Lu Horizon2012 Familyoffice 25062012

New opportunities for the financial industry
Luxembourg as hub for family offices

Ruth Bltmann | Partner, Deloitte Luxembourg
Pascal Rapallino | Partner, Deloitte Luxembourg
21 June 2012
Visit horizonconference.lu to access the
video recording of this presentation
Organisers
Agenda
Financial Industry in Luxembourg
The legal framework as competitive edge
Family Offices characteristics and corresponding Needs
Wealth Structuring: a key success factor for Family Offices
Hot topics in PWM and Wealth Structuring
Outlook for Luxembourg
Horizon Conference | New opportunities for the financial industry Luxembourg as a hub for Family Offices
Financial Industry in Luxembourg
While the Luxembourg banking industry has lost ground

following the crisis the fund industry has recovered
The Banking Sector
The Fund Industry
Assets under Management

1.200
1.000
189
177 169
162
155 156 156 152
800
Number of banks
149
147 143
Net assets
200
3.000.000
160
2.500.000
120
600
2.000.000
1.500.000
80
400
200
40
000
3371 3463
2868
2238
2060
1908 1941 1870 1968
1.000.000
500.000
0
Banks
The number of banks has steadily declined in Luxembourg over the past 10 years
Assets under management have been affected due to drawbacks of the financial crisis
Funds:
Strong growth in the number of Fund units during the last decade mainly due to SIF
Although fund assets decreased during the financial crisis, assets recovered in 2010
Sources: Luxembourg for Finance, CSSF (2012)
4
Number of Fund units

3667
3845
4000
3500
3000
2500
2000
1500
1000
500
0
Luxembourg financial industry is increasingly under pressure

Client Demands
Revenue side: Higher demand for safe investments
Clients with individual investment preferences combined with higher need for
involvement
Product needs
Changing Environment
Increasing complexity requires

intelligent risk management
systems
Technological sophistication
leads to more automated
procedures
Increased regulatory burden

FATCA, MiFiD II, Basel III
Increasing pressure on Offshore
financial centers
Key decisions made at
headquarters
Increased
Competition and
profitability pressure
Competition
High volatility and low interest rates
High uncertainty and (lowered) trust in traditional forms of Banking/Wealth
Management
5
Need for innovation: different solutions for private banking

and fund industry
Private Banking dynamics
Fund Industry dynamics
Client Demands
Client Demands
Increased demand for:

Regular reporting (tax reporting)
e-Private Banking
Tax & Wealth Structuring

Standardization of information
Specific reporting needs
Complex products (alt. assets)
Product needs & Structuring

Diversification of products
More complex solutions
Tax optimized & tailor made solutions
Innovative
products
needed
Product Offering
Using structures & expertise to fill the structuring gap in
Banking
AIF: new service offering/value chain
Changing business model for changing clients
Proactive private banking approach
Increased Regulatory Burden: FATCA, MiFiD II, Basel III
Decision center/main shareholders not in Luxemburg
Extended product offering needed to meet global investor
needs
Increased Regulatory Burden: AIFMD, MIFID
Competition
Profitability pressure leads to rationalisation and
centralisation of core business activities
Competition
Competition among different investment fund locations
The legal framework as competitive edge
The legal framework as a competitive edge: Draft Law 6366

(presumably during the course of 2012)
Definition
Family Office activities consist in providing professional services and advice to natural persons,
families or patrimonial entities of those in respect of their wealth. (Draft law definition)
Competitive
Situation
Family offices are not regulated in traditional

WM centers (Switzerland, London)
Regulation and transparency is a clear trend in
Europe
Objectives
Family Office market lacks a specific and

coordinated legal framework
Offering a legal framework with a businesslike
and flexible approach
Increase transparency
Scope
New
PSF
Family Office denomination reserved to certain professionals

subject to regulation
(Credit establishments;
Investments advisers; Asset managers;
Authorized domiciliation agents;
Specialized, lawyers, accountants
In addition, a new specific PSF Family Office will be
created
Two specific conditions:
Applicant shall be a corporate entity
Share capital of at least 50,000
Single family offices
Out
of
Scope
Board members of commercial companies or foundations,

