Ariste Chiabotti (UBS): Family Offices prepare for a Generational Shift
UBS Managing Director Ariste Chiabotti says that philanthropy and sustainable investments will be key considerations for family offices in future, as large volumes of wealth are transferred to younger generations and increasingly to women.
How has wealth evolved worldwide over the past three years?
The recent Billionaires Report 2019 published jointly by UBS and PwC has revealed that the wealth held worldwide by billionaires has dropped by 4,3% in 2018 - after five years when it grew by 34.5% - to $8.5 trillion. Since 2014 the number of individual billionaires increased by 38,9% to 2,101 in 2018 globally. In terms of geographical distribution, EMEA's billionaire population has increased by 14% - the strongest growth worldwide - to 598, compared to 749 in the Americas - 715 in 2017 - and dropping from 814 in Asia in 2017 to 754 in 2018. Asia still has now more billionaires than the Americas. However, the Americas still remain the region with the greatest amount of billionaires wealth. Despite this slow-down, the natural consequence of this evolution is that family offices are springing up all over the world. Focusing on succession planning; education of the next generation and non-traditional investment strategies such as private equity, co-investment deals, real estate and hedge funds - and actively expanding their network of peers more than ever to orchestrate deals and investments.
« The Americas still remain the region with the greatest amount of billionaires wealth. »
How is Luxembourg positioning itself in the family office sector?
Luxembourg has emerged as a perfect location for setting up family offices. The country distinguishes itself through its international and multilingual community and the presence of key players in the family office value chain, such as banks, law firms and fund managers. Luxembourg also benefits from a stable legal and political environment and its lawmakers work closely together with industry experts to ensure that the country remains at the forefront of innovation. Just consider, for example, the 2012 family office legislation and recent government support for sustainable investment. Companies located in the Grand Duchy can benefit from numerous double taxation treaties and the ability to distribute fund products cross border via the European passport for financial services. However, the family office ecosystem remains fragmented in Luxembourg. We believe the authorities and industry members should strive even harder to bring together all stakeholders and strengthen the financial industry further for the future.
How do you see the sector evolving in the future?
We will witness a massive wealth transfer - $2.4 billion - to the upcoming generation over the next two decades. Women and well-educated young people will assume increasing responsibility for managing large volumes of assets and, while part of this wealth will be dedicated to philanthropic activities, another will be to sustainable investments. UBS is well positioned, with strong competencies in both fields having, for example, already developed several investment products that focus 100% on sustainable investments. Or the UBS Women's Circle network, a platform designed to deepen the knowledge in financial matters and helping making the most of their wealth. Further, digitalisation in the financial industry will continue to increase, enabling faster time to market, cost reductions – and ultimately lower prices for banking services. However, to remain competitive, market players face substantial financial outlay in order to upgrade their IT platforms and not only meet the pace of change, but also the increasing cost of regulatory requirements. Rising to this challenge will take substantial financial capacity - and assets under management. Size matters and preeminent players like UBS are ideally positioned to capture the promise the future holds.