Knowing how the money is invested

Dimitri Senik
Investor Trust Services Leader, PwC Switzerland

Article overview

Diversity unsettles 

The asset investment industry is characterised by complexity and diversity: complex investment categories and instruments, colourful investment products, different investment structures, diverse asset management companies. Most investors - whether private or institutional - are often overwhelmed or unsettled by this. In addition, investment risks have increased massively over the last 20 years. When selecting investment products and asset managers, investors want to rely on objective and verifiable information on the investment process and not "blindly" trust marketing statements.  

Investing in a good feeling

Such objective key information includes a structured investment process, clearly defined investment guidelines, a correct performance record, a transparent investment risk profile of the products, the prevention of "greenwashing" in the case of investments with a sustainability focus, a robust internal control system and comprehensive reporting. Investors and asset managers therefore have this information checked by independent third parties such as Dimitri Senik's teams. With their Investor Trust Services, they provide the assurance that the invested funds are managed with robust, strict and transparent processes. 

The industry is itself

The Swiss wealth management industry must assert itself through innovation, expertise and transparency for target groups from Switzerland and abroad, especially if it wants to maintain its global claim. Interestingly, the demand for independent audits as part of the investment process comes mainly from foreign clients. Against this backdrop, the investment industry in Switzerland has always favoured self-regulation. It is supported by various standards and guidelines issued by the Asset Management Association Switzerland  

(AMAS), the Swiss Bankers Association (SBA) and the Swiss Pension Fund Association (ASIP) and is recognised by the legislature. Voluntary independent auditing is an important control instrument for self-regulatory frameworks. This is because it ensures that the quality of implementation is guaranteed and that the institutions benefit from the independent control and experience of the audit team. 

Please check!

Banks and asset management companies usually commission the following checks: 

• Investment processes, internal controls and compliance with investment guidelines for products: Interest in audits of sustainable investment products is growing rapidly. The target audience wants to know, for example, whether the classification of the investments as sustainable is justified and whether the investment guidelines - in particular the prevention of "greenwashing" in the case of sustainability aspects - are consistently implemented. 
• Proof of investment performance: This audit category includes compliance with the Global Investment Performance Standards (GIPS) as well as additional selective audits of the performance history of the investment products.  
• Investment risk management: The audit of investment risk management is particularly important for more complex investment strategies and the use of derivative financial instruments. 
• Performance-based fee models: If the amount of the asset management fees depends on the investment return achieved and a complex calculation model is used, it is advisable to review the fee model. 
• Financial indices: Some companies require audits of processes and compliance with relevant regulations at service providers for financial indices used as benchmarks in investment portfolios. 
• Specialised reporting: Audits for specialised reports such as investment reporting, the sustainability report in accordance with the self-regulatory standards of industry associations or the Climate Action Report in accordance with the recommendations of the Net Zero Investment Framework and the standard of the Partnership for Carbon Accounting Financials (PCAF) are being requested more and more frequently. 
• Investment governance and controlling for pension funds: Institutional investors themselves have a duty to provide their beneficiaries and other stakeholders with security and transparency as part of their fiduciary duties. 

Performance standards in vogue for 25 years 

The globally established GIPS standards make it possible to calculate the performance of all investments in an offering with a comparable investment strategy. Although these standards were introduced in Switzerland more than 25 years ago, they maintain their status as the only globally recognised guideline for the calculation and presentation of investment performance. The GIPS standards are applied by all major banks and asset management companies, are required by institutional investors and are represented by AMAS in Switzerland. Formal verification of compliance with the GIPS standards is voluntary. Nevertheless, numerous financial institutions have regularly commissioned PwC Switzerland to carry out such audits for a quarter of a century.   

Shared experience, valuable in many ways 

Dimitri Senik could be casually described as an "old hand". He has been advising financial institutions in Switzerland and abroad at PwC for 28 years. His extensive knowledge is not only available to PwC's clientele. He is also involved in various self-regulatory bodies in the asset management industry. In this way, he strengthens the reputation of a key industry that is deeply rooted in Switzerland. Not only the industry players benefit from his experience. Dimitri Senik explains: "All employees in Switzerland are indirectly also investors, as they all have an occupational pension scheme - the second pillar. So it's not just relevant for wealthy people or institutional investors, but for many people in Switzerland to know how their money is managed."