trustees, fiduciaries, or judicially appointed mandates.
Family Offices characteristics and

corresponding Needs
Differences between Family Offices & Private Banking

Family Office
Private Banking
Client
Wealthy families across the generations
Individuals (wealthy and retail)
Asset type
Dealing with diverse assets & family needs
Dealing with financial assets
Advisory focus
Total wealth management
In-house portfolio management
Product
Neutral advice on different products and services
Generally oriented to own products
Family Offices multidisciplinary approach combines the needs of different generations
International wealth clients needs are becoming more complex, placing very strong service demand on financial and non financial services
(such as tax optimization, structuration, succession planning, art & philanthropy planning)
Family Offices offer an attractive multidisciplinary approach to better serve clients demand for neutrality, flexibility and exclusivity
10
Family offices as solutions to serve various client needs

Family Offices
Family Offices Service embedded in extended
business model
Traditional FO solutions
Single Family Office
Serves only one family
Serves more than one

family
Financial players
provide services
Outsourced office
Outsourcing of FO
activities
Product
Preserve & enhance familys wealth

Provide advice on complex asset solutions
Financial & succession planning
Put different service providers into competition in order to provide best services
Coordination of diverse family interests and needs (school, relocation, etc.)
Teams
Multidisciplinary and international teams providing tailor-made services

Coordinating a network of both internal & external service providers
Portfolio management function
Independence with regards to manager/product/advice/service providers to ensure confidentiality and

transparency
Independence
11
FO as integrated part of
service offering
Multifamily Office
Three major pillars of Family offices business

Wealth Growth
Wealth Protection & Preservation
Identification, set up of appropriate legal

structure
Administration, legal services, fiduciary
services
Tax advice
Identification of investment objectives
Controlling the investment process
Executing investment process in order to
Management monitoring
meet client objectives
Consolidation & reporting
Examples:
Examples:
Examples:
Legal structures
Manager selection
Consolidation of positions in different banks
Strategic asset allocation: equities,
Consolidation of total wealth
bonds, hedge funds, private equity
Tax reporting
Real estate and relocation
Monitoring of external service providers
Performance monitoring and control
Investment vehicles
Tax structuring, art advice,
Advice on philanthropy
Succession planning
Art, philanthropic solutions
Education
All services offered in Luxembourg

12
Wealth Control & Consolidation
Family Office Services in Luxembourg: Strong focus on

Vehicle Structuring and Tax issues
Remarks
A series of Family Offices is present in Luxembourg

We analyzed 20 main family office service providers in Luxembourg and mapped these providers with their service offering against standard
services
Standard Service Offering
Financial Services
Vehicles
Shadow Asset reporting
(15%)
Relationship management (networking)
(10%)
Personal/family/psychological counseling
(5%)
(25%)
Sophisticated
services
Philanthropic planning, foundation management

Estate planning, Trust management
Premium
services
Highly
sophisticate
d services
Tax
Asset allocation & portfolio management
(90%)
Concierge/security/life & residence
(10%)
Family education
(75%)
Manager selection and monitoring

Inheritance & tax planning wealth structuring
(10%)
(75%)
(70%)
(55%)
Compliance & risk management

Income tax report, compl. & monitoring
(60%)
(65%)
Legal services
(20%)
Base
services
Document/office management
13
Non-Financial Services
(70%)
Accounting, reporting
Data management
Execution banking, financing, insurance
Wide range of Tax and Vehicle

solutions available in Luxembourg
(10%)
(20%)
Support functions
services are not
location specific and
hence no
differentiation criteria
for FOs
New opportunities for the financial industry:

Challenges for the Financial Industry:
The Fund Industry
Assets under Management

1200.000
189
177 169
1000.000
162
Number of banks
155 156 156 152
149
147 143
800.000
Net assets
200
3000000.0
160
2500000.0
120
600.000
2000000.0
1500000.0
80
400.000
.000
3371 3463
3845
2868
2238
2060
1908 1941 1870 1968
1000000.0
40
200.000
Number of Fund units

