The external asset manager and the custodian bank

A triangle of contracts

The business model of the independent asset manager rests on three contracts. The client concludes an asset management agreement with the manager, which is a contract of mandate under Articles 394 ff. of the Code of Obligations and, since 2020, must also satisfy the information, suitability and documentation duties of FinSA. The client concludes an account and custody agreement with the bank, which keeps the assets, executes transactions and reports to the client. The manager and the bank conclude a collaboration agreement, usually called the external asset manager agreement, in which the bank accepts the manager as an intermediary, sets out the conditions under which it will accept his instructions and governs the exchange of information and, where applicable, the payment of fees and retrocessions.¹ The client signs a limited power of attorney in favour of the manager on the bank's form, which entitles the manager to give management instructions but not to withdraw assets, as Article 24 paragraph 2 FinIO now requires.

Each side of the triangle carries its own risks. The bank does not supervise the manager's investment decisions and as a rule is not liable for them, since it acts on the instructions of a person whom the client has authorized. The Federal Supreme Court has recognized only limited duties of the bank to warn the client where it notices that the manager is acting manifestly against the client's interests or outside his authority.² The bank remains fully responsible for its own anti-money laundering duties. It must identify the client and establish the beneficial owner under the Agreement on the Swiss banks' code of conduct with regard to the exercise of due diligence (CDB 20). By written agreement it may entrust these tasks to the external manager, who often collects the documents in any event, provided that it selects and instructs him carefully and can check his compliance. Even then the bank remains responsible under supervisory law, must keep copies of the documents with a written confirmation that they match the originals and must check the plausibility of the results of any additional clarifications itself (Art. 28–29 AMLO-FINMA).³ Chapter D.III traces the origin of these duties to the Chiasso affair of 1977. For the manager, the triangle creates a dependence on the bank: if the bank terminates the collaboration agreement, the manager must move all his clients to another custodian, which requires the cooperation of each client.

The custodian banks of Lugano

Of the 39 banks active in Ticino in 2024, twelve of which had their head office in the canton, most accept external asset managers as intermediaries. Several, among them the Lugano branches of the large Zurich and Geneva banks and some of the Italianowned and private banks described in Chapter E.I, have built specialized desks for them.⁴ These desks offer the managers trading platforms, access to research and products, consolidated reporting across clients, and assistance with compliance documentation. Since FinIA came into force the banks have also checked that the manager holds a FINMA licence and is affiliated with a supervisory organisation, which has simplified their due diligence on the managers themselves. In exchange, the banks earn custody and transaction fees from the client relationships that the managers bring, without bearing the cost of the relationship manager.

The relationship has been shaped since the 2000s by the decline of the bank-side retrocession, by the end of banking secrecy for Italian clients and by the concentration of the banking sector. When a Lugano bank is sold or closes, as happened repeatedly after 2010, its external managers must decide whether to follow their clients' assets to the acquirer or to move them elsewhere. The collapse of Credit Suisse and its takeover by UBS, which FINMA approved on 19 March 2023, reduced the number of large custodian banks and left external managers with fewer alternatives when they negotiate the terms of their collaboration agreements.⁵

Notes

1. Description of market practice; the collaboration agreements are not published and vary between banks. ↩
2. Federal Supreme Court, judgment 4A_168/2008, on the bank's limited duties to warn in relationships with external asset managers. ↩
3. Swiss Bankers Association, Agreement on the Swiss banks' code of conduct with regard to the exercise of due diligence (CDB 20), 2020; Ordinance of the Swiss Financial Market Supervisory Authority of 3 June 2015 on Combating Money Laundering and Terrorist Financing in the Financial Sector (AMLO-FINMA), SR 955.033.0, Art. 28–29, https://www.droit-bilingue.ch/de-fr/9/95/955.033.0-28-34.html and https://www.droit-bilingue.ch/de-fr/9/95/955.033.0-29-35.html. See also Chapter D.III. ↩
4. Ufficio di statistica del Cantone Ticino (USTAT), 12 Denaro e banche, March 2026, https://m3.ti.ch/DFE/DR/USTAT/allegati/prodima/5112_denaro_e_banche.pdf (39 banks, 12 of them with head office in Ticino, in 2024); see also Chapter E.I. ↩
5. FINMA, "FINMA approves merger of UBS and Credit Suisse", 19 March 2023, https://www.finma.ch/en/news/2023/03/20230319-mm-cs-ubs/; see also Chapter E.I. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.