WealthBriefing, which is working with Coutts on a major research about independent wealth managers in Switzerland, asked the private bank on why this issue is so important for the firm and for the country's financial industry.

Swiss banking has challenges but a major opportunity arises in how banks can serve the SFr400 billion-sized independent wealth management sector in the Alpine state. And in new research, WealthBriefing, in association with Coutts, intends to find out what IWMs need to run a successful business model. (Details on how to take part in the survey are given below.)

There are around 2,600 Swiss-based IWMs; the previously mentioned SFr400 billion AuM figure accounts for 13 per cent of total private banking assets. The market has been growing steadily since 1990. The number of IWMs is, however, expected to fall due to consolidation and succession challenges as independent wealth managers retire and also because of regulatory factors. The long-term future of the IWM business model is heavily dependent on the regulatory environment, Coutts says.

Among the topics addressed by this study will be: the impact of new regulation on Swiss independent asset managers’ business models; how firms are using technology to enhance profitability; the relationship between service providers like banks and independent asset managers; and asset managers’ confidence levels for prospects of their sector and for Switzerland as a whole. 

Despite their typically small size, independent asset managers are an incredibly important part of Switzerland’s financial services industry. Due to their perceived independence and alignment of interests with their clients, independent Swiss asset managers enjoy the loyalty and trust of a diverse client base. Meanwhile, independent asset managers themselves are vigorously courted by banks and others wishing to provide the back-office and custody services which allow these small firms to compete for wallet share with far bigger institutions.

Recently, WealthBriefing travelled to Zurich to meet Coutts’ Klaus-Michael Christensen, director, head for independent wealth managers for Zurich. He spoke about the bank’s interest in this area and why Coutts wanted to push ahead with the research project.

“The IWM industry has been undergoing tremendous change over the past three years. Although there are numerous reports out there that track the asset management market as a whole, none of the reports focus on the sentiment of the Swiss-based independent wealth managers and how they see their industry developing in the future. As a result, together with WealthBriefing, we decided to contact all 2,600 SRO/FINMA-regulated IWMs, to gather industry insights which IWM would themselves find valuable and helpful in the management of their businesses. 

Of the 2,616 Swiss based IWMs, 865 are based in the French speaking part of Switzerland (739 in Geneva), 1580 in the German speaking part of Switzerland and 171 in Ticino.

“We believe that the IWM market will become an even more important segment within the Swiss financial industry. [Asset managers] are a very heterogeneous group of companies. Because of the current changes in the industry we believe that now is really a good time to take the pulse to find out what they are thinking and what their concerns are,” he said.

“Independent wealth managers demand more than just process-based execution-only service from their banks. The market demand is changing; it is much more complex to serve high net worth and ultra high net worth individuals. I see the business moving in the direction of partnership bases arrangements with the IWMs.”

One issue for these firms is learning that going alone is not as simple as it might sound, he said.

“Many managers of IWMs were previously employed by large firms, such as banks, and were used to having operational, HR and other functions taken care of. It is a challenge to be independent with all the entrepreneurial issues that the daily running of a company brings. I believe that banks can play a really supporting role here,” he said.

And Coutts’ experience as a bank with a long pedigree will be an important edge, Christensen said.

“Coutts has served IWMs for more than 20 years and therefore understands their needs. We want to take a supporting role in the discussion about the development of the sector. When IWMs and banks combine their strengths it will surely improve the image of Switzerland as a financial centre as a whole going forward,” he said.

Models

The Swiss IWM sector operates a variety of remuneration models, such as through retrocession to advisors and other intermediaries, all-in fees with or without retrocession, or charging clients on an hourly or some other scheduled agreement, as with a law firm.

“The charging method is going to be transparent,” he said, when asked whether Switzerland is going to copy the reform programme enacted in the UK under the Retail Distribution Review reforms. (The RDR has stamped out the use of trail commissions to advisors.)

He was asked if there were particular firms he would cite as examples of important IWMs.

“All IWMs are important to us. The independent wealth management market is very heterogeneous and no IWM is alike. It is important that banks acknowledge the diversity of the independent wealth managers and accommodate as many of their needs as possible instead of providing a one-fits-all product,” Christensen said.

How to take part:

For the English version of the survey, click here

For the German version of the survey, click here.

For the French version of the survey, click here.