3667
500000.0
Family office LAW # 6366
Need for innovation: different solutions for private banking

and fund industry
While the Luxembourg banking industry has lost ground

following the crisis the fund industry has recovered
The Banking Sector
Increased competition: Growing need for new,

innovative solutions
.0
4000
3500
3000
2500
2000
1500
1000
500
0
Banks:
The number of banks has steadily declined in Luxembourg over the past 10 years
Assets under management have been affected due to drawbacks of the financial crisis
Private Banking dynamics
Fund Industry dynamics
Client Demands
Client Demands

Regular reporting (tax reporting)
e-Private Banking
Tax & Wealth Structuring
The legal framework as a competitive edge: Draft Law 6366

(presumably during the course of 2012)
Definition

Standardization of information
Specific reporting needs
Complex products (alt. assets)
Product needs & Structuring

Diversification of products
More complex solutions
Tax optimized & tailor made solutions
Innovative
products
needed
Product Offering
Using structures & expertise to fill the structuring gap in
Banking
AIF: new service offering/value chain
Changing business model for changing clients
Proactive private banking approach
Increased Regulatory Burden: FATCA, MiFiD II, Basel III
Decision center/main shareholders not in Luxemburg
Extended product offering needed to meet global investor
needs
Increased Regulatory Burden: AIFMD, MIFID
Competition
Profitability pressure leads to rationalisation and
centralisation of core business activities
Competition
Competition among different investment fund locations
Family Office activities consist in providing professional services and advice to natural persons,
families or patrimonial entities of those in respect of their wealth. (Draft law definition)
Competitive
Situation
Family offices are not regulated in traditional

WM centers (Switzerland, London)
Regulation and transparency is a clear trend in
Europe
Objectives
Funds:
Strong growth in the number of Fund units during the last decade mainly due to SIF
Although fund assets decreased during the financial crisis, assets recovered in 2010
Family Office denomination reserved to certain professionals

subject to regulation
(Credit establishments;
Investments advisers; Asset managers;
Authorized domiciliation agents;
Specialized, lawyers, accountants
Scope
In addition, a new specific PSF Family Office will be

created
Two specific conditions:
Applicant shall be a corporate entity
Share capital of at least 50,000
New
PSF
Family Office market lacks a specific and

coordinated legal framework
Offering a legal framework with a businesslike
and flexible approach
Increase transparency
Single family offices

Out
of
Scope
Board members of commercial companies or foundations,

trustees, fiduciaries, or judicially appointed mandates.
New opportunities for Luxembourg
Product
Teams
Serves only one

family
FO as integrated part of
service offering
Multifamily Office
Serves more than one

family
Financial players
provide services
Wealth Growth
Wealth Protection & Preservation
Family Offices Service embedded in extended

business model
Traditional FO solutions
Single Family Office
Three major pillars of Family offices business
Identification, set up of appropriate legal
structure
Administration, legal services, fiduciary
Outsourcing of FO
activities
Preserve & enhance familys wealth

Provide advice on complex asset solutions
Financial & succession planning
Put different service providers into competition in order to provide best services
Coordination of diverse family interests and needs (school, relocation, etc.)
Multidisciplinary and international teams providing tailor-made services

Coordinating a network of both internal & external service providers
Portfolio management function
Independence with regards to manager/product/advice/service providers to ensure confidentiality and

transparency
Family Office Services in Luxembourg: Strong focus on

Vehicle Structuring and Tax issues
Remarks
A series of Family Offices is present in Luxembourg

We analyzed 20 main family office service providers in Luxembourg and mapped these providers with their service offering against standard
services
Standard Service Offering
Outsourced office
Wealth Control & Consolidation
Identification of investment objectives
Controlling the investment process
Executing investment process in order to
Management monitoring
meet client objectives
Consolidation & reporting
services
Tax advice
Examples:
Examples:
Legal structures
Manager selection
Investment vehicles
Strategic asset allocation: equities,
Real estate and relocation
Tax structuring, art advice,
Advice on philanthropy
bonds, hedge funds, private equity
Succession planning
Art, philanthropic solutions
Education
(25%)
Philanthropic planning, foundation management
Tax reporting
Inheritance & tax planning wealth structuring
Monitoring of external service providers
Asset allocation & portfolio management
Performance monitoring and control
(90%)
(10%)
Concierge/security/life & residence
(75%)
Family education
Manager selection and monitoring
(10%)
(75%)
(70%)
(55%)
Compliance & risk management

