For about half a year now, independent asset managers have needed a Finma license to operate. Many of the smaller players now run the danger of having their lean business models collapse, maintains Nicolas Mousset in a piece for finews.first.

This article is published on finews.first, a forum for authors specializing in economic and financial topics.

The regulation and supervision of banks and asset managers has changed dramatically since the 2008 financial crisis. Any number of new rules and ordinances have since come into play. In parallel, as part of the overall industry’s drive to transform digitally, countless fintechs have since sprung up, revolutionizing entire sectors of finance.

The new actors in the market are forcing the traditional ones to invest or give up. That is now progressively happening as costs rise, and profit margins fall. Even though it might be difficult for many to grasp, the burdens of compliance, risk management and IT have become a tremendous challenge for the Swiss financial sector.

«Smaller asset managers run the risk of having their business model collapse»

Since 2008, the independent asset management sector has grown at a tremendous pace. They have been helped along by a strong entrepreneurial spirit and a largely unregulated environment. Many offered a comprehensive selection of products and a certain freedom of action that stemmed from a leaner and less expensive business model. They quickly became important sources of revenue for banks acting as custodians.

In the past, it was very possible for independent asset managers to keep their organization streamlined and focus on a selection of third parties and service providers to serve their own clients. But now the new rules necessitate more comprehensive structures with relevant management and supervisory capabilities. Smaller asset managers run the risk of having their business model collapse.

«Many independent asset managers are small entities with very few growth perspectives»

Against this background, regulated asset managers have entered numerous alliances that pay heed to the logic of cost synergies, and occasionally, the pooling of commercial interests. The pace of the consolidation is largely dependent on the age structure of management and whether those involved are a suitable match. In ideal cases, one of the partners ends up being bought out.

But many independent asset managers are small entities with very few growth perspectives. They are also more vulnerable to the loss of large clients. Most of them have not applied for a Finma license but are simply hoping that they will be taken over by a competitor who is licensed instead. Failing that, some may think they can continue operating as an independent financial advisor instead of an asset manager.

«The trend will continue to accelerate»

Given this premise, it is likely that the independent management landscape will change as drastically as it has in neighboring countries. Regulatory pressures, new technologies and changing client needs will only serve to accelerate those trends. An important role will also be played by investors who are trying to bring together asset managers under one roof, in the way that Cinerius is currently trying to do.

Nicolas Mousset, co-founder of Atlantic Financial Group, has over 25 years of international experience in the financial industry. Prior to founding the company, he held a range of managerial positions in Europe and Asia for HSBC and Société Générale, among others.

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