Two years ago, in recognition of the regulatory burden facing Swiss fund managers, Pfaeffikon-headquartered Etops, an independent operational service provider for hedge funds and investors like family offices and wealth managers, combined forces with Deloitte to develop a unique solution called Assetbox.
Assetbox contains a series of modules to support managers both in the setting up of operations and funds, registration with FINMA, as well as in the FINMA required ongoing processes and substance.
"Assetbox was a pioneering effort to make regulation digestible for hedge fund managers. We went directly to FINMA and established a quasi standard, which the market is now embracing. Assetbox delivers operations, risk management and compliance functions on an outsourced basis to fulfill FINMA requirements as efficiently and practically as possible," explains Michael Appenzeller (pictured), founder of Etops.
In many respects, being regulated has become a marketing consideration, certainly for start-ups who don't necessarily need to be licensed from day one. With Assetbox, Etops is able to take care of everything by acting as a trusted outsourced compliance partner.
"Assetbox helps new managers become regulated by providing the most efficient path. During the application phase, they can outsource the risk management function, compliance function etc. This avoids managers having to hire middle- and back-office staff, saving them money as a result," says Appenzeller. "We support a range of managers from start-ups through to established managers where we are helping translate their operating models into the regulated world."
One particular group that could represent a big opportunity for Etops is the Swiss wealth management community. A new wave of regulation is coming down the pipeline to regulate these entities and as Niloo Verma Bruppacher, General Counsel of Etops, explains: "The new Swiss Financial Services Act (FinSA) and the Financial Institution Act (FinIA) will reshape the regulatory framework governing the Swiss financial market, in particular independent wealth managers. The new regulation envisages introducing new licensing requirements for wealth managers and conduct rules for providing financial services in Switzerland, as known in Europe under the MiFID II regime."
With large wealth managers already beginning to think about how to change the way they do business, Appenzeller thinks it will be a big opportunity for Assetbox. One only has to consider that Switzerland has an estimated CHF1tn of non-bank managed assets to appreciate just how large an opportunity this could be.
"Regulators in various jurisdictions are implementing new regulations in parallel. While MiFID II and the Swiss FinSA/FinIG may both aim to cover investor protection, the specific requirements differ. To be compliant with different regulations, dependent on where the investor is domiciled, poses a big challenge for financial institutions with a global client base," notes Bruppacher.
As such, Etops demonstrates how technology solutions can bring real value to industry practitioners as they look for ways to cope with regulation. Appenzeller says that besides monitoring regulatory developments applicable to its clients, evolving Etops into a financial technology company will be the focus as the compliance burden on portfolios increases.
"With global regulations in place today, Swiss wealth managers face the prospect of complying with multiple versions of regulation. That makes it more complicated so technology will become an integral part of the solution to help stay abreast of regulation and remain compliant. That's where we are focusing our R&D right now," concludes Appenzeller.
