This article was originally published on Paperjam. Read the article here.

Recently, I had the opportunity to travel across Europe and meet with our local business partners. As I engaged in discussions on the current macroeconomic and local market environments, there were several themes that really stood out with regards to sentiment and outlook for the wealth planning industry – notably multi-generational wealth transfer strategies, mobility, regulatory challenges, and asset protection. On my return to Luxembourg, I took the time to reflect on what this means for our industry.

Wealth and succession planning have always been essential pillars of wealth management, shaping the legacies of individuals and families. However, in our rapidly changing world, characterised by economic, technological, generational, and social dynamics, these strategies are also evolving. The recently published Family Barometer Report 2023 from Julius Baer and PwC Switzerland[1] noted that political instability has risen as a major concern among wealthy families in the past 12 months, with tax and regulation remaining significant worries for respondents.

Over the past 15 years, high-net-worth (HNW) individuals and families have faced what some commentators refer to as a “Permacrisis”, navigating a global financial crisis, a global pandemic, and constant geopolitical tensions. Fast forward to today and we find ourselves at a pivotal moment in the realm of wealth and succession planning, with influential dynamics at play, challenging conventional approaches.

Firstly, wealthy families are now placing even greater focus on multi-generational wealth transfer strategies. This entails not only successfully preserving wealth, but also crucially passing down the knowledge, values, and skills required for its long-term management. Foundations, family offices, and financial education programs are also becoming integral components of this process. Simultaneously, there is a growing impact of sustainable investing, as HNW individuals and families are increasingly interested in aligning their investments with their social and environmental values.

Secondly, the portability of wealth is a fundamental priority for HNW individuals and families. With international investment opportunities, dual citizenship, and global business operations becoming more common, this trend requires comprehensive cross-border planning to ensure the smooth management and transfer of assets across different jurisdictions.

Thirdly, one of the most prominent trends in wealth and succession planning is the unpredictability and complexity of evolving regulations. Governments and regulators frequently update their policies and those reforms occur in the context of an economic landscape undergoing substantial changes. With interest rates expected to remain high well into 2024, governments and central banks are being urged to adjust and pivot quickly to establish the “next normal”. This provides opportunities for wealth advisers and financial professionals to re-engage with their clients and talk with them about ensuring that their investment approaches and succession plans are still aligned with their evolving needs.

Finally, asset protection. This remains a key concern for HNW individuals and strategies are evolving to safeguard wealth against unforeseen risks and changing regulations. This demands agile and flexible tools capable of combining wealth and succession planning strategies with the building of sustainable and diversified investment portfolios. Being able to invest in a broad range of asset classes and to respond quickly to market changes is essential. According to a recent survey conducted by Goldman Sachs[2] with 166 family investment entities, family offices currently allocate an average of 28% of their portfolios to publicly-traded shares, 26% to private equity, 12% to cash, 10% to fixed income, 9% to private real estate and infrastructure, 6% to hedge funds, 3% to private credit and 1% to commodities (percentages may not add up to 100% due to rounding).

Luxembourg life insurance, benefiting from one of the largest investment universes in Europe, offers a flexible investment platform for HNW individuals and their advisers seeking to diversify their wealth and futureproof their assets, thanks, in part, to one of the strongest policyholder protection regimes in the world.

No matter how great your solutions are, service excellence is pivotal

But at the heart of everything, the one word that kept emerging from my discussions was “service”. And this is where providers can clearly and meaningfully differentiate themselves.

Technology is revolutionising the way we manage wealth, plan for succession, and, most importantly, the way we service our partners and our clients. Digital platforms, automated tools and artificial intelligence not only enable more efficient and secure financial management but also empower wealth management providers to deliver an enhanced experience to their clients. These tools not only streamline processes but also provide more accessible and cost effective options for individuals and families to plan their financial futures. For several years now, the integration of technology into our key operational processes, such as a digital servicing platform available 24/7, automated risk profile analysis or real-time verification of information for anti-money laundering (AML) controls, have contributed to increasing our operational efficiency. But this also comes with a challenge; the increasing digitisation of wealth and financial information presents cybersecurity risks. Protecting and encrypting sensitive data are paramount and must be the industry’s top priority.

Enhancing wealth and succession planning

The world of wealth and succession planning is in a state of continuous evolution, driven by a confluence of factors, including changes in regulations, technological advancements and evolving societal values. In this dynamic landscape, individuals and families must navigate these waters with care, seeking professional and expert advice. A holistic approach to wealth and succession planning is crucial, one that encompasses not only financial growth but also environmental, social, and governance considerations.

Whilst comprehensive planning requires a certain degree of prediction, our increasingly unpredictable world makes future proofing wealth ever more challenging. This increased level of external complexity is faced with HNW families wanting protection, simplicity, and flexibility.

Sitting at the intersection of private banking, asset management and insurance, the Luxembourg life insurance sector is expertly positioned to assess, adapt, and cater to the changing needs and requirements of HNW families, providing reliable simplicity amidst complexity.