Asset and portfolio management
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 climate towards modern asset and portfolio management service is very positive.
Obligations and requirements to provide asset and portfolio management, or ancillary services described above
Since the entry into force of the Financial Services Act (“FinSA”) and the Financial Institutions Act (“FinIA”) in 2020, providing financial services on a commercial basis in Switzerland or to Swiss based customers are relatively strictly regulated and may trigger a licensing requirement in Switzerland under FinIA.
Financial institutions require a license of FINMA in order to legally operate in Switzerland and are bound by certain organisational rules such as appropriate organization (including inter alia risk management, effective internal control system), the financial institution as well as its management must meet the regulatory fit and proper test (including good reputation and ensure a proper business conduct), the financial institution must be managed in Switzerland. Financial institutions within the meaning of FinIA are (i) asset and portfolio managers, (ii) trustees, (iii) managers of collective assets, (iv) fund management companies and (v) securities firms. The licensing regime follows a pyramid approach, i.e. while the regulation for asset and portfolio managers is rather light weight, the regime for fund management companies, managers of collective assets and securities firms is rather strict. In order to obtain the relevant license, asset and portfolio managers need to be affiliated with a supervisory organisation (“AO”).
Further, FinIA relies on the principle of territoriality and, hence, financial institutions domiciled outside of Switzerland which provide their services to customers located in Switzerland on a strict cross-border basis, without establishing a permanent physical presence in Switzerland (i.e. by a subsidiary, a representative office, a factual branch), do not trigger licensing requirements.
Financial services under the FinSA are activities such as, inter alia, (i) acquisition or disposal of financial instruments, (ii) receipt and transmission of orders in relation to financial instruments, (iii) management of financial instruments, and (iv) provision of personal recommendations on transactions with financial instruments. The provision of financial services under FinSA may trigger requirements to comply with conduct rules and organisational rules. This regime may even apply to services provided to customers in Switzerland on a cross-border basis.
The costs, in particular for obtaining a license as a financial institution as well as running costs and financial reserves depend on the individual case. The equity capital must be at least CHF 100,000.
Additional comments regarding the legal situation for asset and portfolio management services or what FinTech’s must be aware of in this business area
Market size for asset and portfolio management services and biggest companies in this business area
According to a study of the Lucerne University on Swiss Asset Management, the asset under management, managed in Switzerland, grew by 10.6% in 2020 to CHF 2.79 trillion. The largest asset managers still are bank-owned firms in terms of total AuM managed in Switzerland including UBS Asset Management, Credit Suisse Asset Management and Swisscanto Invest by Zürcher Kantonalbank.
Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area
Sustainable investments are one of the key trends in the asset management industry and the biggest opportunity in Switzerland according to a study of the Lucerne University on Swiss Asset Management.