conservatorship and investment what a conservator needs to know

Investments for Protected Persons: What a Conservator Needs to Know

The previous guardianship legislation was completely redrafted in 2013. At the same time, an ordinance entered into force that governs how the assets of protected persons may be invested. Roman Ziegler, a Credit Suisse expert, answers the question: What does the conservator of a protected person need to know?

The new child and adult protection law has been in effect in Switzerland since January 1, 2013. Asset management is one of the duties of the conservator. Article 408 of the Swiss Civil Code (SCC) requires a conservator to manage assets with care and refers to the provisions issued by the Federal Council on the investment and safekeeping of the assets. The conservator shall make appropriate amounts of money from the assets of the protected person freely available to that person (Art. 409 SCC) and shall keep a record. They shall present this to the child and adult protective services (CAPA) for approval at intervals determined by the agency, but at least every two years (Art. 410 SCC).

Conservators Need Specialist Knowledge

The Federal Council also issued the Ordinance on the management of assets in connection with decision-making authorization or guardianship (VBVV). This assumes that the individual mandated to manage the assets has the necessary specialist knowledge to be able to identify the economic needs of the person concerned and to select the appropriate investment strategy for that person.

Roman Ziegler, you assist many clients in Zurich who are protected. What questions from conservators do you have to answer most often?

RZ: The question that conservators ask us most often is: "How can I, and how am I permitted to invest the assets of the protected person?"

Can't a conservator simply continue with the protected person's previous investment strategy?

It's not quite as simple as that: If a person is assigned a conservator, the Ordinance on the management of assets in connection with decision-making authorization or guardianship (VBVV) automatically enters into force. This ordinance stipulates that the assets of a protected person must be invested in a conservative manner. In practice, this means for many conservators that they have to change the way in which the protected person's assets are invested. For professional conservators such as attorneys and accountants, such investment decisions are mostly not a problem. Experience has shown that individuals who are acting as conservators for the first time or who deal little with asset management either professionally or in their private life need more support.

How do the authorities (CAPA) influence the work of conservators?

Article 6 of the ordinance defines which investments are permitted for guaranteeing normal living costs. This includes deposits registered in the name of the protected person concerned, including bonds and time deposits, and fixed-income federal bonds. No CAPA approval is required for these. For example, if a protected person requires CHF 100,000 per year for their living expenses, very large amounts must be invested conservatively for this purpose. Unfortunately, these are at present mostly investments that offer less good return opportunities.

In accordance with Article 7, paragraph 1, 75% of the assets that are not needed for normal living expenses may be invested in fixed-income investments and 25% in equities. All of these investments must be approved by the CAPA. If the financial circumstances of the person concerned are particularly favorable, the CAPA may also approve a higher equity holding. However, the meaning of "particularly favorable circumstances" is not defined in law and must be negotiated with the authorities on a case-by-case basis. Our experience shows that an increase in an equity holding is only possible in an average of two in ten cases.

Deal with this matter at an early stage and draw up an advance directive, so that a person you trust can care for you should the worst come to the worst. 

Roman Ziegler, investment specialist for conservatorship assets, Zurich 

How do you support conservators with the management of the assets of persons lacking mental capacity?

We review the current and recommended securities for suitability in accordance with Art. 6 and 7 of the VBVV, manage the transaction account and the capital account, and send evidence to the CAPA. With our Credit Suisse Invest Partner solution, the conservator receives a portfolio quality report every quarter. We also provide SMS and email alerts on portfolio quality as part of portfolio monitoring. In short, we support conservators in all financial matters within the scope of a conservatorship.

Are there cases in which the CAPA does not accept the proposed investment strategy?

We now have so much experience and know the requirements of the various child and adult protection services so well that we only have to make occasional changes at most.

Does Credit Suisse offer special products and services in order to meet these requirements?

We offer four different services:

  1. Savings accounts and medium-term notes; in addition to our own, we can also offer medium-term notes from selected cantonal banks with a state guarantee.
  2. The traditional investment advisory services based on the requirements of Art. 6 and 7 of the VBVV. They combine flexibility and the right to have a say, and are suitable for assets of CHF 500,000 upwards.
  3. The VBVV 7 strategy fund pursuant to Art. 7 paragraph 1 of the VBVV. This is ideal for amounts between CHF 100,000 and 750,000.
  4. People who want to have as little as possible to do with the investment of the assets can give us a traditional discretionary mandate on the basis of Art. 7 paragraph 1 of the VBVV. A private mandate is recommended with amounts above CHF 500,000.

When the different services are most appropriate doesn't just depend on the investment amount. We are happy to advise all conservators individually so that the best solution can be found for them and for the client in question.

Is it possible for the asset management to be continued in the same way as it was previously handled by the person who now lacks mental capacity?

No. A conservator is always bound by the CAPA's investment regulations.
If you feel uneasy about the idea that the authorities have a say in the management of your own assets, you should draw up an advance directive while you still have legal capacity. In a directive of that kind you can specify who should take over the asset management in the event of your lack of mental capacity. This can also be more than one person. This person is not bound by the investment ordinance with regard to asset management and is not monitored by the CAPA.

Finally, do you have one last tip for conservators?

Conservators should contact us as soon as possible after they are appointed so that we can give them the best possible support. First, it is important that we are informed about the conservatorship. Otherwise, it is possible for a protected person to continue to withdraw money or even execute investment transactions. Second, after a conservator is appointed, the situation on the stock exchange can change to the detriment of the protected person. The conservator is responsible for the protected person's financial situation.

Roman Ziegler, investment specialist for conservatorship assets, Credit Suisse, Zurich.

Roman Ziegler, investment specialist for conservatorship assets, Zurich 

After studying law, Roman Ziegler started his career at Bank Leu. He subsequently moved to the then Swiss Bank Corporation, where he set up and led the financial planning area. Next, he was head of Private Banking Switzerland at Bank Hofmann. Following the merger of Hofmann, Clariden, and Leu to form Clariden Leu, Roman Ziegler led one of the Private Banking Switzerland departments in the newly established bank. Since 2013, he has managed Credit Suisse's conservator clients in Region Zurich.