The story so far
Do you remember the tale of Erich Müller, master baker and chairman of the local curling club, from June 2020? Yes, that Erich who got off lightly after seeing almost his entire million Swiss franc inheritance vanish. All’s well that ends well. Not quite: Erich had some thoughts about how he could invest his assets more securely in the future. He immediately decided to look for a new bank to invest his assets. The advisor at ‘Solid Bank AG’ thought that when Erich closed his account, it had already fully implemented the FinSA requirements. Erich had also recently terminated his mandate with the asset manager at ‘Honest Capital Invest AG’.
On a weekend off, Erich sits down at his computer and starts to research FinSA and his future banking relationship.
FinSA
Erich eagerly types ‘FinSA’ into the search engine, only to be confronted with over 100,000 hits. The second hit leads Erich to the Swiss government website and from there directly to the legal text of the Financial Services Act (FinSA). And it sounds very promising: FinSA aims to protect the clients of financial services providers and to create comparable conditions for the provision of financial services by financial services providers, thus helping to strengthen the reputation and competitiveness of the Swiss financial centre. It lays down requirements for the faithful, diligent and transparent provision of financial services and regulates the offering of financial instruments.
As Erich reads this, he thinks that ‘Solid Bank AG’ and ‘Honest Capital Invest AG’ still have some potential for improvement. Browsing through the legal text of FinSA, Erich is surprised at the number of articles and the scope of the law. How is he supposed to find his way around and discover which points are relevant to him?
And so he refines his research by adding the financial institutions he knows. He decides to compare four financial institutions in terms of the information they provide about FinSA.
Information
This won’t be an easy task, thinks Erich. Nevertheless, in three out of four he navigates fairly quickly to the right place on the website. The initial information he finds doesn’t offer much more than the text on the purpose and subject matter of FinSA. To learn more, Erich has to click through the websites where he can find much more information. But what is he actually interested in? He would like to know about the following topics:
- Client classification
- Risks
- Products
- Costs
- Principles of execution
Two financial institutions provide the information in compact brochures of about 20 pages. This may provide a clear overview. Nevertheless, this is a great deal of information to absorb. Imagine having to read a 20-page brochure before buying a ski boot. Admittedly, perhaps a somewhat sportive comparison.
Three financial institutions overwhelm their clients with about 100 pages of information to explain the risks. One financial institution hits its clients with a 20-page document on costs alone. Erich also has to struggle through umpteen pages of information on the principles of execution.
What next?
Erich is somewhat disillusioned. After his bitter experience in the summer, he hoped that by studying concise information, he might be able to choose his future financial services provider. Erich decides that he will arrange a consultation with one financial institution that offers very extensive information material and one which has a compact FinSA brochure in order to reach a decision. ‘If only it were 2025,’ Erich says to himself, because then he could just select the right financial services provider for him using the ‘Compliance Crawler’ (see gwp Monthly - December 2019).
Reduce to the max
The FinSA requirements must be fully implemented by 31 December 2021. So there is actually still enough time for financial services providers to do their homework. But as we all know, a year usually goes by faster than expected. It would have been helpful for Erich to have a wider choice of financial services providers that offer concise, client-friendly information about the FinSA requirements. With the technological tools already available today, we could easily have user-friendly application solutions for ‘smart’ client information, for example.
Trained client advisors
The informative and technical presentation of FinSA to clients is one thing. But client advisors must also familiarise themselves with all the requirements. Of course, many things have been in place for a long time and client advisors have already been giving advice on them. However, FinSA entails a number of updates. And even an alert client advisor does not simply wake up and know FinSA inside out. Targeted training courses are one way for client advisors to get up to scratch so they can play their part in the success and reputation of the Swiss financial centre. Because resting too long on one’s laurels has rarely been a successful business model.
Conclusion
Investor protection is an important asset. As is the quality seal of the Swiss financial centre. However, everyone needs to put in more effort so that we can achieve and even exceed the targets set for implementing FinSA. Rather than just presenting the legal texts and other generic information brochures to clients, it is clearly worth ‘constructing’ sophisticated, client-friendly investor protection information.