FinSA (FIDLEG) compliant advisory processes

Over the past years I was responsible for the implementation of the investment advisory software FINFOX at various financial institutions. These projects always led to adjustments in the respective advisory processes. Most recently, the requirements of the Financial Services Act (FinSA), which came into force on January 1st 2020, were also taken into account.

It has been shown that the respective project participants can interpret the contents of the FinSA and the associated ordinance quite correctly. The detailed identification of the adjustments to be made to the existing set-up compared to FinSA-compliant advice is usually more difficult. The difficulty is to record all the professional, process-related, legal, technical and supply-related changes that arise. For these, target-oriented, operationally efficient implementation solutions must be specified.

In the corresponding implementation projects, financial institutions often deal with similar issues across all areas. In this context, an exemplary and unstructured list of questions is listed below:

• Is it at all possible to ensure the embedding of regulatory requirements in the operative (advisory) processes with the existing tools?
• Should or can the previous segmentations, risk profiles, etc. of existing clients continue to be used for future advisory services under the new regulatory requirements?
• How must the questions and answers of the questionnaire-based risk profile surveys be formulated in concrete terms and how should the relevant evaluations be designed in order to cover the categories listed in the regulation?
• How can the new legislation be used for new advisory services?
• Should transaction-based advice be offered in addition to portfolio-based advice and, if so, how should this offer be structured in detail?
• What technical adaptations are required for core banking systems, read and write interfaces, data providers, etc.?
• Which stakeholders have what training needs and who will carry out the training in which phase?

The above list could be continued at will. It is clear that the operative implementation of FinSA compliant advisory processes involves a certain complexity from both a business and technical perspective. In addition - as usual in larger projects - a large number of different interests and requirements of various stakeholders must be taken into account.

All in all, these factors mean that a proper implementation of new advisory processes is time-consuming. The extension of the transitional periods from one year to two years from the entry into force of the FIDLEG, as spoken by the Federal Council on 6 November 2019, takes this fact into account.

However, it is also quite possible to implement FinSA compliant advisory processes within a useful period of time. The following approach has proved to be successful in this respect:

1) Implementation of a gap analysis

• Strategic and operational examination of existing advisory processes
• By systematically comparing the advisory steps with the categories listed in FinSA, deviations from the regulatory requirements can be identified

2) Definition of the target solution

• The target solution (primarily functional and non-technical focus), which is represented by new consulting processes, content and services, closes the gaps identified in the gap analysis
• Taking advantage of the moment to optimize existing services and align them with the corporate strategy
• It may also be an opportunity to offer new services
• The target solution should be documented in a business- and technical concept, so that the project participants involved and management decision makers have a common understanding of the newly defined advisory processes and services

3) Implementation of the target solution

• In addition to a coordinating project manager, the project team should consist of representatives from the front line (e.g. investment advisors), product managers (e.g. product managers), the legal department (e.g. legal and compliance managers) and technical managers (e.g. core banking system specialists, interface experts, business analysts)
• The various adjustments must be integrated into a realistic project plan, taking into account possible dependencies, priorities and resources
• In some cases it is also worthwhile to cluster the various requirements with the help of business analysis techniques (e.g. MoSCoW - Must Have, Shoud Have, Could Have, Won't have this time)
• Often, implementation over several phases is advisable, whereby areas that belong together in terms of content (e.g. redesigning the profiling process) should ideally be implemented at once within one phase

Conclusion

The many dependencies and different requirements are a challenge not to be underestimated when implementing efficient FinSA compliant advisory processes. However, with appropriate and realistic planning as well as existing professional, legal and technical know-how, an implementation can be well mastered.

Ultimately, these implementation projects always represent an opportunity to make existing processes leaner and the service offers better and more attractive than before. Take the chance!