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Transforming Luxembourg into a digital fund hub

Luxembourg is the largest fund domicile in Europe, managing over EUR 4 trillion of assets on behalf of clients in more than 70 jurisdictions. The Luxembourg fund industry is mainly dedicated to fund administration, custody and transfer agency services, as well as compliance and risk management activities.

Today, the need to digitalise its services presents the industry with significant challenges. Investor expectations of service have changed, influenced by the plethora of user-friendly applications for mobile phones, tablets and now also computers. With a generational transfer in wealth estimated at $4 trillion occurring in the next two decades, fund managers must ensure they thoroughly understand the tech-savvy generation of millennials and their desire for personalised investment experiences.

Robo-advisors have emerged, responding to these new developments by offering automated portfolio management and “one-click” orders.

The digitalisation of asset management is taking place as a response not only to changing clients’ needs, but also due to the emergence of technologies such as distributed ledger technology (DLT), application programming interfaces (API), data analytics and automation.

The European Commission is also encouraging innovation with directives such as the revised Payment Services Directive (PSD2).

In the current operating world, the industry is weighed down by paper, faxes and labour-intensive reconciliation work. As a consequence, costs are high and the operational model is not as flexible as is required by digital user interfaces and digital transformation in the broader sense.

Change is inevitable, and the asset management industry must embrace it in the form of digitisation.

ALFI initiatives

Given the emergence of new technology that is enabling and changing the way that the asset management industry is developing, ALFI has decided to launch a number of initiatives:

  • Creation of the ALFI Digital/FinTech Forum with various working groups
    • The forum is focusing on digital/FinTech developments which are believed to have a “disruptive” impact on the asset management industry. The ambitions of the forum are to build and spread digital/FinTech know-how within the Luxembourg asset management community, identify the key opportunities and risks that these technologies entail. The members of the forum gather, analyse and share the latest initiatives in the area at national, European or global level and how they can affect the Luxembourg fund industry.
    • The forum contributes to the efforts by the Luxembourg government and various industry bodies to create a strong and innovative ICT ecosystem in Luxembourg by building bridges/relationships with the asset management industry, its members being potential buyers and/or investors.
    • The forum aims to support the Luxembourg regulator and policymakers in developing an adequate regulatory framework around digital/FinTech matters which should ensure investor protection without hampering innovation.
  • Encouraging an open dialogue and a regular exchange of information between the investment fund industry and FinTech companies
  • Encouraging an open dialogue and a regular exchange of information between the ALFI Digital/FinTech Forum and FinTech initiatives by other stakeholders of the financial and economic area in Luxembourg