The Alpine state’s EAM sector has been through several changes, not least new regulations. The author of this article considers where these firms are heading.

Eli Mizrahi (pictured), managing partner of Targa 5 Advisors, a Geneva-headquartered independent asset manager, aka external asset manager, talks about the state of the sector. Switzerland’s federal financial regulator, FINMA, has imposed new rules on the industry in recent years. Changes to the way banks operate have encouraged breakaway teams to form or join EAMs. On the other hand, regulatory costs have encouraged hundreds of EAMs to merge, consolidate, or close. The past few years haven’t been easy, but hopefully the remaining firms will be more resilient. We gained a sense of this enduring vigour in last week’s WealthBriefing Swiss EAM annual awards.

The editors of this news service are pleased to share these ideas from Mizrahi, and hope readers are encouraged to respond to these arguments. The usual editorial disclaimers apply to views of guest writers. Email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

Eli Mizrahi

The future of private banking is increasingly shifting towards independent firms, which continue to expand not only in Switzerland but also in major global financial centres. Recognising this trend, banks are investing in systems and solutions dedicated to external asset managers (EAMs) and pushing them to increase their share-of-pocket with these independent wealth managers. Financial results confirm this evolution: in many cases, the external asset management department represents a significant share of the banks’ growth, contrasting with the stagnation of traditional private banking.

This shift also highlights a growing challenge for banks: attracting talent and bankers capable of building portfolios as they did in the past. In some financial institutions, up to 60 per cent of results already stem from the EAM department. Banks that fail to embrace this partnership model risk losing increasing market share.

Swiss external asset managers, now regulated by FINMA, must operate with excellence and extreme diligence, further strengthening the sector’s relevance. However, the primary challenge lies in balancing stringent regulatory and compliance requirements with the need to remain competitive. With rising regulations and operational costs, consolidation among EAMs is inevitable, as smaller firms struggle to make the necessary investments to comply with FINMA and other regulatory guidelines.

Another critical aspect of the EAM industry is the need for firms to provide relationship managers with a robust, transparent, and efficient structure. High-quality client service depends on ensuring that managers have the right tools, including access to a broad selection of custodian banks, market-aligned costs, efficient management, and attractive products. However, many EAMs lack sufficient structure and internal transparency, even towards their own managers.

New market entrants face increasing challenges, particularly due to rising operational costs linked to regulations and the high minimum thresholds imposed by banks. These barriers make it more difficult for new firms to establish themselves in the sector.

Key differentiators: what sets EAMs apart
External asset managers offer a distinctive value proposition that is increasingly appealing to clients, setting them apart from traditional banking models. Key differentiators include:

-- True independence and impartiality – Investments are managed objectively, free from conflicts of interest or bias towards specific products or issuers. The sole priority is aligning investment strategies with the client’s best interests and financial profile.
-- Tailor-made wealth solutions – Clients benefit from highly personalised investment strategies tailored to their unique needs, risk tolerance, and long-term objectives.
-- Comprehensive, 360-degree wealth management – Beyond investment strategies, EAMs provide holistic financial oversight, including succession planning, tax optimisation, and asset structuring. As independent advisors, they ensure an unbiased and integrated approach to financial wellbeing.
-- Global perspective across custodian banks and jurisdictions – Unlike traditional private banks that operate within their own ecosystem, EAMs offer flexibility by working across multiple custodian banks and financial jurisdictions, optimising wealth management strategies on an international scale.
-- Long-term partnership and next-generation planning – EAMs build lasting relationships by engaging with families across generations, ensuring seamless succession planning and wealth preservation. Their role extends beyond asset management to fostering financial continuity and education for heirs and beneficiaries.
-- Advanced reporting and consolidation capabilities – Financial reports are tailored to each client’s specific needs, presenting information in the most relevant and accessible format. Consolidated reporting integrates financial and non-financial assets into a single, comprehensive view.

By combining independence, personalisation, and a holistic financial approach, EAMs provide a compelling alternative to traditional private banking, empowering clients with greater flexibility, transparency, and control over their wealth.

This close relationship with younger generations gives external asset managers a significant competitive advantage. Unlike traditional clients, who value an institution’s history and legacy, the new generation seeks more dynamic and customised solutions.

Finally, well-structured consolidation among EAMs can create stronger players capable of meeting regulatory requirements while preserving the flexibility and personalisation that define the sector. The future belongs to EAMs that can balance growth with identity while aligning with evolving client expectations and transformations in the private banking industry. 

External asset managers represent a new era in the sector, experiencing strong growth while staying close to clients and advocating for their needs and interests. Rather than being a threat to private banks, EAMs are becoming essential partners across various financial jurisdictions, as clients increasingly seek independent asset managers that work in their best interest, further enhancing the sector's importance within the private banking space.