What is an asset manager?
According to FINMA (Swiss Financial Market Supervisory Authority), asset managers are persons who can dispose of the assets of third parties on a professional basis with a power of attorney . According to the Financial Institutions Act (FinIA), an asset manager is a person who “can dispose of clients’ assets within the meaning of Article 3 letter c numbers 1-4 FinSA on a professional basis and for their account on the basis of an order” (Art 17 FinIA). Asset managers also include persons who manage the assets of collective investment schemes or pension funds below certain thresholds. Asset managers require a license from FINMA to carry out this activity.
What makes a good asset manager?
Not all asset managers are equally professional. The tasks of an asset manager are complex and require a high level of specialist knowledge as well as social skills. When choosing a good asset manager, clients should pay particular attention to the following:
The asset management process begins with a discussion to determine the client’s investment strategy. It is particularly important that the asset manager covers the client’s objectives with the strategy. In doing so, the asset manager must take into account the client’s risk capacity and risk appetite. A good asset manager is interested in the client’s current life situation. They are also interested in planned and unplanned changes to the client’s life situation in the future in order to adapt the investment strategy flexibly. An asset manager therefore not only keeps an eye on the assets under management, but also always considers the overall financial situation of their clients. A good asset manager needs a pronounced empathy for client needs and a high degree of social competence. The focus of their work should always be on the needs of their clients. When selecting an asset manager, attention should be paid to conflicts of interest: There are very good independent asset managers who work without retrocessions. This ensures that they work in the interests of their clients instead of selling products from their bank. Asset managers who receive commissions or are employed by banks are particularly tempted to sell only certain products with high commissions or to use funds and financial products from their own employer. For this reason, asset managers should ideally not offer their own products so that no conflicts of interest arise. A good asset manager therefore has sufficient soft skills and sound specialist knowledge and, in the best case, is even independent and without conflicts of interest.
In summary, a good asset manager must have the following skills:
Soft skills
- Social skills: Empathy, trustworthiness, communication skills, knowledge of human nature
- Activity and implementation-oriented skills: customer orientation, analytical skills, judgment, use of knowledge and information and willingness to take risks
- Personal skills: Passion, self-confidence, creativity, adaptability, decision-making ability, flexibility, logical thinking, willingness to take responsibility
- Methodical skills: Perceptiveness and analytical thinking
Professional qualifications
- Professional qualifications and experience
- Specialist knowledge of all types of investment products
- Understanding of economic relationships
- Knowledge about company valuation
- Must be a specialist and generalist at the same time
- Regular, in-depth training and further education
- Independence
- Without conflicts of interest
Investment advisor vs. asset manager in Switzerland
The Financial Institutions Act (FinIA) and the Financial Services Act (FinSA) came into force in January 2020. As a result, certain financial market players require a license to continue their activities. Asset managers are among these financial market players. Investment and client advisors must now be entered in the register of advisors. Both must join an ombudsman’s office.
Investment advice only concerns advice and recommendations from an advisor (Art. 3 lit. c no. 4 in conjunction with Art. 3 lit. a FinSA). This means that the client only draws on the expertise of the advisor, but carries out the transactions himself. However, an asset manager may freely dispose of the client’s assets (Art. 3 lit. c clauses 1-3 FinSA). Of course, the asset manager only acts within the framework of the asset management agreement, which contains the agreed investment strategy. The investment strategy is developed together with the client according to their wishes, risk capacity and risk appetite. Nevertheless, the asset manager makes independent investment decisions that are within the scope of what has been discussed. The asset manager is given limited power of attorney for this purpose. If the asset manager wishes to invest in assets that are not defined as financial instruments by the FinSA, the asset manager must join a self-regulatory organization (SRO). This is necessary due to money laundering regulations.
The license must be issued by FINMA. For this, the asset manager must meet many personal, financial and organizational requirements. These include a registered office in Switzerland and good organization. In addition, sufficient financial resources must be available. The asset manager must also have a good reputation and sufficient professional qualifications.
Investment advisors, on the other hand, do not require FINMA authorization. They are therefore not supervised by FINMA (via the supervisory organization). Under FinSA, however, they are client advisors and are nevertheless subject to certain requirements, such as specialist knowledge, knowledge of the rules of conduct and, as already mentioned, an entry in the register of advisors and a connection to an ombudsman’s office.
Legal – The requirements of the asset manager in Switzerland
An asset manager in Switzerland must meet stringent requirements in order to obtain a license from FINMA. The requirements are summarized in general terms below. The requirements are set out in the Financial Institutions Act (FinIA):
- Organization: appropriate corporate governance rules – the organization must comply with legal obligations, have appropriate risk controls – with effective internal controls.
- Place of performance: Management based in Switzerland.
- Guarantee: The financial institution and management must offer a guarantee of irreproachable business conduct. The management must have a good reputation and the necessary qualifications.
- Protection against confusion and deception: The name of the financial institution must not be misleading.
- Ombudsman’s office: The asset manager must join an ombudsman’s office.
Other regulated points are that the tasks may generally be delegated to suitable persons and that the foreign business must be reported to FINMA before it is carried out.
An asset manager must also fulfill other criteria:
- Requirements for qualified managing directors: Appropriate training, sufficient professional experience in asset management for third parties – according to Art. 25 FinIO, this is at least 5 years of work experience in the profession of asset manager – and at least 40 hours of training.
- Risk management and internal controls: Risk management can be performed by a qualified managing director or delegated to suitable persons.
- Minimum capital and collateral: The minimum capital of asset managers is CHF 100,000.
- Own funds: Adequate own funds, at least a quarter of the fixed costs of the last annual financial statements and a maximum of CHF 10 million.