Retrocessions - money, which belongs to the clients

Retrocessions are commissions that banks and asset managers receive from third parties. For decades, banks and asset managers collected retrocessions which belongs to their clients. An asset manager receives such commission, for example, for selling financial products from a particular bank to his clients.

In 2006, the Swiss Federal Supreme Court ruled in a landmark decision that independent asset managers must surrender retrocessions to their clients. In 2012, the Federal Supreme Court clarified that the obligation to surrender also applies to banks if they manage assets of clients. In a further ruling, the Federal Court decided that the limitation period for the right to surrender retrocessions is 10 years, i.e. retrocessions of the last 10 years can be reclaimed from asset managers and banks.

Retrocessions create false incentives in advising clients and in asset management. Consequently, there is a conflict of interest in the sense that the client is not offered the most suitable product for him, but the product with the highest sales compensation. This conflict of interest leads to the fact that a bank, for example, does not invest in the fund product A, which would be optimal for the customer, but in the less suitable fund product B, which however generates a higher commission.

However, retrocessions can only be claimed back if one has not legally waived his right. For a valid waiver, specific requirements must be met, which needs to be examined in each individual case. Even if a customer has waived his right to claim for future commissions, retrocessions from previous years can still be demanded.

For decades, banks and asset managers have wrongly retained retrocessions instead of handing them over to their clients. On average, clients have thus lost up to 1% of the assets under management per year. In addition, the bank or asset manager owes interest at 5% per year. If retrocessions have been wrongly collected by the bank or asset manager over a period of several years, this can result in substantial claims.

It is therefore always worth clarifying whether and to what extent retrocessions have been paid out to your bank or asset manager. As a first step, you must obtain an overview of the retrocessions paid out to the bank or asset manager over the last 10 years. Asset managers and banks are obliged to account to their clients and provide information on the retrocessions received.

As soon as you know how many retrocessions your bank or asset manager has collected over the years, you can demand them back. Retrocessions that have been reported can usually be enforced easily and inexpensively. Should you have any questions on this subject, the lawyers in our network will be glad to help you.