In 2022, Luxembourg had 46,200 millionaires – almost 8% of its population. Has this figure risen since then?
In 2023, Luxembourg’s high-net-worth individuals (HNWIs) stagnated. In fact, it declined by 0.7% to 45,834, and wealth declined by 1.6% YoY to USD 135.5 billion. Such a decline – although slight – can be attributed to:
- slower GDP growth – 2.2% in 2022 compared to 5.1% in 2021,
- equity market capitalization contracted by 17.6% in 2022 compared to an increase of 18.7% in 2021,
- the national savings rate fell to 19.2% in 2022 from 21.4% in 2021,
- and real estate prices growth slowed to 1.8% in 2022 compared to a growth of 13% in 2021.
As an asset manager, what would you recommend to wealthy clients in the current geopolitical context? Should they play it safe and try to stay the course, or dare to take on riskier investments?
HNWIs are more conservative during uncertain times, with priorities focused on preserving wealth through diversified investment strategies and an eye to the future. As per our 2023 HNWI survey, it is observed that globally 67% of the HNWIs said preserving wealth is important, whereas 60% of the European HNWIs gave importance to preserving wealth as a key concern during volatile times. Prevailing uncertainty and market volatility drove wealth management firms to prioritize portfolio mix resilience for high-net-worth clients to fortify long-term value over quick returns. During 2022, globally, the asset allocation of surveyed HNWIs was as follows: Cash and cash equivalents (34%), Equity (23%), Fixed income (15%), Real estate (15%), and Alternative investments (13%).
Do you believe that the role of a wealth manager goes beyond being just a financial advisor? Some people talk about a family like relationship… How do you assess their degree of influence?
The role of a wealth manager can certainly go beyond being just a financial advisor. Wealth managers can add value to their firms and improve the satisfaction level of HNWIs when they have financial life partners and offer value added services. To make this happen, wealth management firms need to improve the productivity of the RM workforce. However, right now, our relationship manager survey has revealed that wealth managers are spending nearly 67% of their time in non-core activities, meaning that they are spending less time having meaningful interactions with their clients. To elevate the role of RMs, wealth management firms need to invest in equipping RMs with digital tools, data, and insights. One example of such innovation is a Scandinavian independent wealth manager, which has developed a dynamic platform for its RMs to collect, analyze and recommend financial products to customers throughout their life journeys. With this, the firm is able to integrate itself into the client’s financial life in a more meaningful way, elevating the client’s journey. Data and AI-powered analytics solutions have proved to be powerful tools to step-up the impact and influence that digital innovations have on the client-RM relationship and growth.
How to keep track of financial market trends and developments in such a volatile environment?
Financial market is a vast industry and following up with trends across different markets can be challenging. One way to understand is by looking at products the wealth management firms are pushing. They often offer products that meet the investment requirements of the HNWIs. Another way is to attend global events and follow leading thought leaderships that capture the pulse of industry through extensive primary and secondary research.