OPINION OF THE WEEK: Three European IFCs – Caution, Growth And Privacy

Tom Burroughes Group Editor London 3 April 2024

OPINION OF THE WEEK: Three European IFCs – Caution, Growth And Privacy

The editor gives a brief overview of trips to three European international financial centres and the challenges and developments in each of them.

My job entails more than a fair share of travel but there’s no substitute, even in this day and age of Zoom, Teams and the rest, for visiting the field, talking to wealth managers and their clients, and finding out what’s vexing and exciting them. As a result, I pray your indulgence for a brief whistle-stop tour of three European financial hubs during a manic month of March.

The month kicked off with my trip to Zurich for our annual WealthBriefing Swiss external asset management awards – where I was able to witness the changes happening in the EAM sector. New rules from the Swiss regulator have squeezed out as many as a quarter of all EAMs (exact data is hard to pin down). Hopefully the sector will be more professionally run, more resilient and responsive to clients needs'. Well, that’s meant to be the idea.

During the awards evening my colleague and CEO, Stephen Harris, reminded the audience that they were gathered as UK finance minister, aka Chancellor of the Exchequer, Jeremy Hunt, was making moves to end the UK’s “non-domicile” system. The devil is in the detail, but it seemed that quite a lot of those attending thought that this step raised opportunities for European financial capitals. We shall see if or when Hunt has occasion to rue his attempt to wrong-foot the opposition Labour Party. 

I was left with a great sense of an EAM sector that is full of entrepreneurial vigour, if somewhat cautious in mood. Remember, a year ago Switzerland had to contemplate the demise of Credit Suisse. The Swiss financial services sector could use a period of stability and steady growth. It should not count on it, however. 

Next stop: Monaco. I was in the tiny principality as a guest of TrustConsult, speaking on a panel in a well-attended conference charting the clashes between demands for ever more transparency, and the need to protect legitimate privacy. One takeaway I have is that the case for privacy remains one to be won, and it can be. A few days ago, for example, US politicians demanded to know why the Internal Revenue Service is using AI to track down potential tax offenders. We have had concerns about how transfers of sensitive bank data between countries under tax treaties could be compromised by hackers. There are potential clashes with GDPR legislation when such transfers occur, lawyers have claimed. Beneficial ownership disclosure remains a hard-fought area, and it is far from obvious whether fully-private registers will be tolerated by the courts. 

In fact, I came home from southern France thinking that for the first time in years, we might see an uptick in gains for privacy rather than losses. But it is going to require continued vigilance from the industry, and a willingness to roll up the sleeves and make the case for it. 

My third leg of the European “IFC tour” was in Luxembourg for the ALFI Annual Asset Management Conference. Here, the focus was on how Europe’s mutual funds sector is coping with regulatory change, demands for more alternative/private market offerings for retail/mass-affluent clients, ESG requirements, and more. The mood was relatively upbeat. The wrenching impact of Brexit seemed to have faded somewhat in public mood. The attitude seemed to be that as change has happened, it is up to the wealth sector to handle these alterations as wisely as possible. I certainly had the impression that Luxembourg is prospering, judging by the expansion of its airport and the relentless growth of shiny new offices on the outskirts of the old urban centre. 

In fact, all three European financial hubs, while they have their problems and challenges, appear to be in reasonably solid shape. Luxembourg’s pre-eminence as a centre for UCITS funds, for example, looks secure. The jurisdiction isn't without difficulties, however. Doing business there is expensive. Also, it was recently rapped by the OECD for its "very weak enforcement" of rules to stamp out bribery and corruption. Monaco seems to be continuing to shine for its status as a banking centre, although I heard grumbles about hyper-cautious local banks making it hard for yacht brokerages to open business accounts. (This is potentially a serious problem unless resolved relatively quickly.) And in Zurich, the virtues of stability, close attention to detail and international links are still very much in evidence. 

Monaco, Luxembourg and Zurich are three places that continue to be vital, and vibrant, parts of the wealth management chessboard. 

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