Asset management in Switzerland

With its outstanding tradition of monetary market operation, Switzerland is fairly considered the leader at the cross-border level in the field of asset administration. The structure of asset management in Switzerland applies various business models. Large banks actively cooperate with a range of smaller niche players, constituting the core pillar of their financial center. Read on to find out the main peculiarities of this industry.

Overview of asset management in the Swiss jurisdiction

Along with banks, independent asset managers present a large part of the para-banking vehicle within the Swiss financial domain, with, until recently, a limited level of regulative supervision. However, in 2020, this condition changed with the adoption of 2 standard setters – FinIA and FinSA. These new provisions of law now define the rules and obligations in administration and supervisiοn of the operation of asset managers who are now under the remit of financial law.

Current issues in the Swiss field of asset managing include a number of regulative amendments as a response to a wave of regulative activity and developments occurring at the EU level. Respectively, the country’s legislation is being constantly amended to coincide with adopted norms practicable in the EU and strengthen the security of market players.

Regulative basis takeaways

Generally, there is no one authorization encompassing all financial instruments in Switzerland. Some operations a subject to compulsory licensing, whilst others can be delivered without obligatory approvals. Under the practicable laws, the institutions operating in Swiss financial markets, that are subject to licensing and under regulative supervision by FINMA, include:

• banks;
• firms providing insurance;
• brokerage business;
• funds, asset management, and trustee companies.

Despite Swiss jurisdiction do not have membership in the EU or EEA, it still constitutes the single market platform. Accordingly, EU law does not apply directly to operations carried out in Switzerland.

The recently set regime for asset management in Switzerland is an example of the adaptations implemented to stay in line with international rules. In this relation, the FinSA mechanism is a crucial change both for local and foreign firms servicing Swiss-based customers.

Therefore, the provision of Swiss asset management is implemented under the following terms laid down by the FinSA:

• categorizing customers into such groups as institutional, professional, and retail;
• adherence to legal obligations and business organizational requirements;
• the affiliation with ombudspersons; and
• entering a register by customer advisory providers.

The worth of attention is the issue of retrocessions, the so-called commission paid to financiers. It is also dubbed as finder’s fees, kickbacks, and soft dollars. In line with the amendments in the legal and regulative fields at an international level, Switzerland’s asset management sector is now altering its remuneration system to be less dependent on such types of inducements. But, contrary to the EU’s regulation, retrocessions are lawful albeit more restricted.