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FinTechs belonging to this category offer asset and portfolio management services via an Internet platform or software programs and usually manage and dispose of the assets of their customers long or short term according to their specifications without actually holding the property or the possession of those assets. FinTechs providing information about and access to overnight or time deposit accounts at national and foreign banks and which execute the transactions to these accounts also belong to this category. Some FinTechs, however, only act on request of the customer.
Apart from that, some FinTechs offer software or Internet solutions enabling users to manage and plan their personal finances on their own by providing graphics, overviews and compilations of their financial data and sometimes indicating financial risks or opportunities, but without actually managing the assets.
Introduction
Attitude of the country towards modern asset and portfolio management services
The German asset and portfolio management market continuously aligns with the related business models such as (crowd-)investing and brokerage. About 1.2 million people are estimated to use personal financial management systems in Germany.
The most developing businesses in the portfolio management sector are automated financial portfolio management and robo advisory. The asset management sector is mainly tech-driven and shaped by the trends of cloud computing, Internet of Things, advanced analytics and artificial intelligence.
Legal affairs
Obligations and requirements to provide asset and portfolio management, or ancillary services described above
Asset and portfolio management services are financial services activities governed by the German Securities Institutions Act (Wertpapierinstitutsgesetz – WpIG) and, as the case may be, the German Banking Act (Kreditwesengesetz – KWG). In addition to WpIG and KWG, the EU-wide Regulation (EU) 2019/2033 on the prudential requirements of investment firms from 27 November 2019 (Investment Firms Regulation – IFR) as well as anti-money laundering and data protection regulations are to be complied with. The WpIG derives from the Directive (EU) 2019/2034 on the prudential supervision of investment firms from 27 November 2019 (Investment Firms Directive – IFD).
According to WpIG and KWG, offering asset and portfolio management services requires a license in cases where the asset manager is granted a broad discretionary power to make decisions on behalf of the client. Whether WpIG or KWG provisions apply depends on the scope of business. KWG applies in cases of more than EUR 30bn on their balance sheets on monthly average in the last 12 months and the conduction of issuing business, proprietary trading, or proprietary business. In all other cases, WpIG applies.
License costs depend on the specific business model and result from fixed and time spent costs. Fixed costs are typically in the range between EUR 3,262.00 and EUR 10,114.00, and additional time spent costs depend on the complexity of respective business model.
Among other things, particularly sufficient initial capital consisting of Common Equity Tier 1 capital (CET1) available in Germany is required to obtain a license. In case of asset and portfolio managers who, in providing financial services, are not authorised to obtain ownership or possession of funds or securities of customers and who do not trade in financial instruments for their own account, an amount equivalent to at least EUR 50,000.00 in CET1 is required.
When offering portfolio management services, the service providers shall comply with requirements for the initial capital, as well as with the funds requirements at all times. According t