New spotlight on how wealth managers interact with HNWs

The diversity of high net worth individuals, the driving factors in their success and their experience, means there can be no one-size-fits-all approach for wealth managers serving the market, and call for qualities such as dynamism and adaptability. Far from just being advisors, they are liable to fulfil an extensive range of different roles in order to cater to the diverse needs and expectations of their clients.

To some extent this stems from the factors that prompt HNWIs to seek financial advice in the first place. Whatever their individual background, wealthy Europeans are seeking a breadth and depth of expertise in key areas including not only investment but retirement planning and saving for children’s education. They are looking for advisers capable of acting as strategic planners, but also teachers and possessors of technical skills.

But wealth managers must confront a generational challenge, according to Essential Wealth: The Modern Wealth Manager’s Multitude of Roles. The second part of a survey of the lives and attitudes of more than 600 high net worth individuals conducted by OneLife and Scorpio Partnership, to be released at the end of March, reveals that while managers are the most influential source of knowledge for HNWIs in general, younger generations are more likely to turn to blogs and educational programmes for guidance.

This is one of the factors that requires wealth managers to wear multiple hats, according to the report, including the provision of financial advice and information, covering investment strategy, tax and selection of individual securities, but also broader aspects of HNWIs’ lives including educational issues, real estate and philanthropy. Strong client relationships are forged by the adviser’s expertise and quality of information, but also personalised service and, increasingly, competitive fees.

The survey shows that while HNWI clients are more ready to leave decisions to wealth managers in areas such as tax optimisation, investment and wealth planning, they see them as just one source of advice in areas including relocation, real estate and insurance. Clients vary in their confidence in the strategies they adopt, with younger HNWIs less ready to assume the success of financial strategies.

In a global environment characterised by turbulence and uncertainty, advisers have a card to play in their ability to anticipate their clients’ needs by raising important issues for the future, offering new products and proactively making sure that HNWIs have information on their financial affairs at their fingertips.

Stay tuned for the next in our series of Essential Wealth surveys. Its release is expected by the end of March.

Alternative UCITS: Combining hedge fund strategies with traditional UCITS benefits

We have expanded our platform recently to encompass new funds belonging to a category known as alternative UCITS or liquid alternatives, which can offer access to a wider range of hedge fund-style strategies combined with the investor protection and transparency of the UCITS regime. What are their origins, benefits and limitations?

Undertakings for Collective Investment in Transferable Securities, better known as UCITS, is a regulatory framework, first established through a 1985 EU directive and subsequently updated regularly, with the aim of harmonising the European cross-border fund market while ensuring investor protection. Over more than 30 years it has become the brand of reference for funds under professional regulated management throughout Europe and beyond.

Traditional investment strategies use instruments including listed stocks, bonds and cash, while so-called alternative investments in the broad sense include private equity, hedge funds, real estate and commodities. More narrowly, the expression ‘alternative investments’ refers to hedge funds that adopt techniques different from linear market access and whose managers follow different strategies to obtain active returns.

Hedge funds have become popular with sophisticated investors because of their low correlation to traditional asset classes and their goal of achieving ‘absolute returns’ – in contrast to the relative returns sought by traditional fund managers that measure their performance against a benchmark. For prudent investors, however, some features of hedge funds, including less liquidity, less regulation and less transparency, can be problematic.

Growing demand from investors to obtain greater diversification in their portfolios led to the UCITS III directive in 2002 and the Eligible Assets Directive in 2007, both of which expanded the range of assets in which UCITS funds can invest. Derivatives became an eligible asset, enabling UCITS managers to leverage positions and obtain short exposures through derivatives.

Borrowing as such is subject to a maximum of 10% and directly shorting the markets is completely forbidden under UCITS rules, but derivatives make possible the synthetic replication of such techniques and the creation of different types of return stream. This made various hedge fund-style strategies available to UCITS managers and gave birth to a new asset class: alternative UCITS funds.

