WEALTH MANAGEMENT

HSBC Private Bank Luxembourg

Historically HSBC Private Bank in Luxembourg has been popular with clients from Latin America, the Middle East and the Europe Union. Meanwhile, Eastern Europeans and the non-domiciled UK community are discovering the benefits of having their wealth managed by the bank.

Peter Yeates, the Managing Director, says: "Without any preconceptions, we first understand the needs of our clients, their time horizon, risk tolerance, liquidity requirements, tax situation and personal goals, etc, and only then propose the best-suited solutions that we can find in the market."

"Our aim is to be a trusted friend and advisor more than just a professional wealth manager." —Peter Yeates

For a more strategic approach HSBC offers a range of investment mandates for different risk profiles. These consist of 18 building blocks spread across different asset classes. In addition to diversification by geography, currency exposure and category, a key differentiator is due-diligence in manager selection. For example, less than one percent of the 15,000 investment managers meet the bank’s selection criteria. Of those that do, approximately 15% are replaced every year. This rigorous manager oversight goes a long way to enhancing portfolio quality.

“Based on the client's risk profile and investment horizon, asset allocation varies across the building blocks,” explains Yeates. “If a client, however, wants to pursue a more active investment strategy or concentrate on one or more specific building blocks, such as euro core fixed income, US large caps or something else, we try and understand the reasoning and then give our advice and act appropriately. But this advice would fall outside our core discretionary management mandates.”

For those wishing to include alternative investments in their portfolios, the bank offers a selection of in-house funds of hedge funds. HSBC currently manages more than USD 42bn of client assets in this asset class. The group’s investment arm in France—Louvre Gestion—has also performed well over time on long-only funds, and clients of the Luxembourg office have ready access to this expertise through the Louvre Gestion product range. The Luxembourg office also offers traditional fund of funds discretionary management, focusing mainly on long-only funds that are managed by the local asset management team.

“One jurisdictional advantage of Luxembourg is that we have an EU passport—which allows us to sell our services within the European community,” says Yeates. “Luxembourg is also ideally suited as the EU headquarters for an international Family Office structure as it offers a wide range of flexible solutions designed to maximise the families’ wealth preservation for future generations”.

Looking beyond location factors, there are synergies within the HSBC group that the bank leverages. “For instance,” explains Yeates, “if you are able to process a stock order on a straight-through basis you can dramatically reduce transaction costs. If the system can find the best-priced broker from the moment the relationship manager puts the deal into the system, without any additional human intervention, you can save more than 95% of the subsequent transaction costs. But to achieve such effectiveness, you not only need a system with the necessary checks and balances, but also economies of scale.

This ‘reach’ enables the relationship managers and client-service specialists in Luxembourg to tap the wider HSBC network to access the appropriate solution that a client might need. So in this way the bank provides global access to all the wealth-management solutions from a single point of contact. For example, a division of HSBC private bank is 'Global Wealth Services'. Within this division there are about 800 professionals. They provide international wealth-management solutions such as fiduciary and estate-planning services for establishing foundations, private investment companies and trust administration in a number of jurisdictions. Says Yeates: “From here we can provide all the necessary services to get our clients into the jurisdiction best suited to their needs—be it a Luxembourg corporate structure, a trust structure in Bermuda, Cayman Islands or elsewhere."

HSBC is also one of the biggest providers of trustee services. Indeed, the bank offers a range of geographical solutions and enables its clients to choose the jurisdictions they want. “Clients can decide whether they want to be managed as a global relationship or not,” adds Yeates. “But until they provide the necessary approvals their confidentiality is fully respected between jurisdictions—in line with regulations. We nevertheless know that many clients do prefer to have a central relationship manager who can coordinate all their accounts with the HSBC Group, and we are very happy to provide this service on request.”

HSBC Private Bank also offers a variety of specialised and niche services. For instance, those based around corporate finance, such as arranging acquisition capital, private placements and the introduction of direct investment opportunities to private equity investors. It also advises on various multi-jurisdictional issues, especially geared towards clients with assets and financial interests in multiple countries and offers, among others, services based around immigrant investor programmes for clients wishing to establish a permanent residence in a number of countries, with Canada as an example.