Based on a survey of 2,600 investors across 27 different geographies, the report reveals 54% of respondents in Luxembourg noted an increase in complexity, compared to 48% in Europe and 45% globally.
Millenials, in particular, find navigating the current financial landscape challenging. All respondents between the ages of 21 and 41 reported complexity in their investment needs and displayed a greater inclination for financial advice.
Benjamin Accadia, a partner at Ernst & Young, suggests this trend may be attributed to millennials’ diverse investment needs and desire for diversification. “One of the reasons could be that younger generations are less patient when faced with market volatility and are quicker to react. That’s perhaps also why they are more likely to seek additional advice from a wealth manager than other groups.”
The year 2022 proved challenging for investors worldwide due to soaring inflation and tight monetary policy, impacting economic activity. Although Luxembourg experienced relatively low inflation rates compared to other EU countries, salary indexation affected margins for Luxembourg-based private banking and wealth managers based in the country. The fund industry saw a 15% decline in assets under management, from €5.86trn in 2021 to €5.03trn last year.
Despite these challenges, Accadia was optimistic about Luxembourg’s prospects, highlighting the country’s resilience, expertise and sophistication. “We can remain confident Luxembourg will continue to do well in the coming years.”
Hidden costs an issue
The report indicates that a significant majority (83%) of Luxembourg clients trust their wealth mangers to charge them fairly. However, one-third of clients expressed concerns about hidden fees.
Under Mifid [Markets in Financial Instruments Directive] II, financial institutions are required to provide detailed information about the costs associated with investment products and services, including any hidden fees. Accadia said that while EU regulations such as Mifid II have improved transparency and cost disclosure, there is still “room for improvement” in addressing hidden fees charged to clients.
Low satisfaction with ESG
Regarding investment preferences, the report reveals that while a majority (60%) of Luxembourg clients are satisfied with the investment performance of actively and passively managed funds, they were less satisfied with innovative investments like ESG, digital assets and alternative investments. This may explain why ESG and sustainable investing options are not prioritised by many clients this year. “We see that it takes a bit of time for investors to fully adopt ESG into their investments in terms of preferences and expectations, even if wealth managers now capture such information and embed it into their investment strategies.” Accadia said.
Find the full 2023 EY Global Wealth Research Report with Luxembourg Insights .