FinTechs belonging to this category offer asset and portfolio management services via an internet platform or software programs and usually manage and dispose of the assets of their customers long or short term according to their specifications without actually holding the property or the possession of those assets. FinTechs, which provide information about and access to overnight or time deposit accounts at national and foreign banks and which execute the transactions to these accounts, also belong to this category. Some FinTechs however only act on request of the customer.
Aside from that some FinTechs offer software or internet solutions enabling users to manage and plan their personal finances on their own by providing graphics, overviews and compilations of their financial data and sometimes indicating financial risks or opportunities, but without actually managing the assets.
Attitude of the country towards modern asset and portfolio management services
The Austrian asset and portfolio management market continuously aligns with the related business models such as (crowd-)investing and brokerage.
The most developing businesses in the portfolio management sector are automated financial portfolio management and robo advisory. The asset management sector is mainly tech-driven and shaped by the trends of cloud computing, Internet of Things, advanced analytics as well as artificial intelligence.
Obligations and requirements to provide asset and portfolio management, or ancillary services described above
Asset and portfolio management are financial services covered mainly by the Austrian Trade Act (Gewerbeordnung – "GewO") and, as the case may be, by the Austrian Securities Supervision Act 2018 (Wertpapieraufsichtsgesetz 2018 – "WAG 2018") and, in addition, the EU-wide Regulation (EU) 2019/2033 on the prudential requirements of investment firms from 27 November 2019 (Investment Firms Regulation – "IFR"). Also, anti-money laundering and data protection regulations and the Directive (EU) 2019/2034 on the prudential supervision of investment firms from 27 November 2019 (Investment Firms Directive – "IFD") are to be complied with.
According to the GewO, asset management is a regulated trade, whose performance is tied to a certificate of competence. In order to carry out the activity, registration in the Austrian Trade Register is required. In addition, the conclusion of a pecuniary loss liability insurance policy is necessary to obtain and maintain the license. Since 2019, asset managers have a comprehensive training obligation of 20 hours per year in accordance with Section 136a para. 6a GewO.
The profession of asset management is an activity characterised by numerous legal regulations, which is always directed towards the responsible handling of the assets of the customer.
In order to be allowed to operate as a securities company in Austria, a license from the Financial Market Authority (Finanzmarktaufsicht – "FMA") is required. Before the FMA issues a license, the company is comprehensively reviewed. This process takes an average time of one (1) year. In particular, the equity capital, the qualification of the business managers, the organisation and the business plan of the company are considered.
Among other things, particularly sufficient initial capital consisting of Common Equity Tier 1 capital ("CET1") available in Austria is required to obtain an FMA-license. In case of asset and portfolio managers who, in providing financial services, are not authorised to obtain ownership
or possession of funds or securities of customers and who do not trade in financial instruments for their own account, an amount equivalent to at least EUR 50,000.00 in CET1 is required.
When offering portfolio management services, the service providers shall comply with requirements for the initial capital as well as the funds requirements at all times. According to Art. 92 Regulation (EU) No. 575/2013 (Capital Requirements Regulation – "CRR"), these are: a CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6% and a total capital ratio of 8%. When calculating the capital ratios, the fixed overheads of the respective asset manager have an important impact.
Additional comments regarding the legal situation for asset and portfolio management services or what FinTech’s must be aware of in this business area
Whether a license is required in Austria depends on the specific services of the asset and portfolio management to be performed.
Many Austrian regulatory requirements are derived from EU law or are influenced by EU-wide developments. EU requirements are implemented and transposed into Austrian law rather strictly. Therefore, the Austrian market is an ideal entry market for EU-wide asset and portfolio management businesses.
The legal entities that will later perform the regulated activities and therefore hold the license should be established at a very early stage. Given this, preparations required for the regulated activity can be duly conducted (for example lease agreements and personnel hiring).
Market size for asset and portfolio management services and biggest companies in this business area
Over the past few years, Austrian securities companies have distinguished themselves as financial service providers for institutional investors. The 112 securities firms and securities services companies licensed by the FMA (as of 31 December 2020) managed combined client assets of around EUR 51bn in the previous year, with the vast majority of assets, 90.41%, entrusted to them by professional clients. In individual portfolio management, where a total of EUR 23.2bn is managed, the share of professional customers, measured in terms of assets under management, is already at 93.4%. In terms of revenues, portfolio management accounts for more than 50% of the business, at EUR 88.5 million. Moreover, the investment firms operating in Austria manage EUR 12.7bn as third-party managers of investment funds. Following the structural changes in the market for Austrian securities firms in recent years, the industry is already preparing intensively for the implementation of the new European regulatory regime, the IFD and the IFR, which will place the market for securities firms on a completely new footing.
Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area
The asset and portfolio management is a traditional banking business. FinTechs that operate in this business area require a banking license themselves or have to cooperate with a credit institution.