The first generation which had the chance to build fortunes after the IIWW has passed away. Today we have the opportunity to see how well they did in ensuring safety of their property and financial stability of their relatives.
While the current availability of multiple financial markets allows for diversification, the approach to investing capital can vary. Some entrepreneurs are determined to keep their capital within reach (i.e. hold deposits in banks with which they are in direct contact, e.g. banks in Poland). Others opt for capital diversification abroad. Often they start with a relationship with a single financial entity and never stray, which may prove fatal. I will go back to it a bit later.
Until the Thirties–Fifties of the last century, there had not been much choice in the matter. Capital was deposited in Switzerland, a country offering political neutrality, safety and bank secrecy. Switzerland presented itself as a safe haven for the war-worn world of finance, playing the role of a sort of a gentlemen’s club. This is where family assets were invested in hope that they would last forever courtesy of the Swiss trustworthy banking system.
What is the situation in the 21st century?
Once sacrosanct, principles of capitalism nowadays give way to a global fiscal policy, while Swiss reliability is being replaced by ruthless red tape. The mask of deception falls, unveiling brazen hypocrisy. Or am I going too far with this…? Let us see.
As late as in the Nineties, banks in Switzerland would still not sign contracts with their clients. There was no need for a contract. The relationship’s only foundation was a several-pages-long request to open a bank account signed by the funds’ owner only. Phone number to their personal banker was the only thing related to the account to be kept by the owner at their family home. Plus, optionally, the bank’s address. All the assets data, including the bank account record, was retained by the bank.
To fully grasp the specific nature of this relationship with the bank, it suffices to say that a bank transfer could be made from virtually any place in the world. All you needed to do was send a fax saying: “Natalie, please transfer USD100,000 to this bank account number. Best wishes. Signed by…”. The fax was followed by a phone call. No passwords or PIN numbers were confirmed during the call. A friendly chat about summer vacation would ensue instead. After the phone call, a transfer would be made.
The same principles applied to transfers of funds to a family foundation, or from a family foundation to the bank account of one of the family members in order to commit the funds to their care. There was no practice among clients to hold onto bank transfer confirmations, receipts etc. They were all retained by the bank.
Many of such relationships continued for years, some still exist today. It has to be stressed that these have been predominantly personal relationships. At the institutional level, such relationships work as long as both parties are equal partners. On the one hand, a bank wishes to acquire or retain a sought-after client. On the other hand, a client wants to establish or maintain a status-enhancing relationship with a reputable financial entity.
But what happens after 50 years of such cooperation, when a client, now an elderly and infirm person, no longer has much to give to the respected institution? At 30, they knew the bank’s owner (whose name can still be seen over the bank’s main entrance) in person. They have kept all their assets in this bank for their whole life. Today, these senior clients cannot offer anything but their expectations.
One would think that the bank will stand by its long-time client’s side when that client experiences familial or business problems and urgently needs access to documents or funds kept in a safe-deposit box or on a bank account. That is, one would expect that from gentlemen.
And what about the real world? Certainly, there is no doubt that the funds deposited in the bank belong to the client. It’s just that the bank must apply the beneficiary verification procedure. To do that, it will send its banker to Poland, who will then double-check the client’s identity. With all the formalities having been taken care of, the bank will issue appropriate instructions… provided that it is one-hundred-percent confident that the person requesting access to the funds/documents deposited in the bank is indeed entitled to them.
What if the instructions concerning the documents’ relocation between the accounts of individual family members are retained by the bank as per the rules and, consequently, there is no access to them? And what if the same bank keeps a will in a safety-deposit box to which it will not grant access while checking whether a potential beneficiary has indeed the right to open the box? Please note: the bank will not talk to any third parties (lawyers, solicitors etc.). The bank will only communicate with a potential beneficiary who, as it happens, is old, frail and can no longer look out for himself. Meet the bank’s most powerful weapon, the so-called confidentiality. Meant to benefit the client, confidentiality is now turned against him. In this particular case, it definitely serves the bank’s interests. If the bank withholds from any action, it cannot be accused of any wrongdoing.
And what about the client? Well, he has been unable to come to an agreement with the bank for two years. For months, the bank has been waiting for a statement from the client explaining what he needs these documents and funds for, but the client cannot produce the required documents as they are not in his possession.
It turns out that sometimes it is easier to sell a Kossak or family silver than access your own funds deposited at the bank.
There are two lessons to be learned from this.
A. We only trust ourselves and our closest friends and family.
B. Diversification in terms of how and where you place all your assets is the only recommended approach.
What happens next? Time will tell how successful our generation was in using the available tools of capitalism, such as crypto-currencies or various financial instruments, all entangled in a web of fiscal restrictions, or whether our lawyers, advisors and bankers rise to the challenge of an ever-so-dynamically changing environment.