“Large families are increasingly investing in illiquid assets, such as private equity or real estate.”
How is the LAFO working to develop the family office sector?
Today in Luxembourg, there is a significant number of single-family offices which do not appear as such because they generally take the form of investment vehicles for international or resident families. In addition, there are a number of multi-family offices, often organised by professionals who already have another license – asset managers, domiciliation agents or banks – and who create a specific department. However, pure multi-family offices are experiencing difficulties as they have to request a Professional of the Financial Sector to the CSSF and carry hefty costs. Their business model is therefore under pressure. However, family offices do not manage assets: they administer families' assets and supervise and coordinate the various professionals who work for them. They should therefore not be subject to the same supervisory criteria as those which are applied to asset managers by the regulator. We therefore wish to amend the law of 21 December 2012 to enable multi-family offices to operate in Luxembourg without facing excessive regulatory costs, while maintaining absolute transparency and integrity.
How do you explain the rapid growth of the business?
The stability of the Grand-Duchy and the expertise of the financial centre attract two types of family offices: firstly, important families from Luxembourg or those who have come to live in the country; secondly, international families who use the Grand-Duchy to create their investment vehicle and who hire a team here to administer their interests in Europe or internationally. Luxembourg is one of the few countries where solutions – particularly institutional solutions – can be found for ultra-high net worth families. The unique range of legal solutions and of regulated and unregulated vehicles facilitates the organisation of their assets.
What challenges and opportunities do you identify over the next 5 years?
Generally speaking, the occupation is becoming more professional. Traditionally, it was left to former bankers who only dealt with financial assets. Wealthy families are increasingly investing in illiquid assets, such as private equity or real estate. Other skills are needed for the supervision of these assets. The future of multi-family offices lies in the strengthening of multi-asset skills. Today, families also want multi-family offices to ensure a sustainable relationship. These two trends will lead to the regrouping of professionals in the years to come.
Serge Krancenblum, President of the LAFO, says the legal framework of multi-family offices must adapt to the evolution of the profession. Interview.
Could you present the LAFO in brief?
Our association was created in June 2010 and represents the family office professionals. We have three key areas of focus: managing an exchange and information forum for family offices, working with the public authorities to represent the industry and promoting Luxembourg as a financial centre for wealthy families around the world. Since its creation, the Luxembourg Association for Family Offices (LAFO) has focused on helping to strengthen the expertise of family office professionals. To achieve this objective, we have worked towards the creation of a law regarding multi-family offices. This law has established a framework answering clients’ needs for transparency with regard to remuneration and has enhanced the integrity of stakeholders within the sector.
Serge Krancenblum (LAFO): the transformation of the family office