The assets of French clients managed by Patrimundi 1869, an independent asset management company based in Luxembourg, grew by almost 10% in 2024. “With an acceleration at the beginning of the summer, at the time of the legislative elections,” explains the managing partner of this 25-strong company, Alain Crefcoeur.
Patrimundi 1869 specialises in discretionary management, with clients from France, Belgium, Luxembourg, Germany and a number of other countries. This is similar to the private banking sector in Luxembourg, where, according to KPMG, almost two out of three clients come from these same countries.
For Crefcoeur, the growth in the number of French clients is the highlight of 2024. “Many French investors or savers were very afraid, and this is still true today, of the presence of the extreme left (La France Insoumise) in a government as well as the economic situation in their country. I saw a good number of new and existing French clients opening accounts in Luxembourg to seek shelter. The concern was and remains palpable.”
Geographical distribution of customers
The geographical distribution of clients in Luxembourg's private banking sector has remained largely stable between 2022 and 2023, with around 65% of clients coming from Belgium, France, Germany and other European countries. Source: KPMG/Private Banking Survey
Patrimundi 1869 works with French family offices, which offer their clients capital movements. The Luxembourg company supports them. Patrimundi’s boss says he has not actively canvassed for clients. “That’s not the way we work. New clients have arrived naturally through the company’s network and relationships in the marketplace. In several cases, we are talking about simple account transfers, sometimes within the same bank.”
, chairman of the Luxembourg Association of Family Offices (Lafo), agrees: “In the short term, whether we’re talking about instability in France or elsewhere in the world, this is good news for Luxembourg.” Less because of an influx of new residents than because of an increased influx of capital, adds the founding partner of Lagonda Family Partners, a consultancy specialising in wealth management for high net worth clients.
“If we follow the , some people want to put monumental tax pressure on wealthy families, others want to tighten up the conditions for exit tax... This can happen and people want to shelter their capital. Luxembourg is one possible answer. This money can be invested in funds, life insurance policies or simply deposited in traditional private banks in Luxembourg,” explains the chairman of Lafo.
The spectre of pre-emption
Safe from what? To reduce the tax burden while complying with the law, changing country of residence seems the most obvious solution. “When I talk to large families who are thinking of moving their capital abroad, it’s not to pay less tax. It’s clearly a question of asset protection,” says the specialist.
For the past three or four years, Rapallino has been hearing “a little tune that's making its way through France”: the pre-emption of a certain percentage of French people’s assets to pay off the national debt. “By placing your capital not only abroad, but also in a structure, such as a fund, you benefit from double protection. If you’re simply an investor in a vehicle that doesn’t belong to you, it will be complicated for the French state to liquidate this foreign vehicle in order to recover French capital.”
Wealthy families have not waited until the end of 2024 to set up international structures. But the partner at Lagonda Family Partners hears and reads that in France, the “upper middle class ++” (senior executives, doctors, etc.) are now thinking about it too. “Once again, the issue is not the increase in taxation in France: it’s really the concern about wealth,” he insists.
Many French people have opted for a Luxembourg life insurance policy.
Why Luxembourg? “Because it’s multicultural, it’s multilingual, all the players are present and it’s easier for a French person to come to Luxembourg than to go to Ireland. First of all, there's the language barrier,” says Rapallino.
“The Luxembourg banking sector has a solid reputation for security and quality of service, with many banks boasting excellent ratings, which is particularly attractive to foreign customers,” adds Crefcoeur. The managing partner of Patrimundi 1869 emphasises Luxembourg’s tradition in asset management and the diversity of the investment products on offer. He cites the international vision of Luxembourg banks compared with their French counterparts, which are often focused on the Cac40 index.
He also highlights the key role played by insurance companies, particularly through the Luxembourg life insurance policy, which is very popular in Belgium and France. “This product allows for diversified and flexible portfolio management, unlike French policies, which are often rigid and underperforming. In recent years, many French people have opted for this type of contract, contributing to the steady growth of the Luxembourg market. After the recent slight slowdown, I think that the current tensions have revived the machine a little.”
The Nordic countries are also arriving in force in Luxembourg.
Rapallino does not confirm that he won any customers in 2024 because of the instability in France and elsewhere. He cites a conference in Paris that was cancelled because participants were unavailable, and family offices that were overwhelmed by requests for wealth structuring from their French clients. “This example illustrates unprecedented activity in France, linked to the urgent need for structuring before the end of the year, probably in reaction to the current climate.”
Is this a cyclical or structural phenomenon? “I have the impression that it is quite structural. If we talk only about capital, I have the feeling that the transfers made today will not be reversed. In my opinion, the money that has been transferred is destined to stay,” says Crefcoeur.
And the trend is not unique to France, adds Rapallino. “In Belgium, it’s more or less the same problem. And, surprisingly, we're seeing a similar phenomenon in the Nordic countries. This has nothing to do with the French or Belgian cases, but the Nordic countries are also arriving in force in Luxembourg and Switzerland. There could be geopolitical reasons for this, linked to Russia’s borders.”
Not good news
While some people in Luxembourg are delighted at this situation, the chairman of Lafo is not. “I don’t think, if we take a long-term view, that we should be happy about it. Instability, whether in France, Germany or, to a lesser extent, Belgium, is clearly not good news for Luxembourg in the long term, because it is not good news for Europe in the long term.”
He concludes: “The arrival of Donald Trump in this global chaos will complicate matters, because Europe, already weakened, will be attacked even more. Luxembourg may fare better than its neighbours, but being the best pupil in a low-growth zone is like being ‘the one-eyed among the blind’: first, but among the dunces. We need to keep a close eye on Europe as a whole.”
This article was originally published in .