We are living through a time of rapid and comprehensive change. The Covid-19 crisis, the digital revolution, existential threats like climate change are transforming the way we live. Wealth management is not immune to these trends. Wealth management, with its emphasis on long-term and bespoke investment advice for wealthy private individuals, must understand and get to grips with the new circumstances as swiftly as possible.
Among the immediate key challenges for the wealth management industry are market volatility, heightened operational risk and increased reliance on digital channels. Many features of this “distance economy”, emphasizing remote working, omni-channel customer
service, and digital interaction, are likely to become permanent. Digitalisation permits the development of more customized advice and services. It also creates cost savings, which can in turn be ploughed into investments in productivity and process optimisation.
+125
International banks from 27 countries
€395 billion
Private Banking Assets under Management (AuM)
€ 4.5 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.
Banks in Luxembourg have established several areas of expertise, including private and institutional wealth management, corporate banking, retail and commercial banking, as well as a full range of investment fund services.
The EU passport allows banks in Luxembourg to offer their services throughout the European Single Market
Luxembourg offers bespoke structures for all the main alternative asset classes and investment strategies, including
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.
There is a meeting of minds when such 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.
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.
It takes a special expertise to understand the legal, fiscal and financial implications of living international lives and managing investments across borders.
Private Banking
Luxembourg private banking entities are often designated as EU centres of excellence for wealth management within their own corporate group. The specialised skills that Luxembourg has developed over the years make it a prime location for such intragroup competence centres. The financial ecosystem that Luxembourg has built up over the years, attracts players from outside and inside the EU. The largest group of foreign institutions come from inside the EU – French and German banks for instance have adopted this model. Non-EU banks from Switzerland, the US and Canada use Luxembourg as a gateway to the EU market for wealth management, capital market, treasury and other financial services.
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.
Family Offices - Luxembourg's ecosystem offers the complete spectrum of services
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.
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.
Alternative investment trends
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.