Apiax, a Swiss regtech company, has launched a new tax product that allows banks and asset managers to factor the tax impact of financial instruments into their investment recommendations, addressing key challenges in wealth management, such as the need to increase the quality and frequency of client interactions and the rising demand for tailored investment advice.

“Together with our content partners, we’ve found a way to digitalize tax regulations on the ISIN- level so we know on the level of the financial instrument how it will be taxed in all possible scenarios,” Ralf Huber, co-founder and legal lead of Apiax, told Fintechnews. “Once you have all these variables factored into a regulatory rule set, you can extract tax information from it. More importantly, you can calculate the tax impact of financial instruments and of entire portfolios. We think that’s pretty exciting.”

The solution allows financial institutions to make use of tax calculations in their advisory processes, “the missing piece in the puzzle of value-added, personalized investment advice,” the company said in a blog post. Using the new tool, financial service providers can inform clients about tax-heavy financial instruments and offer them tax-efficient investment recommendations instead, enabling for tailored investment advice as well as new investment products and investment services.

“They can offer their clients better investment advice, superior portfolios and tailored investment products! It’s one of these rare opportunities where preferences align: financial service providers can approach their clients with something new, while clients get better investment performance. It’s a win-win situation,” Huber said. “And because our solution is so easy to integrate into core banking solutions and is even readily integrated in the Temenos WealthSuite, it’s really easy to make use of these benefits.”

The launch of Apiax’s new tax product demonstrates that regtech solutions aren’t only about cross-border compliance and managing regulations digitally. These can also be used to handle the increased complexity of tax regulations, improve investment performance and increase client satisfaction.

“At the very core of the regtech industry is the technology to transform complex regulations into digital, machine-readable regulatory rules and to manage these digital rules over their full lifecycle. This allows financial institutions to regain control over regulatory developments, to increase regulatory certainty and to become efficient and innovative again,” Huber explained. “In essence, regtech allows banks and asset managers to master financial regulations digitally. Whether or not this has a cross-border connotation is only of secondary importance.”

He continued:

“For our solution, there are countless use cases in the areas of digital wealth management, investment services and tax-efficient investing. Robo-advisors can use digital regulatory rules to expand their business reach, for instance. Banks can use digital tax rules to offer their clients tax-efficient investment products. We also find that the data generated by regtech solutions can be really valuable for governance, risk and compliance solutions. And this is still only a snapshot. We constantly discover new and exciting use cases together with our industry partners.”

Founded in 2017 and based in Zurich, Apiax is an award-winning regtech startup that builds tools to transform complex regulations into easy-to-use digital compliance rules that are always up-to-date and verified.

The Apiax platform combines comprehensive legal expertise with state-of-the-art technology to provide financial institutions with machine-readable and dependable answers to complex regulatory questions. It covers key legal areas such as digital cross-border compliance and tax regulations, and can be deployed on premise or in the cloud.

“We offer our clients a platform on which they can transform regulations into digital regulatory rules themselves. But we also give them access to digital rules created by our premium content partners,” Huber said. “We find that different clients have different needs for these software-as-a-service (SaaS) and regulatory-as-a-service (RaaS) solutions depending on a number of factors such as their size or their business strategy.”

Apiax is part of the growing community of regtech startups that are using technology to enhance regulatory processes. Regtech holds significant promise for easing the regulatory burden at banks and allowing for cost-savings.

Thomson Reuters released its annual Cost of Compliance research paper in June and found that regulatory divergence costs financial institutions between 5 and 10% of their annual turnover on average. Since 2008, the financial sector has seen more than 50,000 new regulations being introduced.

“Regulatory compliance takes a huge toll on financial services providers so it seems only natural that more and more banks and wealth managers look to regtech to solve their regulatory headaches,” Huber said. “[Financial services providers] are starting to understand that they can tap into efficient regtech solutions to master their regulatory challenges and focus on business development again.”

In Switzerland, the regtech sector continues to grow now counting some 28 startups, according to Swisscom’s monthly Swiss Regtech Startup Map. These focus on various areas of activity including authentication, AML/KYC, background check, cross-border and tax solutions, enterprise risk management and fraud detection, and more.