≠Success in ≠Relocation: the mind of a HNW relocator

HNWs’ financial needs are constantly changing depending on personal objectives. Add to the mix a move across borders and things can get complicated. Wealth managers must ensure they are aligned to an individual’s goals and avoid adopting a ‘one size fits all’ approach when offering solutions to their clients.

In our most recent research, we identified various types of high net worth personas. By understanding the specific attributes, behavioural traits, and financial objectives that distinguish one high net worth investor from another, we were able to determine specific ways in which wealth managers need to provide tailored solutions to their entire client base.

We asked European investors how they would sum up their most recent relocation experience, and the results consisted of both positive and negative reactions.

European HNWs claimed they felt their move abroad had been exciting, challenging and adventurous. So with this in mind – what communication styles and specific solutions can wealth managers adopt and offer in order to best align with the cross-border hurdles these relocator clients inevitably have faced? How can they keep hold of clients as they move further away from their home base?

Read more in our thought leadership piece… here.

The ISF is dead – long live the IFI?

Between 17 October and 10 November, France’s National Assembly, the lower house of parliament, has been examining the country’s finance bill for 2018. The bill introduces a new final flat tax (Prélèvement Forfaitaire Unique or PFU), applicable to all savings and investment accounts, including life assurance on a retroactive basis from 27 September, 2017.

While common in the UK or the US, the flat tax is an innovation in the French tax system, applying as it does a single tax rate to a broad range of different situations and sources of income.

The French tax system normally customises tax liability according to the personal situation of the taxpayer and the type of income. This therefore represents a significant change of approach to taxation that originates from the presidential programme of Emmanuel Macron.

The underlying idea is to simplify the taxation of capital held by French residents through the application of a flat tax to a broad range of savings and investment accounts and income:

through application of a single tax rate to all financial income;
to avoid the complexity of the application of France’s income tax for different categories of income, including interests, dividends and capital gains.

The 30% rate of the PFU consists of the following:

5% in income tax and 15.5% in social security contributions up to 31 December, 2017, and
8% in income tax and 17.2% in social contributions from 1 January, 2018

The PFU is applicable to all financial and investment accounts held by French residents from 1 January 2018, and for life assurance retroactively from 27 September 2017.

Certain types of investment or account are not liable to the PFU:

Regulated savings accounts (livrets réglementés) such as the Livret A or Sustainable Development Account, or income tax-exempt savings products such as employee savings plans and pension schemes.
Investments predominantly in shares such as Equity Savings Plans, reflecting the government’s policy to encourage investment in the real economy.
Real estate income, which is, however, impacted by the conversion of France’s wealth tax into a tax in real estate assets.

Therefore, neither life insurance nor bank savings accounts such as home ownership savings plans are exempt from the PFU.

As a result of divisions within the government and poor wording of the draft legislation, taxpayers and life assurance policyholders feared they would face higher taxation on existing contracts than under existing rules. The 30% flat tax was supposed to apply to life assurance contracts with a value of more than €150,000 for an individual and €300,000 for a couple, regardless of the length of time the contract had been held.

However, the government has introduced two amendments to clarify the PFU regime.

All contracts subscribed before 27 September, 2017 will be taxed at current applicable rates, according to the length of time the contract has been held. Should the policyholder make top-ups on the contract, the PFU will apply, with the opportunity to apply the lower tax rate of 24.7% from 1 January, 2018 for the share of premiums paid below €150,000 for an individual and €300,000 for a couple. Contracts subscribed after 27 September, 2017 will be subject to the PFU whatever the length or value of the contract.

Up to now, the tax applicable to withdrawals from life assurance contracts has depended on the length of time the contract has been held and whether the policyholder opts for a one-off levy or income tax. The applicable rate of the levy decreases over time as follows:

A 50.5% tax rate where the life insurance contract has been held for less than four years (35% in income tax and 15.5% in social security contributions).
A 30.5% tax rate for life insurance contracts held for between four and eight years (15% income tax and 15.5% social security contributions).
A 23% tax rate for life insurance contracts held for more than eight years (7.5% income tax and 15.5% social security contributions).

These rates are due to increase to 52.2%, 32.2% and 24.7% as of 1 January, 2018 due to an increase of the level of social security contributions.

It should be noted that the rate of the PFU is lower than that of the one-off levy for a withdrawal within less than eight years but potentially higher after the eight year threshold.

