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Wealth management

Key benefits of digitalization of compliance for independent wealth managers

The recent changes to Switzerland’s financial services landscape aimed at increasing investor protection and bringing Swiss regulation in line with the EU's financial regulatory regime have wider implications for many businesses in the financial sector. In this article we are discussing how external asset management companies can meet these new regulatory requirements and save on their resources by going digital.

What regulatory challenges do Swiss wealth managers face?

Anti-Money Laundering (AML), Swiss Financial Services Act (FIDLEG) and the Swiss Financial Institutions Act (FINIG) are aimed at increasing investor protection by requiring more monitoring and more reporting on financial and non-financial data.

The new governance and approval processes that need to be put in place highlight the inefficiency of the traditional, partly analog processes, with data stored in different places and not accessible remotely. Especially for the smaller and medium-sized companies doing things manually is time- and resource-consuming, as well as error prone. On top of this operational inefficiency come rising regulatory costs. Collecting more data and documenting processes is time-consuming, running the costs of both internal and external audits high – while the competition on the market makes it impossible to increase fees.

New regulations also put more pressure on reputational and business risk. Wealth management companies need to collect more clients’ data and make sure it’s well protected. This increases the risk of employees becoming more frustrated and – more importantly – confronts organizations with the threat of regulatory fines or even withdrawal of licenses.

So, how do wealth managers deal with all that using wealth management software?

Interview with Sebastian Ochalek from Clarus Capital Group AG

William: First of all, Sebastian, tell us who you are and what Clarus does.

Sebastian: I am the Head Legal, Risk & Compliance Partner at Clarus Capital Group AG. Since 2011 we’ve been offering wealth management and asset management services to our clients around the world, with six offices across three continents.

W: The main argument for the new regulations is that they will make wealth management more professional, more competitive and resilient on the global scale. What is your take on that? Do you see them as a risk for your business or rather an opportunity?

S: I personally don’t see them as a risk, I consider this new situation as an opportunity. The new regulations change the manner in which we speak to our customers and prospects. We can now explain to them that we're regulated just like banks, so it makes it easier to convince them and make them trust us more. Of course, this new situation also brings more costs to organizations such as ours, but we were looking for ways of streamlining our processes anyway, so digitalization has been on top of our agenda for quite some time.

W: What in your opinion is the most significant change that these new regulations bring as far as compliance is concerned?

S: First of all, more documentation is now required and all communication with the client needs to be stored. With a tool such as WealthArc, that allows to automate all that, it’s way easier to manage the compliance on your own. I now have easy access to all relevant data, I receive alerts whenever an action has been taken by a client advisor, so I can quickly review documentation and approve or reject it. Also, the investment strategies are monitored on an ongoing basis, so I can see immediately if there's a breach or something is not done according to client wishes.

W: Could you talk us through how you monitor both transaction-based and non-transaction-based compliance?

S: We’ve set up a threshold for transactions at 1,000 euro, so I receive alerts and can check if the advisor has documented it properly. I also monitor all the advisory transactions to see if they are sufficiently documented by our relationship managers.

W: And how do you work with post-trade guidelines and strategy management?

S: Basically, there are three types of guideline breaches: potential, real and requested. The potential breaches happen when, e.g., equities suddenly go up because markets went up. I need to monitor those to keep us on the safe side. The real breaches happen when, e.g., our advisor bought something that should not be bought, then I challenge them to justify or document their action. Finally, there are the requested breaches – those that our client explicitly requested. I need to make sure that it is documented that the clients actually wanted this.

W: Are your portfolio managers using pre-trade checks to see if a trade is in line with the client's interest?

S: It depends on the situation. Portfolio managers are doing it regularly, and relationship managers do it to know exactly what they are allowed to do. But I always check it post-trade on a regular basis.

W: How did you digitalize your non-transactional tasks – onboarding, Know Your Customer (KYC), Politically Exposed Persons (PEP), etc.?

S: We store all the required documents in WealthArc, but we use our own KYC questionnaire that – once completed – is uploaded to the system. Depending on the risk category of a client, we put the expiration date of the KYC in the system, so we can go back regularly and make necessary updates. This is always connected to emails – all transactions that impact the KYC are checked for being documented and reflected properly in the KYC.

W: Do you personally use any tools other than WealthArc on the side?

S: We do use other tools, but not for portfolio management, e.g., World-Check to monitor client classification, and another service for cross-border certification.

W: How does WealthArc allow you to pull necessary data for audits?

S: We no longer have physical audits with the auditor visiting our premises and working with paper documents, it’s all done remotely via WealthArc. The auditor picks clients, I give them special access via WealthArc, and they see all they need to see. It has streamlined the entire process – now it only takes us about 30 minutes to show them how WealthArc works. It also has a positive impact on costs.

W: How do you manage access to WealthArc for people inside and outside of your organization?

S: Our relationship managers only have access to their clients and the only external access we grant is for the auditors.

W: Is there any other number indicating what you’ve saved by digitalizing your processes?

S: It’s very hard to put a figure on it, but what I can tell you is that 90% of the checks I now do myself – and we have over 1,000 portfolios! An action in WealthArc takes only one click, compared to a number of clicks across a number of systems necessary if you don’t use WealthArc.

W: Thank you very much, Sebastian, for these insights!

S: Thank you!

So, how does WealthArc streamline regulatory tasks?

Let’s look at each category of tasks separately:

Financial risk management:

• Automated, daily updates on reconciled positions and transactions from 90 banks

• Strategy and guideline management

• Daily Anti-Money Laundering (AML) alerts and eDocs

• Easy overview of allocation per issuer and instrument

• Instrument risk suitability and appropriateness (Key Information Document – KID)

• Order management (single orders, bulk orders and rebalancing, 4-eye check)

• Pre-trade checks and transaction record

• Notes for guideline breaches

Non-financial risk management:

• Client life-cycle management (CRM & DMS)

• Client segmentation (opt-in/opt-out)

• Customizable client digital questionnaires

• Documentation and rendering of account

• Freezable notes and documents


• Quick audit reports OR digital access for auditors

• Audit logs to see which user has done what at what time

• Specific internal user access rights

What are the exact efficiency and profitability gains after implementing WealthArc?

With WealthArc you can digitalize and automate your daily compliance tasks and effortlessly manage financial risk. You get rid of paperwork and reduce manual tasks to a minimum. At the same time you keep a solid record and control of all internal tasks, which saves you time and money on audits.

Overall, WealthArc helps to simplify your processes, which brings more satisfaction to your employees and allows you to focus on what matters most: your clients and the markets.

If you’d like to see WealthArc in action, please do reach out to us!

Click here: Contact Us!

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