There are two ways to run wealth inside a private bank. The familiar one keeps everything under a single roof: the bank holds the assets and manages them too, and the discretionary mandate is signed with the very institution that runs the account. The second splits those functions between separate legal entities: the securities and cash stay in the client's account at a custody bank, while investment decisions are taken by an independent management firm acting under a limited power of attorney. That is the EAM model — external asset manager; in German-speaking Switzerland it is called unabhängiger Vermögensverwalter, in the French-speaking part gérant indépendant.
The model grew in Switzerland almost as a by-product of banker mobility. A banker who had spent twenty years at a Geneva private bank would leave and take his client relationships with him — but he could not take the infrastructure: custody, settlement, reporting, market access. So he would agree with his former employer that the accounts would stay where they were while he managed them from outside. Over several decades a cottage practice became an industry: 2026 industry studies put the assets of Swiss independent managers at CHF 850–890 billion, roughly 10–15% of the country's private wealth market. In Asia the segment is younger but already structured: 295 firms across Singapore and Hong Kong, some USD 328 billion, 7–9% of the wealthy capital in both markets.
This piece takes the model apart from the inside: the contractual construction, the regulatory frame after the Swiss FinIA/FinSA reform, the economics of fees and the painful subject of retrocessions — and the limits beyond which an EAM stops being the right answer.
The triangle: client, bank, manager
The structure rests on three contracts, and the design turns on keeping them separate. The diagram below shows that triangle and where the assets stay.
The first is the custody agreement between the client and the bank. The bank remains a full counterparty: it holds the securities, executes trades, handles settlement and corporate actions, issues statements and, where needed, opens a lombard line against the portfolio. The assets are booked in the client's name. The second is the mandate between the client and the EAM: discretionary, where the manager decides on his own within an agreed investment policy, or advisory, where he recommends and both the decision and the order stay with the client. The third is the cooperation agreement between the bank and the EAM — a technical document covering system access, data transfer, tariffs and compliance procedures.
Everything is tied together by the LPOA, the limited power of attorney. It confers the right to buy, sell and rebalance inside the account, but not the right to pay money out to third parties, transfer assets away or change the account holder. Payment instructions are still signed by the client. Separating who decides from who holds is precisely the mechanism that distinguishes an EAM from arrangements where the manager has both discretion and access to the money.
| Regulator | FINMA; day-to-day oversight by private supervisory organisations |
|---|---|
| Rule | FinIA/FinSA (LEFin/LSFin), licensing since 1 January 2020 |
| Who is caught | Independent managers of third-party assets, and trustees |
| Transition deadline | Application to be filed by 31 December 2022 |
| Minimum capital | CHF 100,000 paid up in cash (art. 22 FinIA) |
| Operating unlicensed | Fine up to CHF 250,000 and up to three years' imprisonment |
| Position at 28.02.2025 | 1,532 licences to portfolio managers and trustees; more than 94% of filings processed |
The Swiss reform: from grey zone to licence
Until 2020 independent managers in Switzerland were not prudentially supervised — membership of an SRO for AML purposes was enough. FinIA/FinSA (LEFin/LSFin) closed that gap. From 1 January 2020 managing third-party assets became a licensed activity; existing firms were given a transition period until 31 December 2022 to file an application. Operating without a licence after the deadline is a criminal offence: in Guidance 02/2023 of 30 January 2023 FINMA recalled the penalty of a fine up to CHF 250,000 and up to three years' imprisonment.
The entry bar has five elements.
- Minimum capital of CHF 100,000 paid up in cash (art. 22 FinIA).
- Own funds of at least one quarter of annual fixed costs, capped at CHF 10 million (art. 23).
- Adequate collateral or professional indemnity insurance.
- Management consisting, as a rule, of at least two qualified persons with five years of relevant experience (art. 20).
- Affiliation with a recognised FinSA ombudsman.
And the most unusual feature: ongoing supervision is delegated to private supervisory organisations (SO/OS), themselves licensed by FINMA — the regulator grants the licence and keeps enforcement, while day-to-day oversight sits with the SO.
