Not many people in Singapore, or Asia for that matter, know much about my home country Luxembourg.
What they may know, perhaps, is that many of the investment funds they invest in are domiciled in Luxembourg. In fact, Luxembourg is the second biggest investment fund domicile in the world after only the United States.
But many in Asia may still think that Luxembourg is a city belonging to one of a host of bigger European nations – France, Germany, the Netherlands, Belgium?
So trust me when I say I know how Singaporeans feel when they hear someone ask if their country was actually part of China.
The similarities between Luxembourg and Singapore extend far beyond their often mistaken identities.
Both have a sizeable workforce from overseas. In Luxembourg’s case, about half of the people living here are from overseas and there are more than 170 nationalities based here. Many workers live in nearby countries like France, Germany and Belgium and commute in to work daily.
Singapore is also very welcoming of foreign talent and there are also sizeable numbers of Malaysians who commute daily across the Causeway to work in Singapore.
But it is the similarities between both countries’ geo-political and economic influence that is the most striking.
Comparing Luxembourg and Singapore as financial hubs
For starters, both are small countries by land size and are surrounded geographically by much larger neighbours.
Both, though, pack a mighty punch well above their weight when it comes to economic power. Both are AAA-rated economies by all three major rating agencies (Fitch, S&P and Moody’s).
Luxembourg is considered one of the world’s major business and financial centres and is home to more than 100 international banks. It consistently has the lowest rate of unemployment among European countries; it boasts the world’s second highest GDP per capita; and it has one of the highest rankings in the world for economic freedom.
Singapore, likewise, is a financial hub in Asia, with many multinational companies basing their regional headquarters there. Not surprising, given that the Republic is ranked second in the world by the World Bank for the ease of doing business.
Due to its strategic location in the heart of Europe, Luxembourg is often seen as a gateway to the entire European Economic Area (EEA); Singapore is likewise seen as an access point to Southeast Asia and Asia.
While Luxembourg was one of the six founding members of the European Union in 1957, Singapore was also one of the five founding members of the Association of South-east Asia (Asean) in 1967.
With such close similarities between the two countries, it is not surprising that Bank of Singapore has chosen to open a subsidiary – BOS Wealth Management Europe S.A. – in Luxembourg.
But are the ultra high net worth individuals in Asia the same as in Europe?
How ‘old money’ compares to ‘new money’
Wealth in continental Europe is mostly inherited rather than created.
This is probably the biggest difference with the wealthy in Asia, who are mostly first-generation business owners, making wealth creation and growth more vibrant in general.
This contrast contributes to the image of the so called ‘old money’ in Europe, although this of course varies widely across different European nations.
A majority of European ultra high net worth individuals prefer to invest in more defensive fixed income or mutual funds and generally conduct less trading activity than their counterparts in Asia. Investments, thus, are more strategic and less tactical for wealthy Europeans.
They also largely choose discretionary rather than advisory investment portfolios. This means that they prefer to leave investment calls to professional fund managers and review their performances every three or six months.
In Asia, many clients still prefer doing it themselves, although many are increasingly turning towards discretionary portfolios as well.
Leverage is in demand but generally less used in Europe than in Asia. However, there is always appetite for property loans for the purchase of real estate in London, Paris, the French Riviera or for chalets in Switzerland among the wealthy here. In Asia, property is also a popular investment tool, although rapidly changing housing regulations in many Asian countries, including Singapore, has dampened the market.
In Europe, the wealthy are very mobile and they sometimes change their home base due to taxation reasons. In Europe, tax systems of individual countries are very different from nation to nation and they tend to evolve very rapidly.
It is common therefore to see large estates re-structure their holding vehicles and for ultra high net worth individuals to relocate from one country to another if they find the tax system no longer benefits them.
The great thing about Bank of Singapore is that while its roots are Asian, it has a global outlook, which means it really works to understand the wealthy in different regions and their unique needs.
A lot of wealthy Europeans are increasingly looking to invest in Asia and Bank of Singapore will give them those valuable insights into the region.
Which is why I am absolutely thrilled to be heading this new subsidiary in Luxembourg, where we can combine the best of European wealth and Asian wealth.Disclaimer applicable to recommendation
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