A new era for asset managers in Switzerland

The new FINMA license for Swiss portfolio managers and the importance of the choice of service providers  

The new financial market regulation stipulates that all asset managers in Switzerland must obtain a license from FINMA by the end of 2022. To date, however, only a small number have applied for such a license and risk forfeiting the right to manage their clients' funds. This increases the pressure to act. Navigating this process succeeds with the help of specialists - one of whom is an innovative service provider: Wealth Management Zurich (WMZ). 

The beginning of 2020 heralded a new regulatory age for Switzerland’s financial markets. In January 2020 the Financial Service Act (FinSA) and Financial Institutions Act (FinIA) came into force with the objective of harmonizing the country’s financial market architecture.  
 
Following the principle “same business, same risk, same rule”, all previously self-regulated independent and external asset managers are now falling under a uniform regulatory framework for either “portfolio managers” or “trustees”.  
 
Portfolio managers professionally manage assets in the name and on behalf of their clients through a power of attorney on client’s accounts. Thus, all managers who started their business activities before 1st of January 2020, must apply for and obtain a corresponding license from FINMA by the end of 2022. [1]   

The path to this licensed status is more complex and time-consuming than many think. This might explain why only a small share has applied for the license so far. As of May 2022, only 177 portfolio managers and 7 trustees had been accepted by FINMA [2] - a fraction considering that there are roughly 2200 asset managers operating in Switzerland. [3] 
 
The lethargy is surprising - especially since the pressure to act is increasing. Applications for a portfolio manager license must already contain proof that the applicant is already affiliated with a FINMA-regulated SO, a step that needs to be taken beforehand. There’s a choice of five SO, two in the Swiss-German (FINcontrol and AOOS) and three in the French part of Switzerland (down from eleven SRO options formerly). [4]  
Although the deadline is until the end of 2022, it can be assumed that the number of applications will increase significantly from June onwards. With this comes the risk of delays - considering that the process takes some months, already on SO level before the application even reaches FINMA. Those who do not receive the license will only be able to act as simple consultants from there on, but not manage portfolio anymore. 
 
Several service providers and larger asset managers have dedicated their business to assisting asset managers in the application process for a portfolio manager license. In most of these cases, however, a collaboration means that smaller asset manager must sell their company or give up control of the business activity, and thus income.  
But there are also other ways, for example Wealth Management Zurich (WMZ) follows a different logic. Unlike the range of services offered by other providers, WMZ has a modular offering, covering the following: 

• FINMA (and SO) licensing support
• Compliance outsourcing  
• Internal control systems
• Compliance with risk and investment profiles
• Pre- and post-trade checks
• CRM and PMS software…

 …and more, [5] this allows portfolio managers to remain independent and to select the services really needed at calculable costs - cost transparency is part of WMZ's core value proposition. The process may be started with an online assessment. [6] 
 
Please feel free to reach out if you want to learn more about the FINMA license application process, related services or experiences made so far.