Income tax report, compl. & monitoring
Legal services
(60%)
(65%)
(20%)
14
All services offered in Luxembourg
Growing need for solutions for international wealth positions (financial/non-financial)

Increasing demand on FO
Luxembourg: Use of existing framework to provide tailor-made solutions Wealth Structuring as core approach
Base
services
Document / office management
Independence
(70%)
Accounting, reporting
Data management
Execution banking, financing, insurance
(15%)
(5%)
Personal/family/psychological counseling
Consolidation of positions in different banks

Consolidation of total wealth
Non-Financial Services
(10%)
Relationship management (networking)
Vehicles
Shadow Asset reporting
Estate planning, Trust management
Examples:
Financial Services
Tax
Highly
sophisticate
d services
Family Offices
Focus on structuring, tax and legal issues
Sophisticated
services
Family offices as solutions to serve various client needs
Luxembourg: Ability to serve all 3 pillars
Premium
services
Need for tailor-made, sophisticated solutions
Wide range of Tax and Vehicle

solutions available in Luxembourg
(10%)
(20%)
Support functions
services are not
location specific and
hence no
differentiation criteria
for FOs
Wealth Structuring: a key success

factor for Family Offices New
clients expectations
4.1. New clients expectations

Targets for Luxembourg
Target
segment
Origin of Wealth
Born rich
Sudden wealth
Wealth
inherited from
former
generations
Event leading
to sudden
increase of
level of wealth
Steady
Accumulation
Steady
accumulation
of wealth due
to professional
career
UltraHNWIs
> $30m
High net worth
individuals (HNWI)
$1m$30m
Affluent
$100k$1m
16
Clients with different origins of wealth face various tax and

structuring issues with different objectives/implications for family
and corporate wealth
Retail
< $100k
Goal:
We need to aim
higher client
segment
Proper monitoring of
the financial
transition period
4.1. New clients expectations

What we have to offer
Stable and efficient

Tax environment
Client expectations
Holistic Approach
Innovation
17
Flexible and tax efficient investment vehicles

Deep technical expertise
Ability to deal with cross-border issues

Full range of tax services (from corporate tax to
inheritance planning
Sophisticated solutions
From Luxembourg-centric to client-centric approach
Awareness of competition & market trends in order to
realign our solutions and better serve clients
4.1. New clients expectations: Tax still a strong driver

Main third party provided family office services*
Tax advisory
76%
Real estate advisory
48%
Legal advisory
48%
Art advisory
40%
Manager selection
32%
Yacht advisory
24%
Reporting
24%
Family governance
Investment Controlling
16%
Horse advisory
8%
Strategy validation
8%
Other
Investment
funds
Personal tax
Succession
Planning
Financing
schemes
Income tax
planning
Asset
structuring
Wealth
Transfer
Planning
Tax
Compliance
Family
members
remuneration
Shareholding
structuring
Structure
Design
M&A
Relocation
package
Intellectual
property
management
Inheritance
and gift
IPO
50%
100%
Tax services are the most common family office services offered by third parties
Tax-related services are provided out of the boxes (service offerings) Strategic Wealth Planning, Corporate Tax, Investment funds and Personal tax
Source: Mythos Family Office 2010 (survey data)

18
Corporate tax
12%
0%
16%
Strategic Wealth
Planning
*Multiple answers were possible
Wealth Structuring: a key success

factor for Family Offices
Luxembourg Toolbox
4.2. Luxembourg Toolbox: A wide range of vehicles

Safe/Passive
Luxembourg
diversity
advantage
UCITS
UCI
SPF
Type of investor
SIF
SOPARFI
SICAR
Risky/Active
Large
Small
Size of the portfolio
Treaty protection
SOPARFI
Double tax
treaty
benefits
SICAV
FCP
SICAR
SIF
SPF
No treaty protection
20
Subject to tax
Exempt from tax
4.2. Luxembourg Toolbox: A wide range of vehicles

Fund Manager
Private
Banking
Assets eligible to participation exemption regime

Carried interest
Real estate (indirectly)
IP Assets
Specifically designed for private investors

Passive asset management (accumulation of investment income in a tax
neutral vehicle)
Specifically designed for private equity investments

Need for a tax efficient and lightly regulated vehicle
May have access to EU directives and double tax treaties (case-by-case
analysis)
Active investment management

Suitable for all kind of (global custody tool)
May have access to DTT (case-by-case basis)
Securitization of all kind of assets or risks linked to any of these assets.