We recommend keeping existing contracts until the eight year threshold without making any top-ups after 27 September, 2017. New contracts should be subscribed for investments after 27 September to ensure the policyholder benefits from the lowest possible rates covering all the premiums they have invested in life contracts above €150,000 euros for an individual and €300,000 for a couple.

This is a unique opportunity to take advantage of the new legislation and benefit from the lower tax rates available to policyholders. OneLife would be happy to help you take advantage of the changes.

Replacement of the ISF by the IFI

Approved on first reading by the National Assembly, the finance bill will replace the wealth solidarity tax (ISF) by a real estate wealth tax (IFI). Here’s the basic outline.

The ISF taxes assets in excess of €1.3m on a progressive scale. The IFI will replace the ISF will the same thresholds and rates.

The taxable base (the assets that are subject to tax) will change considerably, however.

Financial assets (including life assurance policies) will henceforth be excluded, along with forestry assets, works of art, real estate assets related to professional activities and rented furnished accommodation (exclusively under the furnished accommodation rental business regime). By contrast, unfortunately, shares in SCPI real estate investment companies or OPCI real estate collective funds, even when held through a life assurance policy, and all other real estate assets fall within the scope of the new tax.

Fortunately, the allowance of 30% of the value of the taxpayer’s principal residence will be maintained. The other side of the coin is that usufructuaries and reversionary owners will now be liable for their respective fiscal share, and no longer the usufructuary alone.

The bill has now passed to the Senate, which may not necessarily agree with these changes, given a report of 9 November that denounced the changes as incoherent and damaging to the economy.

Nevertheless, the proposals represent appreciable tax savings for many wealthy French households, but at the expense of a sector that accounts for 18% of national wealth and 8% of total employment. More battles may lie ahead between a National Assembly firmly behind the president’s vision and a Senate that remains resolutely opposed to it.

All this underlines even further the advantages of Luxembourg life assurance policies for French residents, and OneLife will keep its partners up to date with further developments on this issue in order to help them guide their clients through the changes.

Article by Jean-Nicolas Grandhaye

≠Success in ≠Relocation: HNWS’ confidantes

Inevitably, stresses and concerns can follow intense change. For relocators creating upheaval in their lives by moving across borders, getting the right support is paramount. Of the 280 European relocators we surveyed, 44% seek advice from their peers.

However, many referenced that actually family advice was the most helpful.

Wealth managers must use relocation as an opportunity to build strong relationships with their clients. Currently, however, they are noticeably absent from the process. Only 25% of relocating HNWs look to their wealth advisers for guidance and just 8% found them the most helpful resource.

Becoming more influential in this process will mean providing clients with a blend of technical advice and emotional support as they embark on this significant change.

Find out more from our recent research: here.

≠Success in ≠Relocation: sentiments towards relocation

The decision to relocate is not easy to execute, especially without an expert guidance.

Individuals must consider the logistics of the move, financial planning, potential tax implications and the impact of moving on social and professional networks. For some, this is enough to put them off relocation!

In our recent research on ‘≠Success in ≠Relocation: The Relocation Journey.’, we asked European HNWs, who have relocated or are planning to, their true feelings about starting afresh in a new country. The general consensus is that relocation is an opportunity which is facilitated by having a flexible approach.

While those who have international aspirations believe relocation has no bearing on their wealth creation potential, the relocators we surveyed were typically wealthier than those who had never moved abroad.

To find out more about what HNW relocators think, click here.

“Quote, unquote” – managing well-diversified portfolios with non-traditional assets

These days, investment portfolios reflect the often global and complex lives which the HNW and their families live. Non-traditional assets such as global real estate, private equity – regulated and non-regulated – and securitisation vehicles are becoming more the norm than the exception when dealing with international wealth.

OneLife is well-placed to take on and value non-traditional assets as part of a life assurance contract, integrating them into the client’s global wealth solution no matter how diverse the portfolio. This has the benefit of giving our clients and their advisors a clear overview of their portfolio as a combination of both traditional and non-traditional asset classes.

Our dedicated team of Unquoted experts carefully analyses each asset within the portfolio to ensure it meets tax and regulatory requirements. A thorough understanding of cross-border jurisdictional matters is necessary to allow us to assess the risks of a broad range of assets.

This is in line with OneLife’s strategy to offer comprehensive, flexible and up to date wealth solutions for its partners and clients. OneLife’s expertise is backed by Luxembourg’s insurance regulation which not only allows a wide range of underlying investments in internal funds but also regularly updates and enriches the arsenal of unlisted related tools like Specialised Insurance Fund (SPIF), a self-management solution, as well as other structures. The regulator’s pragmatic approach offers interesting and flexible wealth planning opportunities to individuals with different tax jurisdictions by considering the potential benefits and risks.

