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Succession planning for Swiss EAMs

Switzerland’s new FINIA regulation is likely to encourage a number of the elder generation of the country’s EAMs to retire and sell their businesses. Relatively few of them have succession plans in place. In the spirit of strategic partnership, Julius Baer is helping EAMs to find suitable partners.




Among Switzerland’s external asset managers (EAMs), succession planning is a topical subject. A large number of founders or senior partners are in their 60s, turning their thoughts to succession, including selling the business, finding successors or merging. 

So far, there has been little merger and acquisition (M&A) activity but that might change from the beginning of 2020 when Switzerland’s new Financial Institutions Act (FINIA) comes into force, ending self-regulation. It is now much more likely to trigger consolidation in the 2,500 strong EAM community and may force some hard decisions.

Typically, EAMs are smaller firms that value their independence and take pride in what they have achieved over the last decades. Their founders might have left private banks a long time ago in order to escape the bureaucracy of a large corporate. Selling the business, or merging with another EAM, is a difficult and highly personal decision, which is why there have been so few transactions.

Michel Yigit, Head of Intermediaries German-speaking Switzerland and Global Custody at Julius Baer explains: “There’s a large group of EAMs where the key people are aging, especially senior partners who are 60 years old, sometimes even 70 plus, who may not yet have a clear plan around what they are going to do with their business.

The new regulation means you need to apply for a license, there are capital requirements and structural requirements. You might have to invest more capital in the business to comply. This could be the trigger for more M&A, as smaller companies decide to merge with larger ones that have scale or decide to get together with similar sized EAMs to form a larger company.”

FINIA changes the game
When Julius Baer first set up its “Business Navigator” partnership proposition in 2018 to help EAMs with strategic and operational advice, the looming succession issue was one of the areas where it expected EAMs to need most help, according to Yigit. 

FINIA is likely to crystallise decisions over succession because EAMs must apply for authorisation by the Swiss Financial Market Supervisory Authority. To be eligible, an EAM must have appropriately qualified staff, specific business processes and minimum capital of CHF 100,000. Existing EAMs have until the end of 2022 to comply, which gives them a little time to consider options.

Business Navigator can help EAMs decide how best to go forward. Typically, the Julius Baer intermediary team employs its extensive knowledge of the intermediary market to look at the intermediary’s business model and a whole range of factors such as costs, expertise, technology, risk management, business strategy or even investment performance. By benchmarking an EAM against the wider industry, it provides a strategic perspective that equips the firm to make informed decisions.

In many circumstances, a merger or acquisition is the obvious route to take, especially as complying with the new regulatory regime takes greater scale. Yet EAMs are people businesses and the chemistry must be right.

“My Head of Business Development, some of my RMs and/or myself met with various EAMs on that topic, all of them having very sound businesses in place and open for discussions, i.e. looking for successors, mergers and/or even selling their business by applying an earn out model,” notes Yigit. “Quite a few actually have been actively engaging in discussions, however with moderate success so far. As they put their heart and soul into their companies it makes it somewhat difficult to find the right match.”

An exit based on trust
Yigit says that “therefore we have to listen very carefully, take a lot of notes, earn their trust and openly discuss various ideas and options.” In some instances, when it was about succession planning, even a professional Wealth Planner was brought into the confidential discussion (without Yigit participating). It was a true eye opener for the one or the other Senior Partner of an EAM who then felt much more confident to actually make a decision. 

Once an EAM decides to sell or merge the business, the intermediary team interviews the key partners and prepares a short document summarising what they want from the transaction, as well as describing the business’s key attributes. Care is taken to completely anonymise the EAM. At this point, the document may be shown  upon agreement of the EAM  to what Yigit’s teams considers a potentially matching peers with similar ethics & personalities but also client domiciles, management style, client segments; just to name a few.

Julius Baer is currently helping several EAMs looking to sell or merge. “We are in continuous and parallel discussions with some of our clients,” reports Yigit. “And as soon as somebody gives us a positive signal, we try to build a bridge. But, clearly, it’s very delicate, very private and has to be based on absolute trust. Our clients know they can fully trust us. Julius Baer is a “pure private bank”, hence our DNA is actually rather similar to that of our valued clients – we speak the same language!”

In the spirit of the Business Navigator approach, Julius Baer acts as a strategic sparring partner rather than looking to earn a fee for brokering a transaction. As FINIA looks likely to herald a new era, the intermediary team aims to bring together those EAMs who decide it’s time to retire and those seeking greater scale.

Contact us
> Please contact us if you want to learn more about our services for intermediaries.

Key take-aways

Switzerland’s new FINIA regulation is a game changer that may push some EAMs to consider M&A as a means of succession planning. But selling is a highly sensitive process, which helps to explain why the decision is so hard to take. Reaching out to Julius Baer means intermediaries will be treated with respect and discretion.


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