On the occasion of its 30th anniversary, the Association of the Luxembourg Fund Industry (ALFI) declared its commitment to work alongside stakeholders in Luxembourg to enable citizens to better understand and manage personal finances, in a context of rapid technological, economic and societal change. A dedicated session at the ALFI Global Distribution Conference provided an opportunity for representatives from the government, education, finance, business and the media to explore ways of closing the financial education gap in the Grand Duchy.
As part of the national financial education strategy coordinated by the financial regulator Commission de Surveillance du Secteur Financier (CSSF), ALFI announced its financial and technical support for the “Fit for Life” awareness-raising programme in schools, led by Jonk Entrepreneuren with the Luxembourg association of economics and social science teachers CNPSES. ALFI also unveiled the new version of its investor education website www.understandinginvesting.org.
ALFI’s chairman Denise Voss said: “Today we celebrate thirty years of working together to make Luxembourg the world’s leading centre for cross-border investment funds. For the continued growth of our industry and for the benefit of society and the economy it’s essential to have well-informed citizens who understand the risks and opportunities of investing and who are capable of managing their personal finances. In these times of economic and social challenges financial education can help individuals protect their own financial interests and plan for the medium to long term, especially for their pensions.”
88% of people polled expect initiatives from policy makers
The Quest survey, conducted on behalf of ALFI in August 2018 among a representative sample of the adult population residing in Luxembourg, reveals a significant gap between stated beliefs and actual practices in personal financial management. While 86% consider that they are in control of their personal finances, 51% do not know their tax rate and 42% do not know how much they contribute to social security. Only 16% actively read articles and publications regarding personal finance.
The good news is that 83% of respondents state that they pay their bills on time, and 73% say they have set aside a reserve for unforeseen events. Only one third however follows a household budget.
Luxembourg residents recognise that they suffer from a lack of financial education. Four in ten consider that the education they received from their parents on this subject was lacking. According to 86% of respondents, the financial education they received during school was insufficient. Though they are aware of these shortcomings, only 26% use a financial advisor.
Looking ahead, 88% of people polled believe that policy makers should step up efforts to improve the financial education of the population and 86% believe that it will be necessary to increase financial education in schools. The vast majority would also like to improve adult education levels, although 43% of respondents say this is the responsibility of each individual.
According to Quest CEO Carlo Kissen: “It’s very human! As citizens, everyone claims to attach considerable importance to financial education, but as individuals we do not make the necessary effort to undergo training and to keep informed. And we ask political decision-makers to take action.
We can draw a parallel between financial and physical health: we would like to stay in shape, but we don’t want to go on a diet or to the gym. The challenge is therefore about motivation; it will take a leap in awareness to change behaviour – at school, in the media, at work, at home...”
Financial education: shared responsibility for investor protection
As part of its 2020 Ambition, ALFI made investor protection a top priority. Accordingly, ALFI supports its members in the adoption of best professional practices and promotes educational initiatives targeting the general public.
Once again this year, the ALFI Global Distribution Conference brought together more than 700 professionals from all over the world on 25 and 26 September. Aiming to improve the distribution of investment funds across borders and give individual investors access to the best financial products, the conference speakers debated the evolving state of the industry, in terms of regulation, technological innovation, quality of service and investor information.
On this occasion, ALFI unveiled a new version of its website www.understandinginvesting.org, now available in English, French and German. The website aims to help individuals understand the potential value but also the risks associated with any investment, ask the right questions before and when investing, master financial vocabulary, learn how to actively seek professional advice and, ultimately, become informed investors.
The closing event of ALFI’s 30th anniversary celebration promoted the cause of financial education in Luxembourg, with the participation of key stakeholders.
Claude Marx, Director General of financial regulator Commission de Surveillance du Secteur Financier, explained the national strategy for financial education coordinated by the CSSF. He explained how the relevant public and private stakeholders work together. Under the mandate given by the government, the CSSF supports existing initiatives and suggests and encourages new ones, such as the mandatory participation in financial education courses in primary and secondary schools or initiatives to assist with personal budget management through games or smartphone apps.
Simon Ramos, Partner at Deloitte and co-chair of the ALFI Investor Forum, says: “Investor education is an essential topic for ALFI and its members. I believe that educating investors is about allowing the capital to flow in a healthy way in the real economy instead of being kept in a bank account. The industry has an important role to play in making sure that the existing information about fund products is made available to investors in a language they understand.”
