Cross-border business considerations in the private banking and wealth management industries
Given the size of the country, Luxembourg’s financial services industry is based mainly on cross-border business. The wealth management and private banking industries are no exception as the local players’ clientele stands in increasingly distant places such as the Middle East, Latin America, or Asia.
The pressure for global tax transparency and regulatory compliance—especially in Europe—has caused a significant shift from offshore to onshore wealth. For instance, over the last couple of years, hundreds of affluent individuals living in Luxembourg’s neighboring countries have made the choice to transfer their assets to their country of residence in order to avoid any potential conflict with their local governments. Interestingly, during this process of “onshorization”, some Luxembourg banks and Family Offices (FO) have made the bold choice to set up a branch abroad in order to follow their clients in their country of residence rather than losing them to the local competition. These affluent customers would then carry on benefiting from Luxembourg’s excellence in financial engineering and access to a wider range of investment vehicles.
However, the increasingly protectionist measures from governments in Europe should not lead us to forget that free movement of goods, people, capital and services within the EU — including financial services — is a fundamental right laid down in the Treaty on the Functioning of the European Union (TFEU). These “Four Freedoms” remain the cornerstones of the internal market. This is very important to remember, especially for the tax and regulatory compliant (U)HNWI and wealthy entrepreneurs whose business activities are usually global with assets and family members split in different countries (e.g., children residing or studying abroad). These clients, who are in essence mobile and travel the world, usually like to be served, wherever they may be, by the same trusted advisers.
Inside magazine issue 9, June 2015
Inside is Deloitte’s quarterly magazine offering an exclusive insight into best practices, trends and opportunities faced by our clients across all industries.
Inside focuses on the main hot topics relevant for the market (Asset management, Banking, Insurance, Public sector, Healthcare, Private equity, Real estate, TMT, Manufacturing and consumer business, Transport and logistics).