Major changes in the independent asset manager industry are forcing custodian banks to adapt. If they don't, they will miss an important business that is one of the pillars of Swiss banking, according to a study available to finews.com.
Independent asset managers in Switzerland will have to fundamentally rethink their business models. With Finma requirements coming into effect in 2023, and subsequent changes in cost structures which will impact the downstream value chain.
Custodian banks in particular will face cost pressures if they see the intermediary business with independent asset managers merely as a by-product of direct business with wealthy private clients, a study by the Zug-based consulting boutique Advea Entrepreneurial Advisory (Advea), concludes. The study was made exclusively available to finews.com.
New Digital Opportunities
A lack of service orientation, less flexible pricing models, and the existing perception of serving primarily as a sales channel for banks' products are leading to simmering dissatisfaction among independent asset managers, the report continues.
Still, many players have shied away from changing their custodian banks because such a step has been associated with a high degree of effort, often manual. «However, increasingly better digital solutions for document exchange, identification, and APIs, and dedicated switching service teams, can make it much easier for independent asset managers to switch custodian banks in the future, while at the same time increasing their appeal to the digitally-savvy generation of heirs,» says Thomas Sontheimer, Advea partner, and co-founder.
Custodian Banks Scenarios
1. Standstill
Custodian banks counter the growing dissatisfaction of independent asset managers only with tactical measures to retain clients. Short-term feel-good measures merely prevent or slow down structural market changes, while further development of a customer-centric service offering in the B2B business does not happen.
2. Adaptation
Custodian changes are increasing due to better digital offerings, although few custodian banks are taking advantage of this opportunity. They are expanding their customer-centric service offerings and systematically profiting from shifts in market share.
3. Disruption
Increasing margin pressure among independent asset managers amidst a cloudy macro outlook and decreasing cost tolerance of end-clients collide with the lack of agility of custodian banks. As a result, entrepreneurially driven asset managers are launching an independent custodian bank, with the help of partners if necessary, and consolidating a considerable investment volume in the medium term.
«The development of the market for custodian bank services in the B2B context will certainly be more dynamic and customer-oriented in the future. New offerings that help independent asset managers achieve their strategic goals are overdue,» says Adrian Weber, CEO, and co-founder of Advea.
Pillar of Swiss Banking
The current structural changes in Swiss business and the reactions of custodian banks offer entrepreneurial opportunities and enable innovative cooperation models. With this, Weber and Sontheimer are convinced the intermediary business will continue to be a central pillar of Swiss banking in the future.
