The FinSA is intended to protect the clients of financial service providers and to create comparable conditions between the various players in the sector. The legislation thus contributes to strengthening the reputation and competitiveness of Switzerland as a location. Among other things, it defines the requirements for a faithful, diligent and transparent supply of services and regulates the offer of financial instruments. For its part, the FinIA regulates the requirements for the exercise of the business of financial institutions, with the aim of protecting the investors and customers of the institutions and ensuring the functionality of the market.
Subsequently, the Finma, the Federal Financial Market Supervisory Authority, recognized as a minimum standard the self-regulation adopted by the Asset Management Association Switzerland (AMAS), with which the new provisions of the FinIA and FinSA are implemented, which will come into effect effective January 2022, XNUMX.
What is the scope of these new measures on the business of asset managers, and what are the consequences for clients? We asked Massimo Vecchio, President of Amgest of Lugano, who recently received the authorization from Finma. Founded in 2006, Amgest is an independent asset management company, which offers portfolio management and consulting services for high net worth individuals, institutional clients and Family Offices.
Very soon the independent asset managers of individual client portfolios (Gpi) will have to have a license issued by the Finma to operate. What requirements must be met to obtain it?
«These are mainly organizational and capital requirements, which also provide for a minimum number of people employed and adequate risk management and compliance measures, also obtained through a strict separation of functions. The manager's structure must be adequate to the complexity of the business operated and the relative level of risk. In this context, precisely to better understand how the concept of risk is considered by the Finma, the supervisory authority applies increased criteria, if the provision of services is aimed for example at resident non-Swiss customers and uses its own financial instruments ".
The new rules were designed primarily to protect savers. Are the improvements in this respect substantial?
"Absolutely yes. Suffice it to say that until now it was possible to conduct asset management and related financial advice to customers with large assets even with a "structure" made up of a single person! It is easy to understand how extremely high the potential risk of less attention to the back-up and control systems was. The quality of services and safety for customers will be significantly improved, to the benefit of customers ".
What are the operational possibilities that Finma authorization will offer?
«Much depends on what is meant by operational possibilities: the authorization and obtaining it will be the minimum indispensable condition for carrying out this profession in a professional and serious way. Certainly, the fact of addressing potential customers by having a high-level organization and through services supervised and authorized by the Finma, will considerably increase the business possibilities, especially as regards UHNWI (ultra-high-net-worth individuals), who have extremely complex needs to satisfy. Furthermore, further opportunities will be created in the event that this type of authorization is also recognized outside Switzerland and equated with the regulations in force in other European countries. I am sure that for our market the advantages in the medium term will be very important, because these regulatory changes will contribute to substantially improve the quality of the services offered. The new laws will lead to a healthy process of aggregation and concentration between managers that will produce more solid structures, and above all able to invest in skills, research and innovation ».
Did Amgest have to review many internal processes in order to obtain authorization? Did this improve operational efficiency?
"Of course. We have had to insert many new processes and thoroughly review the organizational structure since we have given ourselves an important growth plan, and precisely on the basis of our characteristics we have been judged by Finma as an adequate and complete structure. All these substantial improvements will allow us to better manage the growth path that we have been riding for some time. For example, with the expansion of the business and the number of resources involved, it was very useful, as suggested by Finma, to create a management that reports directly to the Board of Directors. This has allowed us to better organize our activities by making more important professional figures more responsible within us ».
What are the consequences for customers? What are the advantages of contacting an operator in possession of the Finma authorization?
«By the end of 2022, if an independent asset manager has not received the authorization, he will not be able to continue operating the business in the future. This is why we will certainly see customer migrations towards authorized structures. The advantages are that of having an organized and supervised structure capable of guaranteeing a continuous and professional service ».
Investors are now confronted with a delicate financial environment, with exchanges running a lot and yields at their lowest on the capital market. How does this situation combine with the need for qualified advice and attention to market risk?
«All financial operators are aware that the risk of sudden market corrections is always present. In this context, the quality of research into financial products and the comparison with the risk manager will make the difference more and more. In any market situation, a serious and reliable asset management structure must know how to apply the appropriate strategies to adequately protect the clients' portfolios. In this context, only those who are equipped with figures suitable for risk control, thanks to high know-how and the aid of advanced technological tools, will be able to face the volatility and risks of the markets with greater skills. For this reason, the choice of a qualified asset manager becomes fundamental ».
