Financial assets transformation

In the past 40 years, the financial markets have experienced a significant evolution, going from a ‘provider of liquidity and credits to the real economy’ to a ‘financial economy and wealth creation industry’ in itself. The search for yield will continue over the coming years and the diversification of asset classes in the portfolio of institutional and private investors will be a sustained trend. “We believe that the coming years and investment cycles will be marked by the search for an economic and social balance between Environmental, Social and Governance and diversified yield,” says Olivier Carré, Financial Services Leader at PwC Luxembourg.

Alternatives industry going strong

Though known as an attractive way to diversify and enhance returns, investing in alternatives requires fresh thinking and a clear strategy in light of the changing market conditions. “In the current low or negative interest rate environment, and with the central banks further stimulating the economy, institutional investors are searching for alternative methods of generating alpha, with private market investments being a key manner of doing so,” says Vincent Lebrun, Alternatives Leader at PwC Luxembourg.

Solutions to address investor needs

In the field of asset management, Luxembourg is well positioned to leverage on the increase in the cross-border activity, both in terms of investment and distribution. But major changes to product requirements and an evolving discussion on the level of fees between actively managed and passive products are critical issues impacting asset management strategies. “Fees are decreasing, due to both investor and regulator pressure. Asset Managers have been called on to provide value for money, increase transparency and lower costs to investors,” says Oliver Weber, Asset Management Leader at PwC Luxembourg.

Amazonisation of banking

No matter the industry, business models are changing faster than ever. For banks operating in Luxembourg it has never been so important to redefine target operating models, revamp procedures and reconsider IT systems. In an increasingly digital age, banks will struggle to succeed if they don’t embrace a platform model, offering clients a customised front-end service. “Most banks in the Grand Duchy embarked on a transformation journey, encompassing business models, reviewing their value chain, people and technology projects,” says Roxane Haas, Banking Leader at PwC Luxembourg.

Life insurance investment solutions

Luxembourg is also Europe’s leading centre for cross-border life insurance, typically distributed in under EU Freedom of Services or Freedom of Establishment provisions. While much of the coverage of Luxembourg’s insurance sector in the past few years has focused on the influx of major international property & casualty or specialist insurance companies setting up in the Grand Duchy to solve for Brexit, the centre is also renowned for providing wealth insurance solutions, says Matt Moran, Insurance Industry Leader at PwC Luxembourg. Well structured, a Luxembourg life insurance policy affords great flexibility to policyholders. As today’s mass affluent and high net worth individuals are ever more mobile, the Luxembourg solution becomes more relevant.

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