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Luxembourg gains greater share of UHNW ‘wallet’

16 February 2017

Claire Coe Smith

Luxembourg City, downtown city part Grund. Photo: Wolfgang Staudt

The wealthy population of Luxembourg is rising, as government efforts to attract ultra-wealthy new residents spells good news for the country’s wealth management industry.  Not so long ago, the end of banking secrecy threatened the future of private banks in Luxembourg, as many predicted a wave of consolidation.

Belgians pour into Luxembourg

But instead, the number of rich Europeans moving to Luxembourg continues to increase, and the general population has grown from 436,000 in 2000 to 584,000 in 2017, according to data provider Worldometers. By 2040, the figure will rise to 743,000, and the good news for the wealth managers is that it is high-net-worth individuals that are choosing to make Luxembourg home. According to a report in Belgian newspaper De Tijd in October, the number of rich Belgians moving to Luxembourg has reached a record high.

Chinese is now one percent of the population

Eric Fort is a partner in the tax and private wealth practices of Luxembourg law firm Arendt & Medernach, and he says: “We see a lot of work coming from families in South America interested in using Luxembourg structures, and we see a growing interest from people who want to migrate here, from all over the world.”  One percent of the population is now Chinese, and with the six largest Chinese banks having set up their European headquarters in Luxembourg, there is another incentive for Chinese HNWIs to relocate.

Guy Harles is co-chairman of Arendt & Medernach and a founding partner. He says: “The government is making efforts to attract wealthy people. As of mid-February, we will have new investment visas available for permanent residency.” There will be four options and one of them is that inward investors will be able to get a three year investment visa by putting €500,000 in an existing company with a five year commitment.

The result is growth for the wealth management management industry, not just working for new residents, but also, much more significantly, for those choosing to move their assets to the jurisdiction: “There are certainly many clients coming to Luxembourg, and assets moving in,” says Sandrine De Vuyst, Head of Private Banking at ING Luxembourg. “It helps that Luxembourg is AAA-rated by Standard & Poor’s, and it’s a stable country from a political, economic and social point of view. The assets in the private banks in Luxembourg have increased in the last year. We haven’t seen the consolidation in the private banking sector that some predicted. Luxembourg is well positioned internationally and has found new ways to attract more wealthy people.”

Wallet size rises

Hans-Peter Borgh, head of wealth and investment management at Banque Internationale à Luxembourg (BIL), says: “I see Luxembourg taking a growing share of the international private wealth management market. There has been a shift from smaller clients to ultra high net worth individuals, and from servicing neighbouring countries to having clients from Europe and globally.”

Asset serving business climbs

BIL has seen its wealth management AUM grow significantly in Luxembourg in the last year. Borgh says there are two reasons for the client shift: “It is party driven by diversification needs, with Luxembourg growing as a credible Eurozone alternative but the second driver is structuring in the asset servicing space which means dealing with custody, reporting and administration for foreign clients outside of Europe.”

Arendt, too, reported its busiest January for years in 2017, with significant activity for HNWi’s setting up Luxembourg structures for investments, running family offices from the jurisdiction, and seeking advice on family charters and cross-border inheritance and estate planning.

French election provides more opportunity

Political uncertainty elsewhere looks set to continue to play in to the hands of Luxembourg advisers: “At ING Luxembourg, there is little real impact from Brexit for our clients,” says De Vuyst. “However, the outcome of the elections in other European countries, such as France, could have an impact on the way our clients distribute their wealth geographically.”

So not only has Luxembourg, managed to see off the threat of a downturn from the end of banking secrecy but government measures have brought growth. As well as this political threats elsewhere in the world are bringing opportunity and market share to the domestic wealth management industry.  

 

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https://www.citywealthmag.com/news/buzz-buzzacott-interview-partner-gregory-wheatley

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