While intuition might suggest that the cost of regulation would reduce flexibility for managers of alternative funds, empirical research has shown that UCITS regulation does not hinder the risk-adjusted performance of alternative funds by comparison with traditional strategies or offshore hedge funds. Alternative UCITS thus aim to offer the best of both worlds: a hedge fund-like absolute return stream with lower correlation to equity and bond markets combined with a regulatory framework that imposes liquidity, transparency, regulatory oversight and strict risk management.

Of course, there are some differences. Not all types of hedge fund strategy are feasible in UCITS format. Underlying investments for some strategies, for example event-driven approaches focusing on distressed securities, or arbitrage strategies with asset-backed instruments, are simply not liquid enough to comply with the requirements of most alternative UCITS fund frameworks, which usually offer daily pricing and trading. Others often use instruments or assets that don’t fit the UCITS framework, such as short-only managers and commodity traders.

Despite the absence of these highly diversifying strategies, the market for alternative UCITS has been increasing rapidly, both in the number of funds and assets under management. The demand side has seen a shift in the mindset of investors in favour of alternative returns to diversify their portfolios. On the supply side, old-school hedge fund managers have been quick to package their strategies for the more transparent and regulated UCITS format in order to appeal to traditional investors and offer their funds as part of broader liquid instrument portfolios.

Going forward, we see still plenty of room for sustained growth in the alternative UCITS space. At €400 billion, alternative strategies still represent just 5% of total UCITS fund assets of currently €8 trillion.

Thank you to our friends at LuxHedge for their assistance in writing this article.

>>>> For more info on alternative UCITS or other underlying assets available within our life assurance contracts, please contact our Investment specialists.

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Preparing to welcome the KID

It’s now almost a decade since the European Commission began thinking in 2007 about a way to present the features of complex investment products to retail investors in a clear, concise and non-misleading way. That initiative led to the introduction of the Key Investor Information Document (KIID) for funds through the UCITS IV directive. However, European policy-makers wanted to extend the idea to other types of investment to enable investors to compare them.

The result is the Key Information document (KID) created by EU Regulation 1286/2014 on Packaged Retail and Insurance-Based Investment Products (PRIIPs). Although similar in its presentation to the UCITS KIID, the information contained in the PRIIPS KID is very different in approach, prompting the fund industry to obtain a ‘grandfathering’ period during which it could retain the (itself recently-introduced) KIID before having to switch to the KID.

Along with other providers of retail investment products, insurers were originally required to implement the regulation by 1 January 2017. However, in response to industry criticism, the European Parliament called on the Commission to revise details of how the regulation is to be put into effect, resulting in a decision to delay its application until the beginning of 2018.

PRIIPs distinguishes between two models, the single investment option and the multiple investment option (sometimes referred to as MOP). The MOP approach will apply to products such as those offered by OneLife, which can include a combination of external and internal funds (collective, dedicated and model portfolio).

This involves a two-level KID – one for the contract and one for each of the various investment options. Because PRIIPs requires full transparency, asset managers will be asked to provide standardised investment models that use or reference a benchmark. This approach will be followed by all Insurers in Luxembourg.

In addition, asset managers will be requested to provide information to enable the calculation of performance scenarios. Asset managers working with OneLife are already familiar with the KIID approach that we implemented more than three years ago, confirming the wisdom of our choice of strategy at the time.

We have also joined forces with Lombard International Assurance and ABN AMRO Life to share resources and avoid the need for asset managers and custodian banks to provide the same information several times, and the three companies will draw on the expertise of KNEIP Communication for KID production.

We will soon contact our asset managers and custodian banks to ensure they understand the challenges of the new regulation and what the insurance companies expect from them. OneLife is committed to assisting its partners to meet this challenge, which represents a step change in the way financial products are marketed to retail clients.

>>> For more information on PRIIPS please contact our Tax and Legal specialists here.

>>> This article is part of the November 2016 edition of our monthly newsletter Life Insights. Click here to subscribe.

OneLife’s ambition? To make digital a business enabler.

