Pietro Ugazzi of Compass-AM explains the recent developments for his company

by Compass AM

Compass-AM recently announced it obtained from FINMA its license as Securities Dealers. Pietro Ugazzi, one of the founders and customer relationship manager, explains why this is important for the company.


“Compass-AM was founded in 1998, we began as investment advisors although we come from the fund management business. In 2007 we took the Licol license that was needed in Switzerland to be investment managers of funds, and in 2008 with markets that had halved we found there were good opportunities for brokerage. Therefore we decided to set up a pure brokerage desk. This activity was further developed in recent years. Here in Switzerland there's a limit, if you are not regulated, of a maximum of 5 billion francs that a good desk reaches very soon. Our request to become Securities Dealers was done primarily to scale the business of securities intermediation. On the 7th of February, we received the license from FINMA.

We are Securities Dealers and we will not hold the clients' assets, we made this choice on strategic grounds. It is clear that becoming Dealers, especially to scale the securities intermediation business, means first of all that, as we work with global institutional counterparties, we need a certain framework, that's why we looked for something that was similar to the regulations of other developed countries. Therefore, we requested and obtained this license to be in line with the regulations of developed countries and to be more easily accepted as counterparties. This FINMA license has a similar type of controls to those that exist in other countries of the European Union.

Currently we manage 1 billion Euros, there are 27 employees and have shareholders' equity of 7,000,000”.

What is the secret to twenty years of activity?

“Above all, it is important to be independent, to make choices with a clear mind and not following indications from others. The secret is to work in a professional manner and be fair with customers, aligning our goals with theirs. This means managing money in the most sensible way, having a correct pricing”.

In your experience, do private customers appreciate this approach?

“They do. Over these years we built very good relationships of mutual trust and transparency. Honestly, it is also important to teach clients, sometimes we become similar to tutors, in a way. Thankfully this never happened in recent years, but, earlier on, someone made us impossible requests, like "I want to gain 20 per cent but with guaranteed capital." These things do not happen anymore, our customers know us and we are the first not to take into consideration requests of this kind. We have management mandates with very clear limits and whoever wants to be managed by us has to stay within those limits. Also, we do not use structured products, precisely because we feel they are not transparent enough.

Transparency must be at all levels, both in the reporting for private clients where there are no hidden costs, everything is very clear, and in the fund management: our customers may ask us for their portfolios and we can send them within seconds. There is nothing to hide. We were a little ahead of times, when at first we were doing this kind of business we were seen as a black sheep, somebody thought "How come they do not get demotions, how come they negotiate prices with banks instead of accepting them, why don't they use structured". In the end, this was the right direction to take.

This type of activity could also be used as a sort of aggregator of small companies: in a world that is moving more and more towards regulating, small companies might not have the resources to build a regulated reality. This truly takes resources, both in capital and in the investment in people and procedures.

The other interesting thing is that, since we are in Switzerland but with partners in Europe or other countries, we hope that being Securities Dealers it will be easier to be recognized in other European markets”.

How is your business structured?

“On one side we handle private clients, duly declared, whom we take care of directly in custodian banks. Our other business area is the investment manager area, we have a SICAV and a SIF in Luxembourg that we manage from our regulated company based in Lugano”.

How much does the type of customer influence the type of investment you suggest them?

“We are a very small company, we are like a small boutique, our approach is absolutely tailor-made. Of course, we have standard lines but normally we prepare tailor-made portfolios depending on the customer's needs. The customers come to us and must hold capital here in Switzerland, after tax compliance in their own countries, and must be looking for an independent operator. We use our know-how to improve portfolio return profiles.

Ours is a quite particular company: apart from the brokerage business, where there are Chinese walls, the funds business and the private clients business in some way communicate. Therefore, if we were only producing investment funds we could not handle client portfolios as we do right now. We may use proprietary funds or funds that we select, a field where, clearly, being an independent company is even more valuable, or we might manage the portfolios with the fund-side know-how, ranging from bonds to more particular instruments that are not used by the typical asset-manager, just because we have the chance to tap into the expertise of the Investment manager who manages more than twenty sectors.

Some funds are managed directly by us, and these are named Active, while others are bespoke, tailor-made either for very wealthy private clients or for small banks, small companies that do not have a SICAV”.

What kind of environment does Switzerland offer to a reality like yours?

“At our level it is still very useful to be here, since the biggest advantage Switzerland has is that there is little bureaucracy, laws are clear and easy to understand. Therefore, their applicability is clear. I'm Italian, I know very well the application of regulated AMs and Italian brokerage firms (SIM), they move in a different market environment, while here regarding capitalization, controls and control systems nothing is lacking. Probably, being in an environment where there are clear, stable and easily interpretable laws gives us a base of strength and peace of mind for which we are happy to be here. The rules do not change every two days, there are no surprises. This environment helps in creating this and other types of businesses. It gives more certainty. At tax level, however, dividends are treated in Switzerland as in Italy”.



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