The clock is ticking in the industry of independent wealth managers – with a new regulatory framework in place since the start of the year. Some players are ready to emerge emboldened from the consolidation that will inevitably take place.

Stefan Bucher is an energetic entrepreneur. Some 18 years ago, he founded Corum Wealth Management in Zurich. Today, he is the master over a minor financial empire that stretches as far as Australia.

With his Swic-Gateway (Swic being the acronym for Swiss Invest Coin), Bucher is about to enter the new business with tokenized funds and other financial products. He has also taken a stake in a brokerage to gain access to distribution channels in the Asia-Pacific region. And he is invested in Samuel Haas & Partner, a family office for professional sportspeople. Last but not least, he owns the Swiss Fund Platform as well as the Rocum consultancy with his Corum Holding.

Higher Costs for Most

With assets under management north of the one-billion-franc mark, Corum isn’t one to worry much about the new Financial Services Act and Financial Institutions Act (FinSA and FinIA). Unlike the more than 2,500 independent wealth managers, with an average three members of staff and about 200 million Swiss francs ($215 million) in assets under management.

For those, the new Swiss regulatory framework means more complexity and higher costs. So high in fact that the basis for a profitable existence is put in question. With the demographic structure of the industry as it is, it stands to reason that a wave of consolidation will sweep away mainly the smallest of these wealth management boutiques.

Wealth Management Under One Roof

Away, or into the arms of companies such as Corum. Bucher last year founded the Corum Wealth Management Platform, a business that he designed to allow wealth managers coexist under one roof, offering services key to allow them continue with their business despite the regulatory and competitive pressures.

Corum isn’t the only firm to see opportunities in a market that is undergoing a major transformation. Aquila is another such company to offer similar services, while further wealth managers are active as consolidators.

Avalor, Marcuard and Swisspartners have launched Fred, a forum for all business aspects not relevant for the client-facing and other more tightly controlled activities. The three partners are making Fred available for other wealth managers to join.

Select Modules

Corum’s business idea is to offer rival wealth managers services that it has readily available and which it can easily share – at a certain price of course. It is offering a selection of modules to choose from: regulation (risk management/compliance); back office (portfolio management, bookkeeping), IT and office infrastructure.

Thomas Tietz, CEO of the Corum platform told finews.com that the onboarding of firms was now underway: «We have a dozen commitments from Zurich and the rest of the German-speaking part of Switzerland as well as the Ticino region. In our case, we expect to onboard between 25 and 50 wealth managers to our platform by 2022, but we already see that it could become more. We have reached our target for 2020 already.»

Additional Costs of 1,000 Francs

The new regulation will add about 1,000 francs to the costs of managing the assets of a client for wealth management firms, Corum estimates. The profitability of doing business with clients who own less than 1 million francs in assets is thus called into question. Many wealth managers have already moved out their legal and compliance. With demands from clients rising, the wealth managers require a more up-to-date IT. But a portfolio management and documentation system alone costs several ten thousands of francs each year.

Corum says it can provide those services at a lower price – allowing them all to profit from economies of scale.

A Bad Bank of Sorts for Risk Clients

Wealth managers can also opt to move their entire business under the roof of Corum or to keep their business independent while giving Corum a share of the profit. Both options include the bookkeeping on the Corum platform and access to all services provided by Corum.

One of the problems that the industry faces are linked to clients who still don’t comply with their country’s tax regime. Corum plans for this a type of bad bank: «We have a solution for this potential problem: We are looking carefully into risky clients together with specialists in legal, tax and compliance matters, we are conducting necessary checks in relation to know-your-customer rules and we will regularize such assets,» Tietz said.

Major Potential Legal Consequences

The time is right to introduce such solutions, he believes. «With the introduction of FinSA and FinIA, the clock has started ticking for independent wealth managers: they have to decide by June whether to continue with their business and companies independently and declare as much with Finma,» said Tietz. They will then have until the end of 2022 to implement – and there is no more escape route for wealth managers.

The potential legal consequences are leaving no room for doubt: failing to comply with the rules and regulation of the financial services law carries a maximum penalty of 500,000 francs.