Driven by the will to expand its footprint across Europe, the need to adapt to the expectations of new generations, and the ambition to overturn conventional attitudes to life assurance, OneLife has made the strategic choice to deploy eProseed FSIP, an automation, integration and supervision platform that enables organizations to adapt their business models and operations to meet the requirements of increasingly digital ecosystems.

Eric Lippert is the CIO of OneLife, a European player in life assurance and wealth management. A a specialist in IT transformation, he shares with us the reasoning behind his choice and the resulting benefits, in the company of Laurent Pulinckx, COO of eProseed

“Leveraging on the new opportunities that digital offers and on our decision to make it a real business enabler, we undertook, almost two years ago, a complete overhaul of our information systems in order to benefit from a sound basis for ensuring optimal transition to digital”, Eric Lippert explains. “We have therefore streamlined the existing systems, deployed new infrastructure elements – servers, storage, networking, security – and implemented new software architecture tools. These are the new foundations that enable us today to deliver innovative digital solutions to our clients, our network of partners and our internal users. We have just launched a new mobile application for our partners who can now view the status of their insurance transactions, at any time and from everywhere. In our industry in Luxembourg, it is a premiere”, he points out.

Streamlining the information systems

“When I took up my post as CIO in early 2015, OneLife’s information systems were based on a heavy, complex and outdated machinery. The reason being that OneLife was formed through the acquisition of different companies, without any genuine rationalization of the IT systems. As an example, on top of an obsolete infrastructure, we had to manage eight printing systems, eight contract management systems, three accounting systems, four extranets, two data warehouse systems, … So, one of our main objectives was to implement common processes for all our insurance portfolios”, Eric Lippert explains. In order to achieve this, OneLife, in collaboration with eProseed, has deployed a service-oriented architecture, new workflow and case management tools, and a new document management solution. The FSIP platform has provided OneLife with technical and architectural solutions for all of its integration and automation needs. “All our insurance transaction management processes are now harmonized and orchestrated by the eProseed FSIP solution tools,” Eric Lippert says. “As for the renewal of our data warehouse system, it is planned for 2018.”

“I am convinced that the IT systems rationalization capabilities of eProseed FSIP are highly valuable assets for fluid, cost-effective and successful digital transformation.” – Eric Lippert

A fluid and consistent software architecture

Given the breadth of the company’s transformation plan, the CIO of OneLife did not want to embark on a way of selecting solutions that would have forced him to repeat the process for each of the elements to be implemented and to raise each time the question of their interoperability. “Our strategy has been to choose a single platform capable of meeting all of our current as well as future needs. This one-stop-shop strategy offers the advantage of a fluid, consistent and harmonious software architecture which allows efforts to be concentrated on business solutions rather than technological issues. Even though we had to convince some stakeholders of the relevance of our approach, this strategy has proven to be the right choice as demonstrated by the subsequent course of events”. And it was eProseed FSIP that best matched the selection criteria thus defined. “With the other providers consulted, I did not find a level of integration and consistency of all the architectural elements comparable to what eProseed FSIP offered”, underlines Eric Lippert.

Turning IT into a tool for creating value

“The IT transformation projects that we carry out aim to achieve three objectives common to many of our clients”, says Laurent Pulinckx. “Our first concern is to automate recurring tasks, thus enabling the reallocation of resources and skills to missions with higher added value, increasing efficiency and improving service quality, which puts the client back at center stage. Then comes the advanced and real-time integration of data sources with a wide variety of formats and interfacing models. Finally, the adoption of a future-oriented platform such as eProseed FSIP makes it possible to integrate the legacy systems in a single solution based on industry standards”.

“This approach echoes our will to turn IT into a tool for creating value for the company”, adds the CIO of OneLife. “Throughout the execution of our transformation plan, we have always kept in mind that, beyond streamlining costs, we also had to be innovative even if we sometimes had to be the first in our industry to adopt certain solutions.”