Jella Benner-Heinacher, President of Better Finance, the European Federation of Investors and Financial Services Users, stressed the importance of investor education for citizens to be able to exercise their responsibilities, for themselves and their families – as well as to defend their interests in relations with both policy-makers and financial partners. She also presented some good practices of investor education she has observed in Europe.
Marc Muller, an Economics and Social Sciences teacher and the Chairman of the CNPSES association, confirmed the almost total absence of teaching on money and sound personal finance management practices in school curricula. These specific learnings should, he said, be part of a mandatory course in high school on Citizens in their Economic and Social Environment, an essential part of general knowledge nowadays. The civic dimension of an economics and social science course would enable the country to train future citizens capable of understanding the State’s budget and policies, the mechanisms and constraints of business, as well as the management of their families’ budgets and assets.
Stéphanie Damgé, Director of Jonk Entrepreneuren, presented the work of her NGO in schools through the Fit for Life programme. In her view, financial education plays an essential role in preparing young people to lead independent lives, choosing a career that suits them and carrying out the personal or entrepreneurial projects that are close to their hearts.
Denise Voss called upon all fund industry players to step up their support to financial and investor education initiatives and presented, on behalf of ALFI, a cheque for €25,000 to Jonk Entrepreneuren, along with a pledge to assist the Fit for Life programme in the coming years.
Nathalie Reuter, a journalist at RTL, moderated the debate.
A selection of photos of the 30th anniversary celebration can be downloaded on this link (copyright ALFI).
For further information:
Senior Communications Manager
Tel: +352 22 30 26 - 1
According to the report issued today by ALFI to mark ALFI’s 30th anniversary, UCITS assets have the potential to grow at a compound rate of 5% in the next three decades, with average annual net sales flows rising from €201 billion in 2017 to €860 billion in thirty years. As long as certain risk factors are addressed, this growth rate would quadruple UCITS’ asset base to over €42 trillion by the year 2048.
The report, which was produced by Broadridge, also predicts that Europe’s Capital Markets Union and local initiatives to enhance long-term savings to meet demographic challenges will encourage future growth in Europe. Outside Europe regulators are likely to wish to protect their own markets, but the strength of the UCITS brand means that the UCITS structure is most likely to be the adopted vehicle.
Denise Voss, Chairman of ALFI, says “The report, which looks at the development of UCITS since they first came into being in 1988, demonstrates the success of the brand in terms of growth of assets and its global reach, as well as its potential for solving the challenge of changing demographics as the dependency ratio doubles over the next 30 years to reach 51%.
She continues: “The global footprint of UCITS bodes well for the coming decade as populations in many of the newer markets are encouraged by their governments to take on the mantle of pension provision. Regulators in most non-European countries will wish to build a local fund franchise, but the regulatory structures they use are most likely to be based on UCITS. This can only be good news for UCITS when doors begin to open.
“We can also expect UCITS to be a key beneficiary of the launch of the Capital Markets Union, which aims to increase investment and the choices available to retail and institutional investors and migrate some of the vast pool of deposit savings into managed investments.
“However, we recognise that further work must be undertaken by the industry to ensure that UCITS fulfil their role of providing long-term financial stability for people and economies. A key element is to set in place effective financial education so that people both recognise the need to build their long-term wealth and know how they are going to achieve that.”
The report outlines how:
- The UCITS Directive gave investment funds regulatory credibility, making funds acceptable vehicles for retail investors, thereby kick-starting a period of explosive growth that took assets in long-term UCITS from €300 billion to nearly €10 trillion in their first three decades of life. More recently AIFMD has added a further €6 trillion of assets.
- More than one third of funds domiciled in Europe are sourcing assets from multiple European and global markets and, of these, 64% are based in Luxembourg and a further 25% in Dublin, and UCITS is increasingly becoming the most commonly accepted regulatory standard for funds around the world.
- Although designed for European investors, UCITS has proved to be a successful export: Asian markets account for 13% of cross-border assets, with Latin American markets contributing 3%.
