“We have a duty to continue to make Luxembourg attractive by developing services that will continue to add value to the financial centre,” says Arendt Investor Services CEO Christian Heinen. “That’s not just the job of politicians.”

He explains that the ecosystem has changed since the company was founded in 2009 to provide domiciliation services for customers who had no presence in Luxembourg. At the time, that was the only service line the firm offered. As of now, they are up to five.

“There were virtually no clients based in Luxembourg,” says Heinen, talking about the early days in 2009. “We held all the meetings in a call centre. They would come in from time to time for meetings or a board meeting. Today, a good proportion of our customers meet us whenever we want. They have set up offices and teams here. They are more accessible. Fifteen years ago, they didn’t necessarily know where Luxembourg was, and they needed a service provider to take care of everything from A to Z. Today, company governance, company secretarial services, accounting and all that is done in-house, but they have new needs for which they look to external partners with the expertise and technology--instead of investing in that expertise themselves by sourcing talent, training them and giving them career prospects. Or they don’t have the technology, the critical mass, the ability to manage projects, to manage IT problems, the cost.”

Service providers, not advisors

“Today, if you want to operate from Luxembourg, a primary hub for investment platforms, you can’t necessarily do it without being here, without having any substance,” says the CEO. “It’s a trend we’ve been observing for some years now. Our new clients are very well informed about Luxembourg, they don’t necessarily need our help for everything, they are connected to the place, they make their decisions here.”

At the same time, regulations have evolved considerably, with some circulars going from 10 to 100 or even 150 pages. “Compliance costs a lot of money, and you have to recruit--but that’s not a priority for their Luxembourg structure. So they outsource. This trend is only just beginning in some sectors, partly because of their growth. Perhaps there is a paradigm shift: for years, having this in-house was seen as the best solution in terms of control; costs or even the increase in penalties are pushing towards this trend of having a partner with expertise and technology. The difficulty of finding, training and keeping profiles is also pushing them in this direction.”

And the corollary is the evolution of the business. “We are not advisers, but service providers who implement their strategy,” Heinen explains. “Like a back office that can take different forms. Their job is to invest, and they need people who can help them do that effectively. We are there to help them concentrate on their core business. There are reporting, accounting, governance, regulatory compliance and other services. We are obliged to respect this framework, because we are part of the Arendt Group! We help our clients to do this so that they don’t need to set up a very expensive back office or middle office.”

Level playing field

On the subject of regulation, Heinen comments: “Arendt Investor Services depends on the attractiveness of the financial centre. It has to have rules, to make sure that we attract the right players--and that’s very important!--but over-regulation is not conducive to attractiveness. What is the right level of regulation to ensure that the market is protected and attractive? That’s the question.”

“We have to make sure that there is no over-regulation,” he continues. “There has to be a level playing field in Europe, and Luxembourg has to be well placed in the level playing field. What has always made the country attractive is a certain speed, a certain agility and a certain intelligent implementation of European rules and directives. Luxembourg has done a great deal in recent years to protect its financial centre. The Gafi’s [Financial Action Task Force; editor’s note] visit shows that the Luxembourg financial centre has done its job. It must remain attractive to come to Luxembourg.”

With 300 employees spanning 46 nationalities and five service segments (corporate; tax compliance; governance; fund administration; and operational AML and compliance), the structure also benefits from the Arendt brand. “The differentiating factor is that we are part of a structure with a very stable shareholder base and a medium- to long-term perspective,” comments Heinen. “We carry the Arendt DNA of human and technological expertise. We go the extra mile, we want to do things right, and the customer gets a ‘premium’ feeling.”

Technological developments

With almost a startup’s outlook, AIS has another advantage, the CEO says. “The challenge for some of the more mature players is that they have a legacy; baggage. New players have more simplicity. We don’t have that much baggage. We’re relatively young. We have invested in a hedge fund management system that we have combined with a very strong system for the entire KYC/AML cycle. These two systems--Investran, which is relatively traditional but very established, and Fenergo--have a good reputation. Clients who don’t have the critical mass to invest in technology can use it as part of our services.”

With a very clear focus on the Luxembourg market and AML/KYC, Heinen points to their latest mandate. “We took over a team from a major financial institution and integrated them here. We are seeing a trend towards asset services clients becoming clients of other services--a few years ago, that didn’t exist. Part of our strategy is to seek out units that can bring their expertise to work with us. These trends are going to be more and more visible as the players have more and more complexity to manage.” Similarly, the company--which generates annual sales of €60m--is keeping a close eye on artificial intelligence. The CEO is betting that “a fragmentation of systems will persist,” but foresees “additional elements that will dig into these systems to aggregate them.”

This article in Paperjam. It has been translated and edited for Delano.