The result was hard consolidation. 1,699 applications arrived before the deadline, but around 1,060 firms told FINMA outright that they would not apply: they wound down, moved under someone else's licence, or fell below the thresholds of "professional" activity. By the end of February 2025 FINMA had issued 1,532 licences to portfolio managers and trustees, having processed more than 94% of what was filed on time. An industry where three people could once work out of a rented office has become capital-intensive — which, complaints notwithstanding, is rather good news for the client.
Outside Switzerland the frame is similar in substance and different in its labels.
- EU: an independent manager is a MiFID firm authorised for portfolio management.
- Singapore: a company holding a CMS licence for fund management — the LFMC regime, whose details we cover in the piece on the Singapore licence.
- Hong Kong: a Type 9 (asset management) licence from the SFC.
- DIFC: DFSA Category 3C "Managing Assets".
Retrocessions: where Swiss law reshaped the market
Retrocessions are payments the manager receives from third parties: funds, structured-product issuers, the custody bank itself (a share of the fees it collects). The Swiss Federal Supreme Court has methodically closed off the option of quietly keeping them.
In BGE 137 III 393 (case 4A_266/2010 of 29 August 2011) the court dealt with an independent manager specifically: under art. 400 CO, whatever is received in connection with performing a mandate belongs to the principal, and a client's waiver is valid only if he understood the calculation basis and the order of magnitude of the payments. "I am aware that such things happen" is not enough.
In 2012 — BGE 138 III 755 (cases 4A_127/2012 and 4A_141/2012 of 30 October) — the same logic was extended to a bank managing a portfolio, including payments made inside its own group.
The limitation period is ten years under art. 127 CO, and it starts running when each individual retrocession is received, not when the mandate ends (BGE 143 III 348, 4A_508/2016 of 16 June 2017). Art. 26 FinSA codified the case law: a third-party payment may be retained only with the client's express and informed waiver; otherwise it must be passed on.
The outer boundary was drawn in early 2026: in case 4A_149/2025 the court held that in pure execution-only there is no duty to hand over retrocessions — the bank takes no investment decisions, so there is no conflict of interest. The reasoning is useful read backwards: the duty arises exactly where discretion exists — that is, at the heart of an EAM mandate.
The EU took a different route — an outright ban. Art. 24(7)(b) and 24(8) MiFID II prohibit a firm providing independent advice or portfolio management from accepting and retaining fees from third parties (minor non-monetary benefits aside). The Retail Investment Strategy, through which the Commission proposed extending the ban to execution-only, was softened in the political agreement between the Council and Parliament of 18 December 2025: there will be no general ban, and in its place a requirement of "tangible benefit" to the client, separate disclosure of costs, and the right of member states to introduce national bans. Singapore takes a third route — the retrocession stays with the bank and the duty reduces to disclosing its cap; both regimes are set side by side in Switzerland or Singapore.
Economics: where an EAM is cheaper, and where it is not
The client pays twice. The EAM charges a management fee on AuM, sometimes a performance fee; the bank charges separately for custody, transactions and FX. Comparing this with a bank's DPM is only meaningful all-in.
Moneyland's independent comparison and industry comparisons on larger portfolios give the following orders of magnitude.
| Bank all-in | Roughly 1.28% a year (2025); 1.32% a year earlier |
|---|---|
| Portfolio measured | CHF 250,000 with a high equity weighting |
| Provider spread | Three- to fourfold between cheap and expensive |
| EAM management fee | 15–25% below the bank's |
| Custody and reporting | A higher bill than under a bank mandate |
The bank stops quietly topping up its income from the transaction layer and moves it into an explicit tariff; those second figures come from practitioners, so they should be read as orders of magnitude.