When users become advocates for change

If such a transformation of OneLife’s key processes could be carried out successfully, it is because close collaboration was established between the IT teams of the company and the experts from eProseed, but also between those two stakeholders and the users. “The dialogue between the three parties has actually played a significant role in the success of the project,” says Laurent Pulinckx. “The users were not solicited at the end of the project, at the time of testing, as is too often the case. OneLife managed to mobilize the different operational and technical interlocutors under one single leadership, that of its CIO. I also want to point out the role of change agents played by the business users who were involved in the project: they proved to be the best advocates of the new solution vis-à-vis their colleagues.”

“Out of all the business solution delivery projects in which I have been involved, it is clearly during this one that the users were the most enthusiastic and motivated, both to obtain a pragmatic answer to their needs and to implement change on the ground”, adds Eric Lippert.

OneLife managed to mobilize the different operational and technical interlocutors under one single leadership, that of its CIO.” – Laurent Pulinckx

A platform ready to tackle the next challenges of the digital economy

Less than eight months have elapsed between the beginning of OneLife’s process redesign project and the delivery of the new platform to the users. Meanwhile, more than three million elements were migrated to a new document management system. Today, eProseed FSIP enables OneLife to continuously optimize its services, helps reduce costs and allows more effective portfolio and client management while providing IT as well as business teams with new monitoring and tracking capabilities.

“FSIP’s automation and integration capabilities and eProseed’s technical expertise have helped us complete a digital transformation that allows us to offer our users a new experience, a more efficient and faster fully dematerialized service. eProseed’s solution not only improves our overall efficiency, but also provides real-time tracking of our clients’ and partners’ transaction portfolios”, Eric Lippert sums up.

Portugal : a sunny jurisdiction for life assurance policyholders

The attraction of Portugal as a tourist destination is well known – its magnificent landscapes, cultural heritage and gastronomic delights have made the country a popular choice for holidaymakers for many years.

Hard hit by the European sovereign debt crisis, Portugal suffered a substantial economic downturn in 2011, resulting in a wave of austerity measures to restore the country’s financial stability. The country’s inhabitants were faced with high unemployment, a significant drop in income and increased healthcare costs.

In response to these problems, Portugal has succeeded in stabilising its finances, and growth has returned, although it’s still too early to talk about a genuine recovery of the country’s economy.

A holiday destination with a 10-year residence option

The Portuguese government has strengthened its tourism industry, reflected by the tertiary sector employing almost 65% of the working population. Furthermore, it has introduced fiscal measures to attract new residents, particularly retirees, including tax breaks on their pensions and offshore investments.

This attractive regime, combined with affordable property prices and a relatively low cost of living, has lured many European retirees to settle in Portugal and benefit from the Non-Habitual Resident status. They may continue to enjoy this status for 10 years.

To boost investment in the country, the government has also introduced a residence permit allocation scheme involving so-called ‘golden visas”, which are available to non-EU citizens that invest in property, create jobs or transfer part of their assets to Portugal.

An attractive jurisdiction for life assurance

Among the many asset management tools available to investors, life assurance offers various advantages, including an attractive fiscal regime thanks to the exemption from tax of capital gains earned on the financial assets underlying the contract. Owners of life assurance contracts can therefore manage the underlying funds without worrying about the tax impact of their transactions. Only in the event of withdrawals may taxation apply.

This is because withdrawals are subject to the ‘First In, First Out’ principle, whereby capital is redeemed first and any capital gains taken into account only afterwards. At this point gains are taxed on a flat-rate basis or according to a sliding scale depending on the system chosen by the taxpayer.

Another advantage of life assurance contracts from an income tax perspective is a tax reduction depending on the length of time the contract has been held. This reduction may be as high as 60% for term contracts, that last longer than 8 years.

These advantages are NOT offered by traditional investment portfolios, even for Non-Habitual Residents, who at most can obtain an exemption on interest and dividends if permitted by the double taxation avoidance treaty between Portugal and the country where the assets are located, e.g. in Luxembourg.

