Part 1 / B2B
International wealth management
“Luxembourg is the perfect location” Legal questions, tax issues, regulatory regimes – all combine to make wealth management a complex subject. Even more so when it is international. Ernst & Young’s Omid Mohebati and Sylvie Leick look at what it is that gives Luxembourg its competitive advantage in this sector. Text: Marc Vandermeir | Photo: Christophe Olinger
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Omid Mohebati, executive director au sein du département fiscal d’Ernst & Young Luxembourg. Omid Mohebati, Executive Director of Tax at Ernst & Young Luxembourg.
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ffective wealth management is all about striking a balance between risk and profitability with each investment cycle, from acquisition to transmission, via development,” says immediately Omid Mohebati, Executive Director of Tax at Ernst & Young Luxembourg. “The aim is to secure one’s future, and that of one’s nearest and dearest, whether that is for the short, medium or long term. Of course, one’s objective may differ depending on the term and size of the wealth.” Nonetheless, legal questions, tax issues and regulatory regimes make international wealth management a complex subject. This is where Luxembourg comes up trumps, with advantages that make it extremely attractive. “The complexity is primarily down to the fact that the manager must have expertise in a number of different markets, such as insurance products, real estate, securities and the like,” explains Mohebati. “You need to talk to professionals working in each of the different areas, especially financial advisors and legal and tax consultants. But the main factor – and this is vital – is that effective management requires complete independence, to ensure you get impartial advice when selecting products.” Adding an international dimension accentuates the complexity. Most of the clients of private banks based in the Grand Duchy are non-resident. “This raises the complexity stakes even higher, since this non-resident clientele’s portfolio consists of extremely varied assets, located in many different countries and therefore subject
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to many different jurisdictions. Even the family itself may be spread over a number of countries.” But, wealth management also demands a specific environment with access to a special toolkit. “Luxembourg is perfectly adapted to this role,” emphasises Omid Mohebati. “From the point of view of the environment, Luxembourg enjoys remarkable political, economic and social stability. It is a market leader when it comes to investment funds. The first fund was created here in 1959, and all that history implies expertise and an accumulated savoir-faire.” Sylvie Leick, Associate Director in the tax department at Ernst & Young Luxembourg, also believes strongly that the environment could not be better suited. “Our multilingualism, cosmopolitan outlook, quality of life and feeling of security are also beneficial factors, not only in providing wealth management for an international clientele, but also, as borne out by the facts, in welcoming this clientele to become residents here. The fact that Luxembourg is a Member State of the European Union, enjoying freedom of movement and, with its very central situation, accessibility to all the other capital cities in the region, is also a considerable advantage. In addition, Luxembourg’s administrative sector has all the required expertise in this domain, and is thus very approachable. The government is also very proactive, unlike in many other countries.” The range of investments on offer is also able to respond to all needs and expectations, from unregulated investment vehicles to regulated
products. “Well-suited for the former are company structures such as the Soparfi (société de participations financières – a fully taxable company) or the SPF (société de gestion de patrimoine familial – reserved for individuals acting in the scope of the management of their wealth or for investment entities taking the form of a foundation or trust). The SPF may not engage in any commercial activity,” explains Mohebati. “The objective is to acquire, manage and realise any financial asset in a manner that would be permitted for any individual acting in the management of his private capital, tax neutrally. The only levy is a subscription tax of 0.25%.” These are followed by regulated vehicles such as SIFs (Specialised Investment Funds), which are ideal for wealth management as they can invest in just about anything. In addition to the local expertise and environment, another competitive advantage enjoyed by Luxembourg is that “we are not actually off-shore. We are European and very proactive,” notes Omid Mohebati. “Of course, there are competing financial locations, but they have this negative aspect of being off-shore.” “The European aspect is very important,” continues Sylvie Leick. “But even if the clientele is turning towards new markets, our core business remains European, with a strong affinity to this European outlook and the expertise of Luxembourg-based advisors. And that is in comparison with Asian locations, for example, as well as with Switzerland.” .