Non-traditional assets were on the agenda of OneLife’s 10^th Investment Forum held on 19^th October in Brussels. This year’s anniversary event gathered together over 550 visitors, 40 fund houses … and included 38 working sessions on diverse themes.

Anthony Lorrain, OneLife Director Non-traditional Assets and Liana Aghabekyan, OneLife Financial Assets Analyst, held a panel presentation for an international audience giving insight into current topics such as, Why is Luxembourg Life Insurance particularly suitable for the non-listed world? How can non-traditional assets be integrated into life insurance contracts? Unlisted in regulated or non-regulated environments: risks associated with non-traditional assets.

OneLife is a member of the Luxembourg Private Equity & Venture Capital Association (#LPEA). With over 120 members, LPEA plays a leading role in the discussion and development of the investment framework and actively promotes the industry beyond the country’s borders.

To learn more, please contact Anthony Lorrain or Liana Aghabekyan.

#Success in #Relocation: motivations for HNW relocation

European HNWs are increasingly becoming internationally mobile and over a quarter are already planning their next move. Yet in spite of these widespread aspirations to relocate, the specific drivers for moving abroad are diverse. For 37% of HNW relocators, career progression is the most influential factor, followed closely by lifestyle reasons. Professional development is important for 42% of HNW women alongside the desire to provide their children with better opportunities. By contrast, a primary motivation for men is to have a more comfortable retirement.

HNW relocators clearly think beyond the financial reasons for relocation and are driven by opportunities to improve both their careers and their lifestyle. So, it is critical that wealth management providers acknowledge what makes HNW relocators tick and provide services which are aligned with their cross-border motivations.

Discover more about the reasons why European HNWs move abroad by accessing our latest research: here.

≠Success in ≠Relocation: the cross-border agenda

Relocation, whether for work or for leisure, can be an exciting yet stressful time for high net worth (HNW) individuals. Our latest research explores the objectives, attitudes and expectations of these individuals ahead of relocation. Their concerns and motivations vary and for the most part they extend beyond the financial.

During this time of change, wealth providers must adapt a holistic approach to successful wealth management solutions involving managing multiple financial factors to suit HNWs developing needs. To meet HNW expectations, advisors must avoid tunnel vision when it comes to offering cross-border advice.

To understand the financial complexities of relocation we asked European HNWs about their relocation experiences. For many, a new location means new priorities; over half of these individuals said setting up a new bank account was at the top of their to-do-list with tax related priorities following close behind.

Interested in learning more? Get ready for the upcoming launch of our newest research on wealthy relocators!

KYCTech-OneLife: a fruitful collaboration

Milenko Keserovic (Compliance Manager at OneLife) and Luc Maquil (Co-founder of KYC Tech) shared the first steps of the collaboration between their two companies during the RegTech Summit which took place at Luxembourg-Kirchberg on 12^th October. “One click, One KYC report” actually best describes their common Compliance – or Reg – and Technology – or Tech – project.

“Technology makes compliance more efficient. It facilitates administrative tasks and allows employees to work on projects with added value” started Luc Maquil, who co-founded KYC Tech with his partner Thierry André to help answer the growing challenges posed by regulatory constraints. “We have a symbiotic approach, as we look to apply our RegTech solution in an efficient way for the business” explained Mr. Maquil. The solution is composed of multiple ingredients, the first one being raw data (PEP lists, terrorists lists, sanctions lists…) which can also be extracted from the internet, social media, etc. Workflow is also a crucial step: who undertakes the action? What needs to be done? Exchange and collaboration are key. Then comes architecture: identify, select, plug and comply.

“Save time and focus on added value”

Milenko Keserovic then took the stage to go over the collaboration between OneLife and KYCTech. “When we onboard a new client, we face a number of regulatory constraints. First of all, we need to screen the name of the client – client being a generic term, also meaning entities and not only the holder of the policy” started the Compliance Manager, who continued: “These tasks are currently being done manually. KYCTech has a fully automated solution: when we register a client into the database, the system makes an automatic call to the platform and the results come back in just a few seconds”. Then, the Compliance team can easily decide whether to onboard the new client or not. “The results are positive. Clients are categorised in the right way and the tool is user-friendly. It has a lot of benefits: no manual work means less risk of error” explained Milenko.