With regard to inheritance rights, all amounts invested in life assurance contracts are completely tax-free when the contract reaches maturity or when it is terminated by death of the insured person. They are also exempt from stamp duty on inheritances and legacies bequeathed to heirs other than the spouse, descendants and ascendants of the deceased.

The OneLife strategy with its new Wealth Portugal solution

With Portugal being a favoured location for many foreign nationals looking to relocate, notably – but not only – Brazilians, OneLife sees the importance and potential of the Portuguese market and has included it in its European development strategy.

In terms of financial diversification, the new Wealth Portugal solution allows policyholders to invest in a range of external funds, distributed by fund companies of international reputation, as well as in internal funds. The internal funds may be collective funds available to all OneLife policyholders or dedicated funds tailored to match the policyholder’s investor profile.

External and internal collective funds with daily valuation may also be accompanied by automatic investment options such as the “Stop Loss”, “Save Gains” or “Drip Feeding” mechanisms, giving policyholders tools to react swiftly to market developments. These investment options may be activated or deactivated at any time during the lifetime of the contract.

Depending on the policyholders’ investment strategy, they may consider a dedicated fund with discretionary management entrusted to an investment manager of their choice or should policyholders be interested in selecting the investments themselves with a view to a long-term holding, there is the option to invest in a specialised insurance fund.

The flexibility of Wealth Portugal makes it possible to include any of the fund types mentioned above at the same time and even to hold several in the same category, provided that the investment limits imposed by the Luxembourg Commissariat aux Assurances are respected.

Policyholders of a Wealth Portugal contract have the option to select an additional death cover. If there are two or more insured persons, a choice of first or last death basis is also available. Furthermore, the product allows policyholders to designate the beneficiaries that best suit their needs. In addition to this, there is the added benefit of a succession planning mechanism. The contractual rights may be passed on to the surviving Policyholder(s) or to any other third party designated by the Policyholder(s), where a policyholder dies before the insured person.

Valérie Vaes, Senior Wealth Planner

Andre Piovezan, Regional Sales Director

>>> For more information on our new Wealth Portugal solution, please contact our specialist Andre Piovezan at: andre.piovezan@onelife.com

>>> This article is part of the November 2016 edition of our monthly newsletter Life Insights. Click here to subscribe.

RAIFs and SPIFs – the best of both worlds

On 14 July 2016, legislation took effect in Luxembourg introducing a new type of investment vehicle, the Reserved Alternative Investment Fund or RAIF. The RAIF is regulated under the EU Alternative Investment Fund Managers (AIFM) Directive (2011/61/UE of 8 June 2011) and is not supervised by the Luxembourg regulator, the Commission de Surveillance du Secteur Financier (CSSF). Sufficient protection and oversight comes from management of the RAIF by an authorised external AIFM.

Historically, Luxembourg’s regulatory approach has been based on product regulation, in this case the supervision of funds. This has led to the creation of a range of regulated investment funds including:

UCITS subject to Part I of the legislation of 17 December 2010 on Undertakings for Collective Investment;
Part II funds subject to Part II of the 2010 legislation (non-UCITS funds);
SIFs subject to the legislation of 13 February 2007 on Specialised Investment Funds, as amended, restricted to well-informed investors; and
SICARs (risk capital investment companies) subject to the legislation of 15 June 2004 on the SICAR, as amended, covering risk capital investments.

Wealth managers now have the choice, depending on the investor’s preferences and profile, between setting up alternative investment funds as Part II Funds, SIFs or SICARs which are subject to direct supervision by the CSSF, or RAIFs, which are more attractive from a time-to-market perspective.

The Luxembourg insurance regulator, the Commissariat aux Assurances or CAA, permits a wide range of investments in the form of an Internal Dedicated Fund and/or Specialised Insurance Fund (SPIF).

At OneLife, these investments may include notably unquoted/unlisted assets, depending generally on the investment strategy of the life assurance policy.