May have access to EU directives and double tax treaties (case-by-case
analysis)
LIFE-INSURANCE
Estate planning tool

Tax efficiency
FIDUCIARY
AGREEMENT
Alternative to offshore trust

Generational transfer planning
SOPARFI
(listed)
HNWIs
SPF
SICAR
Toolbox to serve
client needs
SIF
Securitization
Investments
21
Hot topics in PWM and Wealth

Structuring
5. Hot Topics in PWM and Wealth Structuring

Investment &
Risk
Art &
Finance Family Offices demand a broad
range of wealth structuring tax
services.
Financial Strategy &

Compliance
Audit
Philanthropy
Tax Structuring
Collectible Assets
Financial
Strategy
Personal &
Corporate Tax
Your
Family
Office
Collectible assets becoming

increasingly important in PWM
Administrative
Support
Set-Up &
legal Support
Succession
planning
Strategy &
Operations
HR
Operational toolbox
Relationships
Education
Strategic asset allocation and its

monitoring are of key importance
23
Horizon Conference | New opportunities for the financial industry Luxembourg as a hubEducation
for Family Offices
5. Hot Topics: Collectible assets
What do you have in

investment-grade reds?
24
5. Hot Topics Collectible assets (cont.)

Benefits
Tax efficient
Wealth transition planning
Reporting capabilities
Investors protection (regulated vehicle)
Flexibility for cross-border issues
Investors
Funding
ManCo
Advisory
SIF
Main tax and operational issues
LuxCo
if needed
Direct and indirect taxes

Corporate income tax
VAT
Managers benefits
Assets custody and delivery

Goods trading process
Substance needed
25
Investment
Collectible
5. Hot Topics in PWM and Wealth Structuring

Investment &
Risk
Art &
Finance Family Offices demand a broad
range of wealth structuring tax
services.
Financial Strategy &

Compliance
Audit
Philanthropy
Tax Structuring
Collectible Assets
Financial
Strategy
Personal &
Corporate Tax
Your
Family
Office
Collectible assets becoming

increasingly important in PWM
Administrative
Support
Set-Up &
legal Support
Succession
planning
Strategy &
Operations
HR
Operational toolbox
Relationships
Education
Strategic asset allocation and its

monitoring are of key importance
26
Horizon Conference | New opportunities for the financial industry Luxembourg as a hubEducation
for Family Offices
5. Hot Topics Operational Toolbox

Issues
Several banking providers
Comprehensive and clear overview on clients
assets
Performance analysis and benchmarking
Services to be offered
Asset consolidation solution
Onshore assets
Complex products (tax treatment)
Cross-border aspects
Competition from domestic financial players
Tax reporting capabilities
Tax and regulatory comparison between

investment solutions
International benchmark
Identify the different outcomes for the investor
Tax matrix
27
Outlook for Luxembourg
6. Outlook for Luxembourg
Demand
Growing number of HNWIs in
Europe with international
business interests
Financial institutions are looking

for alternative revenue sources
Family Office clients request a
multidisciplinary service offering
Financial and non-financial
solution must be transgenerational
Increasing demand for complex
and tailor-made solutions
29
Next Steps
New opportunities for
Family Offices
Supply
Proactive and flexible tax
environment
Family Office regulation to

be enacted
Wide range of high quality

service provider located in
Luxemburg
Develop common mission

statement to cater to HNWI
needs & to foster HNWI
industry growth
Leverage on existing wealth

structuring solutions
Client-centric approach to
be enhanced
Ability to provide full range of

services: advisory, set-up and
follow-up, etc
Supportive of government
intiatives
Contacts: Family Office Services

