Across the time, Luxembourg has become a central hub for leading institutions in banking sectors and more particularly Private Banking. As the seat of some EU institutions and agencies and as eurozone’s principal financial hub and centre of excellence for wealth management and investment funds, Luxembourg’s financial centre has a central position at an international level as well as being the largest contributor to its economy. Indeed, it is the second-largest investment fund centre in the world following the United States, and the first captive reinsurance market in the European Union and the leading private banking centre in the eurozone.
As a matter of fact, most of the banks operating in Luxembourg are also anchored all around the European Union and this is helping them to expand their local seat whether thanks to their individual branch network or by benefiting from their European nature in order to develop their transnational activities. Also, a part of the private bankers increased their services through this European center towards another European or Middle Eastern entities.
A well-developed ecosystem
Among Luxembourg’s advantages there’s a triple A rating, a political and social stability, and a transparent regulatory infrastructure. Benefiting from a strategic location at the heart of Western Europe, it is providing a complete range of services to both private and institutional investors. In fact, these diverse services are delivered by renowned financial sector professionals such as banks and wealth managers. Thanks to their considerable experience they can develop and deliver tailored solutions to offer the highest standards of professional support despite the restrictive regulatory requirements.
The fund industry is one of the country’s prides, which has become the world’s second-largest center for investment funds, behind the United States. The development of this industry, which has slowly specialized in the cross-border distribution of funds, has brought a series of other activities. Among these, private banking occupies a special place, especially for clients whose professional and private affairs have an international dimension.
An increasing number of banks have in fact chosen to set up the headquarters of their wealth management activity in Europe in Luxembourg, in order to better serve their international customers. While some have joined the country recently, due to specific events such as Brexit, others have deep roots in Luxembourg.
Expertise and benefiting from a European passport
Right now, the traditional family pattern is evolving with geographic mobility and the internationalization of heritage. Family governance has therefore become a necessity for many families. These people find the right answer to their problem more easily in Luxembourg than in another European country, where services and advice are often provided from a domestic angle. There are also solutions in Luxembourg that are better understood than elsewhere, and even unique, such as the shareholders’ agreement. ” Thanks to the different skills present in Luxembourg, private banks can quickly understand the client’s needs and respond to them in the best possible way.
For a Swiss bank, which is therefore not part of the European Union, the problem is different. Setting up its European hub in Luxembourg provides access to the Union market and its 450 million consumers. “Julius Baer, even though it is the leading Swiss private banking group, does not automatically have access to the European market,” explains Falk Fischer, CEO of Bank Julius Baer Europe SA Or, given that we have an international clientele, we must be able to offer flexible and European solutions to these customers. This is the reason we created Bank Julius Baer Europe S.A., a 100% subsidiary of the group, with a full European banking license. This structure has been the European platform for the entire group since 2016. “
The clients and services
All these assets are put to the service of clients whose professional and private affairs are spread over several countries. Nonetheless, beyond this description, the clients served by private banks in Luxembourg are very wealthy people, qualified as high net worth individuals, who have at least $ 1 million in assets or ultra-high net worth individuals, $ 30 million in assets. “Our customers are indeed one of those categories. Most of them have an international background and a close relationship with the European Union. For example, it could be an entrepreneur who runs a structure present in different countries, while having deep roots in one of the states of the European Union,” explains Falk Fischer.
Therefore, these particularly demanding profiles are looking for personalized service. Surprisingly, where the personal, physical relationship prevailed before the crisis, private banking customers have however quickly adapted to digital tools. “Many of our customers have shown interest in digital communications and are willing to contact us through different means that they would not have considered or accepted before the pandemic,” adds Falk Fischer. Thanks to various new tools, we have even been able to increase the contact time with our customers by 25%. ”