While Internal Dedicated Funds offers discretionary, mandated management, the SPIF, a recent solution introduced by the CAA in Circular 15/3, enables policyholders to select the underlying asset(s) of their policy independently from a list of assets predefined by the insurer. The SPIF is aimed at a ‘buy and hold’ strategy.

This low-cost solution, which does not involve an investment manager, can be used for investors in private equity or other long-term assets, such as real estate or securitisation instruments.

While the RAIF is available only to well-informed investors, the SPIF is aimed at Category D investors (category C in certain cases) as defined by the CAA. The admissible underlying assets of a Luxembourg life assurance policy are determined according to the regulatory classification of the policyholder, in principle based on the amount of the initial premium as well as the policyholder‘s total wealth and their investment profile, which depends on their risk profile.

Combining the RAIF and the innovative SPIF solution clearly enhances the efficiency of investment transactions involving real estate, private equity or securitisation instruments by offering a low-cost solution for the policyholder, due to the absence of an investment manager and other intermediation.

The aim is eventually to create an investment option tailored to the policyholder’s particular objectives and needs.

UPDATE : Interest on RAIF “OneLife” solutions strongly increased since few months. Since RAIF launch in July 2016, the interest shown by the alternative investments industry to the Reserved Alternative Investment Fund (“RAIF”) is real and concrete. Indeed, at the end of February 2017, we counted up to 53 RAIFs distributed on the European market.

Anthony Lorrain

Director – Unquoted & Traditional Assets

https://lu.linkedin.com/in/anthony-lorrain

>>> For more info on RAIFs or other underlying assets available within our life assurance contracts, please contact our Investment specialists at: Users_IFS@onelife.com

>>> This article is part of the September 2016 edition of our monthly newsletter Life Insights. Click below to subscribe.

The multitude of benefits a Life Assurance contract can bring

One wealth transfer plan. Four key benefits. You guessed it – it’s an OneLife Life Assurance contract.

Not only can a life assurance contract meet cross-border requirements in case of relocation to another country, providing you with favourable tax regimes, it also offers a gateway to a whole world of investment opportunities.

And it doesn’t stop there. A life assurance contract with OneLife means you are protected within the Triangle of Security – which in a nutshell, means that in the case of a default, you will have preferential rights over all other creditors on the entire pool of assets invested in various segregated accounts.

It sounds pretty good to us, but why don’t you see for yourself?

>>> Click here to learn more about the ways in which a OneLife life assurance contract has benefitted families just like yours…

(Click below to download our e-Book.)

Put yourself in their shoes…

In today’s consumer culture, we are all bombarded with information about seemingly exciting new products and services. Life assurance isn’t right for everyone but it is a flexible solution that can adapt to the needs of different individuals and families. OneLife’s Succession e-Book demonstrates how some families have filled the gaps in their wealth transfer planning by leveraging this tool.

Perhaps the experience of Martin, a French retiree concerned about giving enough money to his two daughters from his first marriage, resonates with you… or maybe Timo and Anna Tuominen with their dual objectives of supporting their children’s careers while saving an inheritance for their two grandchildren, strike a chord?

Whether your situation places you as the benefactor or beneficiary in any of these scenarios, our family case studies clarify exactly how life assurance can help you as well.

Why not see for yourself? Click below to download our e-Book.

Which OneLife family are you? Reap the benefits of life assurance contracts, as they did.

The Blanchet family. The Peeters family. The Tuominen family.

Three families living in different countries, with varying family structures and very diverse requirements.

So, what do they have in common? Life assurance. A Luxembourg life assurance contract to be exact. And this contract has lived up to its promise of being an ideal solution for each and every one of these families, due to the high level of customisation and flexibility it provides.

Click below to learn more about the ways in which these three families have reaped the benefits… (Click below to download our e-Book.)

No matter your stage of life, be prepared with our checklist.

Life – the long and winding road, full of exciting possibilities, diversions, and sometimes even big and unexpected bumps.

But, no matter what stage of life you are in, we have expert advice ready for you. To get you started, take a look at our Succession planning check-list.

Have you asked all of the right questions?

Click below to download our Slide Share.