In early 2023, after a three-year transition, the Financial Institutions Act (FinIA) was fully implemented in Switzerland. Under this new regulation, portfolio managers, including wealth managers, are required to register on a publicly available list maintained by FINMA, the Financial Market Supervisory Authority.
This legislation not only mandates personal qualifications but also introduces minimum capital requirements and adds organisational complexity. Consequently, specialised investment advisers and individual practitioners are looking for leading-edge solutions to meet these new demands and to continue to offer superior services. This has led to a consolidation in the industry, with professionals joining larger bank wealth management departments or selling their businesses to larger wealth managers.
However, as is often the case, stricter regulations spur new opportunities. Across various industries, from hospitality to finance, we’ve observed this phenomenon. In wealth management, the personal touch and care professionals provide remain invaluable. These soft skills, crucial in a field where personal relationships are key, are complemented by technology, particularly in areas required for legal compliance as well as reporting.
In response, a few players have emerged to lower the barriers for entities aspiring to offer wealth management services. These players must obtain the portfolio management license from FINMA, adhering to strict regulations and fulfilling ongoing requirements.
By partnering with these firms, former wealth managers, as well as financial advisers and financial planners, can operate under the licensed entity’s umbrella. This collaboration allows them to focus on their advisory roles while benefiting from streamlined operational processes. The economies of scale achieved by offering services to multiple parties justify the investment in technological solutions that enhance products and processes.
Enhancing wealth management with digital platforms
A significant advancement is the introduction of fully digital platforms that make wealth management as a service accessible for investments lower than CHF100,000. This caters to a US$3 trillion market in Switzerland and US$28 trillion in Europe.
While affluent generations are accustomed to digital products, we see that the trust built between advisers and clients remains paramount. Our aim with the end-to-end platform is to support and enhance this trusted relationship.
In the past, advisers and their clients have often been burdened by the extensive paperwork required for the onboarding process, as well as the potential delays at various stages. Now, advisers can effortlessly onboard clients using digital tools that connect them to the licensed wealth manager and custodian banks. This allows them to maintain their advisory roles while outsourcing onboarding and KYC processes.
Digitisation addresses another critical need: transparency. Consumers rightfully demand up-to-date portfolio performance, a challenge in traditional wealth management. However, open APIs and other technological advancements have eliminated this barrier, enabling the development of products that both clients and advisers can use independently while staying interconnected for an enhanced experience.
Rapid advancements in Artificial Intelligence (AI) present new opportunities to enhance these technological breakthroughs. Keeping pace with such developments is essential; failure to do so poses the risk of falling behind and not fully embracing this evolving landscape. We anticipate a greater number of practical applications emerging from this iteration of AI. While these should be balanced with the irreplaceable value of human relationships, it is short-sighted to ignore the potential challenges to the status quo.
Interested in reading the full report? You can read this edition of the Swiss WealthTech Landscape Report 2024 online here.
