Looking back at the big financial headlines of 2014 and 2015, it’s clear that a few themes dominated. There was talk of cryptocurrencies and blockchain, and demand for digitalisation. But, perhaps more importantly, there were also new regulations on the horizon. The signing of Fatca and MiFID II signalled to Swiss wealth managers that their industry was about to undergo a change far more tangible than bitcoin.
Cost pressure kicked in, and managers across the country began to explore their options. For four firms, that meant joining forces to face the upcoming revolution head-on.
Sept Finance, as it is known today, is a Geneva-based wealth management firm born out of the 2015 merger of CP Conseils, Perastra Finance, Sodiprivés and Zellinvest. It services primarily Swiss clients, though it also has clients across Europe and the rest of the world.
According to Sept Finance partner Olivier Stadelmann, the intention behind the launch was to build a firm that could stand the test of time and become a major player in Switzerland’s independent asset management industry.
‘We had a revolution happening in our industry. We were ready to get together to find a solution for the next 20 years. I’m sure it would have been impossible to stay as we were and still be here in 20 years with what was happening with regulation,’ he says.
Following the decision to come together, Stadelmann says the firm emerged on sturdy ground, coming out more prepared than it would have been flying solo. ‘The merger gave us opportunities to have a stronger and more credible organisation than we had. It gave us the opportunity to become compliant with all the new regulation that was to come.’
According to partner Patrick Bernasconi, part of this organisational fortification can be seen in the way the team approaches its administration – a task many investors still struggle with ahead of FinSA and FinIA.
‘It helped us become stronger in terms of administration,’ he says. ‘Administrative work is very important. If you are not organised, you will not be able to grow in the future, or to work in partnership with deposit banks. Today, we’re very well positioned in this area.’
The firm’s strength in organisation does not end at administration.
Bernasconi says coming together meant building a unified and scalable investment process as well.
‘Today, we only have one process, only one practical investment procedure, and everybody is clear with that. We are very well organised, and have things done a certain way. For example, if you join the portfolio management committee, you can share your opinion, but in the end we decide together what to implement.’
This team-based approach has been one of the cornerstones of the firm’s philosophy, though Stadelmann admits it came with a steep learning curve.
‘The hardest factor in the merger was the human one. Everybody was
independent. Being independent means you can make your own decisions and go where you want,’ he says.
‘You have to merge together after being independent for years, and you have to put a little bit of water in your wine.’
Though the merger did present challenges, Stadelmann says it was a
smooth transition overall. The firm now has a team of 23 people and six shareholders.
As regulation continues to ramp up , many investors have predicted mass mergers and industry consolidation. However, Stadelmann notes that merging a business isn ’t easy – and it isn’t for everybody.
‘Of course, the market will be a bit consolidated in the near future with regulation. There will be some mergers, but that’s only one part. To set up a new company or to merge a company is very difficult.
‘You can merge your company and do exactly what we did, or join a suitable company that is already in place.’
Bernasconi notes both merging and joining an existing firm present some difficulties, as many wealth managers are understandably hesitant to give up their independence.
‘In this industry, you have a lot of people who are very proud of
their business. Sometimes it’s difficult to merge and to say, “OK, I’ll close my company and join a new one.”
‘Today, if we look at external asset managers, they want to do everything. If you want to keep introducing new people to the company to remain compliant, you can do that. If not, then you have to join a larger company and be willing to change the way you proceed.’
For companies that are not sure they want to tackle the challenges of a merger, Sept Finance is ready to welcome them aboard.
The firm is prepared to partner with and advise independent asset managers that lack the size and power to manage increased regulation on their own, thanks to the legwork already put in by the four founding firms.
‘People come join us because we’re organised, we have a good brand and we’re good with asset management. They can take care of their clients and we can help them with everything else,’ Bernasconi says.
‘If we have to integrate new partners, we have already done the background work. It works.’
Regardless of which path investors take, Stadelmann believes every firm should be thinking about what their future is going to look
‘If you haven’t thought about it at all, you’re dead. You have to find a
solution and wake up and realise that the world is changing.’
An open book
As the industry continues to change, Stadelmann predicts Switzerland will continue to become more and more transparent.
‘Switzerland, in terms of knowledge and competence, is well known. Where we were delayed was in terms of regulation and licensing.
Today, we’re putting these things in place to be recognised internationally.’
Clients are also interested in working with firms that share information, instead of those that keep it concealed, Bernasconi says.
‘The industry is going to become more professional and more transparent.
‘We can already anticipate that companies will put their performance on their website, while 10 years ago everything was very much closed. You didn’t put information about the company and the way you invested online.’
This demand for openness and honesty goes hand in hand with an increased desire for a full-service and long-term team, Bernasconi
says. Though passive strategies have grown in popularity, he believes demand is still high for tailor-made solutions, which the firm will provide to all clients, regardless of size.
‘Servicing is the key word. When you’re with an external asset manager, it means you’re always with the same team for years, and that’s important for clients. In banks, you have a lot of turnover and change.
‘In terms of portfolio management, I won’t say we’re better every year than the big banks, but I can say that for us it’s easier to find small or “niche” funds that would not be played by very large banks because they don’t have a lot of assets or are maybe new in the industry,’ he explains.
According to Bernasconi, the firm maintains a classic investment style, constructing portfolios top-down. Keeping servicing in mind, he says the firm places a priority on finding top funds.
‘We have about 100 one-on-one meetings per year with fund managers, and we ’ve been doing this for many years. The investment
universe we have to date is very wide, and we’re very good with fund selection – it’ s the expertise we have.
‘We can prove to our clients that in a period of three years over 75% of our selection sees better performance than passive strategies. The company is young, but we’ve been in this industry for a long time.’
Mixing decades of experience with a modern view on change and partnership has so far proven to be successful for the firm. It’s unclear how the industry will evolve next, but one thing’s for sure: Sept Finance has shown it’s not afraid of change.
This article originally appeared in the October issue of Citywire Switzerland.