- UCITS has made Europe an attractive centre for fund groups worldwide: Groups from EU countries manage 56% of assets, with US groups accounting for 30%
- Cross-border groups source 77% of their assets from Europe, with five countries (Italy, Switzerland, Germany, the UK and Spain) accounting for 70% of assets
- MiFID 2 has been a game changer, disrupting the traditional value chain, and the impact has been increased transparency and pricing pressure, leading to a new focus on low-cost passives.
Diana Mackay, Managing Director, Global Distribution Solutions of Broadridge, concludes: “The success of the UCITS brand is remarkable but the industry cannot afford to be complacent. Like any brand it must be guarded by all those who benefit from its recognition because any lapse will be destructive not only to the pool of assets invested in UCITS, but potentially to the investors that have been persuaded to believe in the brand.”
 European Commission, The Demographic Future of Europe – from Challenge to Opportunity. 2006
BlackRock, Robeco, J.P. Morgan Asset Management and Sycomore were named the top groups in the Broadridge Distribution Achievement Awards, presented at the ALFI Global Distribution Conference in Luxembourg on 25 September.
Now in their second year, the Distribution Achievement Awards celebrate the industry professionals who exemplify the unique capabilities of their companies and support the efforts of their distribution partners in delivering all the information needed to help investors make informed choices.
Announcing the winners of this year’s awards, Diana Mackay, Managing Director, Global Distribution Solutions, Broadridge, said:
“In a crowded industry where fund performance is no longer a sufficient differentiator, fund groups must excel in the delivery of information, education and services across the spectrum of client support. The Distribution Achievement Awards are designed to acknowledge excellence in these key areas where asset management brands stand out as trusted throughout the value chain.”
Denise Voss, Chairman of ALFI, said: “Investment funds play a dual role of driving the global economy and helping people reach their financial goals. Delivering information, education and service is key to ensuring that people are well-equipped to provide for their long-term financial security.”
The awards, based on responses from nearly 1,000 fund selectors participating in Broadridge’s annual sentiment survey, feature Europe’s top third-party brands and leaders in Sales Services, Marketing and Communications, and Socially Responsible Investing. These fund selectors are key influencers in their markets, representing €3.2 trn of third-party client assets in Europe.
“Brand, Sales Services and Marketing and Communications are now critical to a group’s ability to stand out from the crowd” added Mackay. “This year, however, we have added an ESG/Socially Responsible Investment award because of its increasing importance in the minds of fund selectors and their clients.”
Award categories and winners 2018:
Brand is the amalgamation of all the experiences that a client has of an asset manager. BlackRock is the winner for the second year running, but Natixis has made the most notable gains in the last year with its multi-affiliate business model, following its rebranding initiative last year.
Top group: BlackRock
Rising star: Natixis Investment Managers
Excellence in the sales arena is no longer about pushing the latest product. In this category fund selectors value knowledge that is both deep and broad. They are looking for a conversation that is rewarding and informative with the style of a trusted adviser.
Top group: J.P. Morgan Asset Management
Rising star: BNP Paribas Asset Management
Marketing and Communications
Over the last five years, professional fund buyers have placed increasing importance on the role of marketing, seeking more information and support for their business but also for their end clients, both from an educational and brand perspective.
Top group: BlackRock
Rising star: Sycomore Asset Management
ESG/Socially Responsible Investment
While demand from end investors and their advisers have pushed ESG/SRI into the spotlight, successful asset managers in this category have a clear commitment to ethical investment embedded in their business cultures. The launch of one or more ESG/SRI funds in a wider product range is no longer enough.
Top group: Robeco
Rising star: Hermes Investment Management
Photographs of the award winners are available upon request. Please contact: firstname.lastname@example.org
One month ahead of the national elections, ALFI presents its recommendations to maintain the successes achieved and ensure the future development of the investment fund sector in Luxembourg.
These recommendations are grouped around three axes: (i) the ecosystem, (ii) taxation and (iii) investors (financial education and long-term investment). Read the press release (only available in French).
The European Commission published for comments in May a number of legislative proposals on sustainable finance as a follow-up to its Action Plan on sustainable finance.
Read ALFI's views on the following proposals:
- ALFI’s comments on the proposal for a regulation on the establishment of a framework to facilitate sustainable investment
- ALFI’s comments on the proposal for a regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive 2016/2341
ALFI published its response to ESMA consultation on the extension of the clearing exemption for intragroup transactions with third countries.
Read the document here.