Market Insight by Colin Vidal - Between regulation and new technologies – the fund market in Switzerland

Switzerland is renowned for its robust financial industry and recognised as a global banking leader. Its stability, well-developed infrastructure and investor-friendly regulations have made it an attractive destination for foreign asset managers to distribute their funds. Yet, as the Swiss banking industry undergoes a transformative shift, the rules of the game are changing and managers may have to adapt to a new paradigm.


Regulatory Transformation: More Friend than Foe

Switzerland boasts a straightforward and simple framework for investors and for foreign managers to distribute their funds under The Collective Investment Scheme Act (CISA) and Collective Investment Scheme Ordinance. 


In 2020, the Financial Services Act (FinSA) and Financial Institutions Act (FinIA) were enacted and amended certain rules. The objective of the new legislation was to unify the regulatory framework and align Switzerland with MiFID rules, bringing more transparency and protection to investors. This created a more burdensome regulatory environment for some local actors, but it alleviated many hurdles for foreign asset managers and modified the approach to regulation of fund distribution at the point of sale, including repealing the requirement for local distributors to be regulated by FINMA. The change to the definition of investor type has also had a major impact on certain registration requirements and increased the number of investors that a foreign asset manager can approach.


The Digitalisation of Distribution

There is a multi-channel approach to fund distribution in Switzerland. Historically, the main distribution channels have been institutional investors, intermediary wholesale, intermediary retail and direct retail. While traditional advisory remains crucial, digital technologies are changing the wwadvisors with digital tools such as robo-advisors and other data-driven analytics. 


Delivery methods are also changing with the introduction of digital banks and the growth of fund platforms. Global institutional players, including Swiss banks, are investing in creating decentralised platforms based on distributed ledger technology. This digitalisation of distribution will bring further efficiency and transparency to the sales process, facilitating transactions.