To a parent, 15 years is the “blink of an eye, in which your adorable little baby turns into an unruly teenager,” said , Luxembourg for Finance CEO, during the opening of his speech at the Clearstream Fund Summit on 12 October. The conference aimed to offer industry players insight into future trends in fund distribution, but Mackel began his talk with a reference to the past.
In that very short period of time, the world has seen four epoch-making crises, he argued. First off: the global financial crisis. “Everybody thinks that’s behind us,” said Mackel. “But there are different elements that we still chew on from that crisis.” The resulting “regulatory tsunami” that people are “still trying to come to grips with” is one example; institutional changes, such as the establishment of the European Securities and Markets Authority (Esma), is another example.
“All of this has, I think, fundamentally contributed to changing the way we can run business, the way rules are adopted,” he said.
From financial crisis to populism and its consequences
“European financial services--from banks to asset managers--have really substantially lost global market share following the global financial crisis,” argued Mackel. While the amount of assets under management in Luxembourg and in the European asset management industry may seem impressive, “when you look at the position of the 100 biggest asset managers, and the European asset managers’ share among these 100 biggest: before the global financial crisis, that stood at 49.8. And guess where it stands today. 21.9. It’s not even half of what it used to be. It’s not even a quarter of the total.”
Austerity policies implemented by governments after the financial crisis led to populism and Brexit, “the greatest example of reckless politicians,” continued Mackel. “When you have a prime minister walking on stage to the tunes of Dancing Queen, and a prime minister who says ‘Fuck business’--excuse me for the expletive--that is when you know you have hit the bottom in politics.”
More than 100 financial institutions--to a very large degree asset managers, but also banks, payment firms and insurance companies--have relocated activities here.
Brexit has redrawn the European financial services landscape, he said, and we’ve seen a “multi-polarisation” of the industry. Luxembourg is “one of the winners,” in that “more than 100 financial institutions--to a very large degree asset managers, but also banks, payment firms and insurance companies--have relocated activities here.”
Pandemic has changed relationship to work
While it may seem that we’ve gone back to life as normal, the covid-19 pandemic has left “deeper scars,” said Mackel. “The pandemic has changed our relationship to work, and those of our employees, and those of our colleagues. And that is something that we will still be grappling with, for some time, how to organise this new way of working.”
But much more serious are the protectionism, fragmentation and de-globalisation brought about by the pandemic, he continued.
Russia’s invasion has shown links between business, politics
“But the real crisis,” said Mackel, “has been Russia’s invasion of Ukraine. I think that everybody will agree and hope that it will ultimately bring about Mr Putin’s Waterloo.”
We live in one dimension, and you cannot abstract business from politics
“What it has also brought about is the loss of innocence. Businesses, just as financial services institutions, have also considered that politics is one dimension, business is another dimension and never the two shall meet. But I think that on the day after Russia’s aggression, they realise that there are no two dimensions. We live in one dimension, and you cannot abstract business from politics.”
So what does the future hold?
“Our Israeli friends, what they have experienced last weekend, shows you that there will be plenty of nasty surprises, things you didn’t expect, even if you have the best intelligence service in the world. Stuff happens, and you just have to be ready for it,” said Mackel.
“The US will also keep us busy,” he added, referring to the United States presidential election that will take place in November 2024. “I think that that result will really be defining the future of the world.”
Mankind definitely has the capacity to make technological evolution a solution to its problems
But there are more positive elements, said Mackel, citing technological developments, and, in particular, artificial intelligence. The emergence of ChatGPT and the speed with which it has evolved has shown the speed with which will have to adapt. “Now that is positive, because it shows us that we will find technological solutions,” he said. “I think mankind definitely has the capacity to make technological evolution a solution to its problems. And that is what we need to be capable of.”
“The real crisis--the mother of all crises--that is climate change,” said Mackel. “We’re not doing nearly enough to address it.” This September was by far the hottest on record, And “while the world is burning, others are having discussions for or against woke capitalism. It doesn’t make sense, makes feel like they are rearranging the deck chairs on the Titanic.”
Know how to react, adapt and keep fighting
Mackel’s key message to the audience? It’s essential to take your head out of your daily work and look around. “There are larger developments that will impact your business,” he said. “Change is not only inevitable. Change--whether it comes through crises or whether it comes through digital evolution, technological evolution, or so on, regulatory evolution--it is inevitable. And change is accelerating.”
The pace of crises has also sped up over the last few decades: there’s been a shift of one every 10 years or so to a “more a rhythm of every two years.” It will be necessary to adapt.
“In the unforgettable wise words of former heavyweight boxing champion Mike Tyson, everybody has a plan until they get punched in the face,” said Mackel. “The important thing is that you know how to react to that, you know how to adapt to that, how to get up and keep fighting.”