The real difference sits in the transaction layer: portfolio turnover, FX spreads, mark-ups on structured products, the share of house funds. An EAM with institutional terms at several custodians compresses that part; an EAM living off retrocessions inflates it. Hence a practical test at the first meeting: ask for the all-in cost broken down by layer, and for evidence that none of the manager's income depends on which particular product is chosen.
What the model delivers — and what it does not remove
Multi-banking: one manager across several custody relationships, bank risk spread, a consolidated view of the portfolio. Portability: changing banks does not mean changing managers, and vice versa — the parties are replaceable separately. Continuity: relationship-manager rotation is the background noise of private banking, whereas in an EAM the owner of the firm is the relationship. Independence of product choice: the architecture is open and house funds enjoy no built-in advantage.
What the model does not remove. Custody risk stays with the bank — an EAM is no protection against a custodian's problems, and questions about segregation and securities custody should be put to the bank.
There is a dependency on "admission rules": banks accredit EAMs, prune their lists periodically, and a small manager may one day turn out to be unprofitable for the bank to keep. There is key-person and succession risk inside the firm itself — more than 80% of Swiss independent managers are companies with up to ten employees, and two thirds of their principals are over fifty.
An EAM does not remove the custody bank’s legal or compliance obligations. For a client with Russian connections, determine the personal and transactional scope of each Swiss restriction and its exceptions: the CHF 100,000 limit on accepting deposits and restrictions on particular securities are not triggered by every Russian connection. SECO guidance also distinguishes deposits from custody assets and identifies nationality- and residence-permit-based exceptions. The bank and EAM may each require source-of-funds evidence, but this is not an automatic doubling rule. Test the EAM’s reporting and consolidation before signing.
Where the boundaries run with an MFO, a bank and your own office
An EAM is about managing a liquid portfolio and almost nothing else. A multi-family office takes a wider brief: structures, tax and succession architecture, real estate, private equity, family governance — and an MFO often holds an EAM licence itself for the investment part. A bank's DPM offers the simplicity of a single window and the full range of balance-sheet services, at the cost of product independence. Your own family office makes sense when volume and complexity justify a permanent team; below that threshold an EAM is a way to buy discretion without building infrastructure.
How to choose
The licence and the supervisory organisation are verifiable in FINMA's public register — that is the first and mandatory step. Then: the size and economics of the firm (will it survive two bad years), the ownership structure and the succession plan, the auditor, the limits of the liability insurance, the full remuneration model with written confirmation that no third-party payments are received, the set of custody relationships and the actual terms at each of them, the ability to produce consolidated reporting across all banks in a single format. And separately — a track record read as a history of decisions taken in specific bad quarters.
Q/A
Do the assets remain in my name when I use an EAM?
Usually yes: the account and custody agreement are between the client and the bank, while the EAM receives a separate investment mandate. But booking, segregation and insolvency rights come from the bank documents and governing law; an independent manager neither assumes nor removes custody risk.
Can the EAM withdraw money under the LPOA?
Not under a properly limited LPOA: it permits trading and rebalancing inside the account but not changing the owner or paying third parties. Check the signed power and the bank’s settings themselves, including permitted transactions, limits, revocation and separate authorisation for external transfers.
How do I verify a Swiss EAM’s licence?
Match the exact legal entity against FINMA’s current list and the named supervisory organisation. Name, address and status must match, not merely the brand or adviser; then confirm that the licensed entity signs the mandate. A custody-bank relationship or trade-association membership is not a substitute for a licence.
Is an EAM always cheaper than a bank DPM?
No. Compare the all-in amount: the EAM’s management and performance fees plus the bank’s custody, dealing, FX spreads, product costs, reporting and taxes. A low management rate can be offset by turnover and mark-ups, so obtain a like-for-like portfolio calculation and written disclosure of every remuneration source before signing.
May a Swiss EAM retain retrocessions?
Yes, but only under the rules for third-party compensation. Article 26 FinSA requires the client to be informed in advance about the nature and range of the payment and to waive its transfer expressly; without a valid waiver it goes to the client. A waiver does not remove the conflict, so product incentives should still be disclosed separately.