Legislators have increased the required standards for client protection

The work of consultants is becoming more and more challenging
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Client protection

Required by law

The work of the consultant is becoming more and more demanding. The objective of the legislators, to increase client protection, means the direct involvement of the client in investment decisions: The client is responsible.
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New requirements

FIDLEG and client protection

FIDLEG has created new client protection requirements, which are having a major impact on the work of all consultants in the financial services industry.
Essentially, client consulting is now only possible with the precise clarification of the true conditions and future wishes of the client, with detailed documentation of the decisions made during each consultation.
FIDLEG

Scope

The provisions of FIDLEG apply for all those (financial service providers, consultants) whose professions involve the provision of financial services in Switzerland or for clients in Switzerland.

This means that every financial intermediary who offers a client a financial instrument must respect the FIDLEG provisions.

New consulting

What has changed in consulting because of FIDLEG?

The requirements are varied and challenging.

The investment risks must be financially bearable for the client, in consideration of their investment objectives.

The client must understand the risks and be prepared to accept them.

As the service is continually assessed to check the suitability of the recommended financial instruments, the suitability assessment must be repeated continuously for the duration of the consulting or management relationship.

In the future, consulting will only be possible with precise clarification of the circumstances and wishes of the client, and with detailed documentation of the decisions made.

New financial consulting

What do the provisions mean for investment consulting, asset management, and private banking up to now?

The assets that a financial intermediary manages are no longer the important thing – instead, it is what they don’t explicitly manage that is important.

Investment consulting with the knowledge of the entire portfolio and asset management can no longer be continued as usual. A suitability assessment must always be carried out. The funds that the client provides for the asset management or investment consulting is no longer the only important thing – rather, the financial consultant must, above all, know every single asset that is not being invested or managed.

This creates huge problems not only, but primarily, for banks. When arranging a mortgage, for example, the bank knows the client’s entire portfolio. This means that now, it cannot simply sell more assets to a client without carrying out a suitability assessment.

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Asset sale

With suitability assessment
100% legally watertight consulting

With any potential asset sale, the new risk situation of the client must first be established, calculated, illustrated, and filed evidentially.

Seeing the tax return and following up on any wishes of the client in a questionnaire is, in the eyes of many experts, not sufficient.

When providing investment advice having seen the entire client portfolio, or when carrying out asset management, FIDLEG always requires a suitability assessment.

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Paradigm shift in financial consulting

Client protection
is the focus

    • The personal circumstances, risk tolerance, and capacity of the clients determine the consulting objectives.
    • The risk of an investment recommendation is in the circumstances of the client, and no longer in the product.
    • The amount of living expenses determine the measures – not the future old-age pension.
    • The client’s understanding of the recommended financial instruments must be demonstrated.
    • All activities, contacts, costs, and relations between the client and consultant must be transparent and historically documented.
    • The client’s dossier, with all recommendations, sales, and analyses, will be visible to the client and the consultant.