KYCTech also provides OneLife with an Enhanced Due Diligence (EDD) solution. Here again, work is currently being done manually, and experts have to devote a lot of time to collect information and documents. “The RegTech startup is able to offer an EDD report which we have tested: we send a request and receive a comprehensive report within the next 48 hours. We can then focus on analysing the file” added the Compliance Manager who describes the report as “accurate, useful and full of information”. The tool is automated, simplified, immediate and cost efficient. Moreover, the two experts are also currently developing solutions to facilitate the tasks of the compliance team when it comes to dormant policies.

Finally, Milenko Keserovic explained that on the one hand this project has been managed in an agile way, based on exchanges and interaction between the teams of KYCTech and OneLife. On the other hand, the RegTech startup tries to understand how OneLife employees work, what and why they do it. Milenko Keserovic and Luc Maquil can only agree on this exciting project: “We both realise more and more that technology can really be helpful and allows employees to save time which can be used for tasks where human judgment is needed”.

InsurTech : using technology to change the client experience

On 12 October, at the second edition of the InsurTech Summit at the Novotel Kirchberg, CEO OneLife, Marc Stevens, participated in a round table discussion in the company of his Luxembourg peers. The experts from the life insurance serctor discussed the themes of innovation and investment in the area of InsurTech.

The session was moderated by Geoffroy Gailly, Partner at KPMG, who asked about the return on investment in the area of InsurTech. “What are the amounts and how are they invested? How do you measure the ROI ?” asked M. Gailly.

For Marc Stevens, measuring the end-to-end ROI is simply not possible : “A better way of looking at it is to define a field of application and to to take processes into account”. The CEO of OneLife then shared a number of examples with participants: the use of robots for e-mail management, requiring an investment of two days, in order to gain 20 man-days per year. In addition, prospectiing using social media and notably LinkedIn. This investment, led by Christophe Regnault, Digital Marketing Manager at the life insurance company located in Capellen, is already bearing its fruit. As Marc Stevens indicates, the cost is 10 times lighter than using traditional prospection methods and the ratio is 3 times higher. Moreover, according to the CEO, certain questions remain: “How can these prospects be converted into real partner relationships ? In fact, our prospects are developing in a digital environment, so the question is, can your company evolve in the same universe as them?”

At OneLife, investment in technology goes hand-in-hand with a new way of managing projects, with an Agile type of approach advocated by Eric Lipper, COO of the life insurer. “We are now able to deliver new products and services in a much shorter timeframe. This was the case with our App developed last year. If it is difficult to evaluate the return on investment from A to Z, a number of different factors may be calculated which demonstrate that we are moving in the right direction” added Marc Stevens. He went on to say : “Spending is easy, Smart spending is way more difficult”.

The Luxembourg life insurance experts then discussed the digital transformation within their respective companies. Marc Stevens began his speech by sharing an example of a site comparing different non-life assurance propositions, launched over 20 years ago in the Netherlands. «Today, 60 % of product distribution passes through this site. However, the same concept for life insurance companies just didn’t work’. With this example, M. Stevens also emphasised the importance of the interchange between human contact and technology. «Some do not want either telephone or face to face contact, as they are used to a totally digital experience. But in our sector, some still prefer human contact. One of the challenges is therefore to be able to integrate this interchange process”.

The client – and partner – experience is key and technology can now allow an optimal level of exchange which creates new relationships. “Thirty years ago, technology wasn’t mature. Today, we are involved in a process of change with a variety of different marketing operations and HR tools etc … we have embarked on a journey without really knowing the final destination. But one thing is sure, the client experience can only benefit from it, as will, in fine, the experience of our employees, our partners and our clients” concluded Marc Stevens.

≠Success in ≠Relocation: HNW Relocation – what you need to know

Relocation is a life-changing, somewhat hectic (!) but enriching adventure which many high net-worth (HNW) individuals are choosing to embark on. Around a quarter of HNW individuals have already launched their cross-border adventure and 13% of HNW individuals have plans to follow suit.

As more and more HNW individuals are choosing to relocate, their financial needs and expectations of wealth providers transform. It has become increasingly important that wealth management providers are able to provide dynamic solutions and products which suit HNW relocators’ changing needs.

Our upcoming research on cross-border relocation explores some of the key facts, motivations and concerns HNW individuals have, as well as the financial decisions which arise as a result of moving countries.

Interested in learning more? Get ready for the upcoming launch of our newest research on wealthy relocators!