Luxembourg's wealth management
ecosystem at a glance
The transition to a tax-transparent cross-border wealth management centre in the aftermath of the financial crisis had already strengthened Luxembourg’s position as an onshore EU hub for private banks, wealth managers and their clients. The country’s private banking sector has continued to diversify into (ultra-)high-net-worth client segments, with assets under management growing over 20 percent since 2014.
Why Luxembourg
+125
International banks from 27 countries
€ 508 billion
Private Banking Assets under Management (AuM)
€ 5.6 trillion
in assets under management (as of April 2020), Luxembourg is the number one investment fund centre in Europe and second worldwide. It is the undisputed global leader in the cross-border distribution of funds.
The EU passport allows banks in Luxembourg to offer their services throughout the European Single Market
There is a meeting of minds when (ultra-)high-net-worth individuals choose to manage their wealth out of Luxembourg. Living and working across borders is very common in the Grand Duchy. Four-fifths of financial sector employees are foreign nationals, coming from across the globe. Luxembourg’s wealth managers are drawn from a cosmopolitan workforce and have an intimate understanding of the languages and cultures of their international clients and partners.
Cross-border wealth management is not just about specialist financial advice but also requires knowledge and understanding of the different regulations that apply, depending on the domicile of the client.
Luxembourg is unique in its ability to satisfy all these requirements, enabling assets and interests to be managed seamlessly and in full compliance with applicable regulations.
J.P. Morgan recently established its Wealth Management business headquarters in the Grand Duchy. This has allowed us to seamlessly support clients in multiple EU markets with goals-based, bespoke private banking advice and counsel.
RISING ASSETS UNDER MANAGEMENT
Private banking assets in Luxembourg totalled EUR395 billion at the end of 2018, 76 percent higher than the amount recorded just before the onset of the financial crisis in 2008 (EUR 225 billion). This decade of continuous growth in private banking assets is a clear vote of confidence in the expertise of Luxembourg’s wealth management professionals.
Luxembourg is one of the few countries to offer institutional solutions to ultra-high net worth families. The unique range of legal solutions and of regulated and unregulated vehicles facilitates the organisation of their assets.
More and more international families create their investment vehicle in Luxembourg to administer their interests in Europe or internationally.
A diversified toolbox for wealth management
Wealth management professionals rely on a comprehensive “toolbox” of well-designed legal instruments. Precise solutions can be crafted for each family’s unique cross-border financial and estate management needs. Depending on the individual’s requirements, options include flexible, non-regulated solutions, specialised investment funds or risk capital investment companies. A range of contractual tools, such as fiduciary agreements and insurance products is also available.
Life insurance as a wealth management solution
Key differentiators for Luxembourg are its toolbox, the proven delegation and oversight model for sourcing best of breed institutional asset managers globally both for liquid and illiquid assets as well as its best in class regulatory environment. These features enable wealthy families to design tailored solutions which can match their most sophisticated asset management and transmission needs whilst ensuring strong governance and investor protection.
Luxembourg’s regulatory framework
Like any other global banking centre, the Luxembourg financial centre has undergone profound structural changes, driven by supranational regulation. Private banks have embarked on a journey to implement these new standards, creating a need for significant adjustments to bank business models and even more so in cross-border wealth management.
Digital trends
Wealth Management is set to welcome a new generation of clients. They have new attitudes and expectations of the wealth management business and they think differently about advisory services. Wealth management is a people business and is founded on personal trust. Nevertheless, technology, used wisely, can strengthen these relationships and improve customer experience. Luxembourg is committed to leading the drive towards digital financial services.
Luxembourg is well known for being an international hub for Private Equity (PE) deals and attracts an increasing number of PE houses. According to Preqin, a leading data provider for the alternative asset community, 19 out of the top 20 Private Equity firms and General Partners worldwide have operations in Luxembourg. This market is expected to grow at least 10 percent annually in the coming years.
The Fondation de Luxembourg (“the Foundation”), established in 2008, is the Grand Duchy’s specialist service provider for philanthropic projects. It is an umbrella organisation for the reation, management and supervision of charitable foundations through which long-term commitments can be managed. The Foundation acts as an expert adviser, offering a simple, secure and rapid solution to individuals and corporate donors. It is a fully independent, not-for-profit initiative, and benefits from government support.
Over the last 11 years, the Foundation has established 87 foundations, representing over EUR220 million in donations and bequests.
Portfolio diversification is key when taking a holistic view on an (U) HNWI’s financial situation. Over the last decades we have witnessed the rise of a different and new asset class: art – a niche investment class among wealth management services.
According to the Deloitte Art and Finance Report 2019, 72 percent of wealth managers said they had offered art-related services to their clients. With estate planning taking on an increasing importance for wealthy individuals, art-related services have become a key building block in holistic wealth management strategies.
ABOUT LUXEMBOURG / QUALITY OF LIFE
5th
in Europe for expats
7th
in the World in terms of level of English proficiency and is the leading EU country for multilingual skills
1st
for technological readiness worldwide (Global Competitiveness Report, The World Economic Forum 2017-18)
Luxembourg has led the way in international education for decades and has a wide selection of multilingual schooling options