As commercial director at Baloise Vie Luxembourg, Tine Vanmassenhove is responsible for the Belgian market. Throughout her career, she has guided wealthy Belgians through the world of Luxembourg investments. The grand duchy has undeniable advantages, she says, though these are now most pronounced for larger fortunes.
Until mid-2005, both large and small Belgian investors flocked to Luxembourg banks to cash in their bond coupons tax-free. Many even made a day trip out of it. But the European Savings Directive, which required member states to exchange financial information, marked the end of that tradition.
The era of those “coupon buses and trains” was ‘a different time,’ Vanmassenhove told Investment Officer on the sidelines of the BZB-Fedafin association’s conference in Brussels. Yet she still sees several reasons to invest in Luxembourg financial products.
Geographical diversification
One of the most important, she said, is geographical risk diversification. “So that not all your investments fall under the same tax jurisdiction, just as you would diversify across asset classes.”
The various proposals circulating in Belgium’s political circles (a millionaire’s tax, higher securities tax) and those already enacted (a capital gains tax) continue to fuel capital flight. Trusted destinations such as Switzerland and Luxembourg naturally come up as alternatives.
“Luxembourg is considered a stable country from a fiscal perspective,” said Vanmassenhove, who previously worked at Lombard International Assurance and as a private banker at ING Luxembourg. “Larger Belgian fortunes often choose to invest with multiple institutions across different countries, including Luxembourg. I like to think of the Belgium–Luxembourg relationship as a tango. There’s push and pull, but they’ve been dancing together for over thirty years.”
In the case of investment-linked insurance, geographical diversification also concerns where the custodian bank and asset manager are located, often for tax reasons. “We often see Belgian residents choosing a custodian bank in Luxembourg for the solidity of its financial market and the quality of its expertise,” Vanmassenhove explained.
Another advantage of Luxembourg is the additional barrier it poses for the Belgian tax authorities. In Belgium, banks increasingly complain that the government forces them into the role of tax gatekeeper, especially when assets are repatriated. This creates friction with clients who don’t want the state to have full visibility into their wealth.
While Luxembourg’s banking secrecy has largely been eroded, the so-called “insurance secrecy” still exists. Luxembourg institutions never share sensitive information with the Belgian tax authorities without the client’s explicit consent.
Branch 23
Baloise Vie Luxembourg mainly offers Belgian clients policies known as ‘Branch 23’, the investment-linked life insurance products that compete with traditional investment portfolios offered by banks. Thanks to its open-architecture model, investors have “access to a broad range of investment options,” according to Vanmassenhove. The key difference with a bank portfolio is that ‘Branch 23’ is an insurance contract, with a policyholder, an insured person (who may be someone else), and one or more beneficiaries in case of the insured’s death.
Of the 13.3 billion euro in assets under management at Baloise Vie Luxembourg, one fifth is linked to the Belgian market. Despite the looming threat of Belgium’s new capital gains tax, Vanmassenhove remains a strong believer in investment-linked insurance.
“The value proposition of Branch 23 has held up for at least twenty years. We’ve had to tweak and adapt it here and there, but the robustness of the contract remains intact. The insurance wrapper has so many applications and advantages that I compare it to a Swiss army knife.”
“The value proposition of Branch 23 has held up for at least twenty years”
Tine Vanmassenhove, Baloise Vie Luxembourg
Baloise increasingly observes that grandparents are skipping a generation by naming their grandchildren as beneficiaries. “A Branch 23 policy remains a highly flexible tool for estate planning. It’s not a bank account but a portable contract you can literally carry with you, even across borders, and pass on.”
Starting from 250,000 euro
At the BZB conference, which targets independent bankers and insurance brokers, the Swiss brand Baloise had two separate stands: one for Baloise Belgium, focused on insurance brokers with retail clients, and one for Baloise Vie Luxembourg, catering to advisors serving high-net-worth clients.
The flagship product of Baloise Vie Luxembourg is available starting from an investment of 250,000 euro. “If you ask me whether Luxembourg is an attractive destination for Belgian investors,” said Vanmassenhove, “my answer is that it depends heavily on the client’s profile. For individuals or families who can set aside 250,000 euro, geographical diversification is very important. For smaller fortunes, local Belgian solutions are a good alternative due to their accessibility and ease of management.”