Partner, Strategy Consulting
Partner, BT Private Wealth Management
Pascal Rapallino
Ruth Bltmann
Tel: + 352 451 452 846

Fax: +352 451 453 505
Email: prapallino@deloitte.lu
Tel: + 352 451 452 115

Fax: +352 451 453 505
Email: rbueltmann@deloitte.lu
Pascal is a tax partner and leads the Private Wealth Management activities
within Deloitte Luxembourgs Tax practice. Pascal has an extensive
experience of wealth management industry and investment funds for private
investors. He is also advising clients on cross border transactions.
Ruth has gained significant experience over more than 10 years as director
and managing director in the Luxembourg Banking and Fund Management
industry. She started her career with one of the BIG 4 in the audit
department.
Former practicing lawyer in Paris, Pascal was previously a member of the

executive committee of a French bank in Luxembourg, where he headed the
Wealth Management department. He also has significant international
experience in the mergers and acquisitions services, acquired in Freshfields,
Bruckhaus, Deringer and Allen&Overy. Pascal is further a lecturer at various
French universities, specialized in international tax.
Between 2006 and 2011 she has been responsible for the set up, daily
management and business development of 2 Management Companies in
Luxemburg. Her business experience covers areas such as project
management in the Banking and Fund Industry, product development,
structuring of investment funds, legal & compliance, domiciliation of
companies, fund administration, custody services, and outsourcing relations.
She is active member in different professional organisations. Ruth speaks
fluent German, English and French.
Ruth holds an MBA in Finance (University of Hagen/University of Wales), a
Master degree in Business (double diploma) from the University of applied
sciences, Aachen (Germany) and the Ecole Suprieure de Commerce de
Compigne (France).
30
Visit horizonconference.lu to access the

video recording of this presentation
31
Organisers

Lu Horizon2012 Familyoffice 25062012

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Lu Horizon2012 Familyoffice 25062012

Încărcat de

Drepturi de autor:

Formate disponibile

New opportunities for the financial industry

Luxembourg as hub for family offices

Financial Industry in Luxembourg

The legal framework as competitive edge

Family Offices characteristics and corresponding Needs

Wealth Structuring: a key success factor for Family Offices

Hot topics in PWM and Wealth Structuring

Outlook for Luxembourg

Financial Industry in Luxembourg

While the Luxembourg banking industry has lost ground

The Fund Industry

Assets under Management

155 156 156 152

Number of Fund units

Luxembourg financial industry is increasingly under pressure

Increasing complexity requires

Increased regulatory burden

Need for innovation: different solutions for private banking

Fund Industry dynamics

Increased demand for:

Increased demand for:

Product needs & Structuring

The legal framework as competitive edge

The legal framework as a competitive edge: Draft Law 6366

Family offices are not regulated in traditional

Family Office market lacks a specific and

Family Office denomination reserved to certain professionals

Board members of commercial companies or foundations,

Family Offices characteristics and

Differences between Family Offices & Private Banking

Wealthy families across the generations

Individuals (wealthy and retail)

Dealing with diverse assets & family needs

Dealing with financial assets

Total wealth management

In-house portfolio management

Neutral advice on different products and services

Generally oriented to own products

Family Offices multidisciplinary approach combines the needs of different generations

Family offices as solutions to serve various client needs

Single Family Office

Serves only one family

Serves more than one

Preserve & enhance familys wealth

Multidisciplinary and international teams providing tailor-made services

Independence with regards to manager/product/advice/service providers to ensure confidentiality and

Three major pillars of Family offices business

Wealth Protection & Preservation

Identification, set up of appropriate legal

Identification of investment objectives

Controlling the investment process

Executing investment process in order to

meet client objectives

Consolidation & reporting

Consolidation of positions in different banks

Strategic asset allocation: equities,

Consolidation of total wealth

bonds, hedge funds, private equity

Real estate and relocation

Monitoring of external service providers

Performance monitoring and control

Tax structuring, art advice,

Art, philanthropic solutions

All services offered in Luxembourg