least-costly model, the Speedster, retails for about $8,800, while his largest, the Spirit, goes for $20,000.
He and a dozen assistants assemble about 400 machines a year in his small workshop in the town of Waalre in the southern Netherlands. Most buyers are cafes and espresso bars.
Wealthy individuals, however, have recently begun purchasing commercial espresso machines as showpieces for home kitchens, van der Westen says—no small commitment given the specialized electrical hookups, plumbing and water-filtration systems required.
Edwin Mayer, a London media lawyer, saw one of van der Westen’s Speedsters in the window of a local coffee shop and was immediately smitten.
“I loved the look of it,” he says.
While the Speedster’s price gave him pause, Mayer says he considers the purchase on a par with a painting or sculpture.
“It’s a functional piece of art,” he says.
Having bought it for its aesthetics, Mayer quickly came to appreciate its brewing prowess.
“It makes superb coffee and is very forgiving and easy to maintain,” he says, adding that most home machines aren’t robust enough to produce consistently excellent espresso.