Rough Waters

by Will Rankin

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A Local Exchange

In an increasingly competitive environment, the Luxembourg Stock Exchange remains a major center for the listing of international securities in Europe.

"Luxembourg realized the value of creating a market conducive to funds a long time ago," Castagne told Waters before the recent events. "They have had a world-leading regulatory framework in place for the last 10 years. The government has been very creative in attracting capital and in creating a large center of excellence. They appreciate that the fund administration business is critical to the nation's success."

Indeed, Luxembourg's regulatory body is at the forefront of international regulatory development and it drives regional and global regulation. And the crux of that framework has to be based on sound use of technology, observers note.

For technology provider Odyssey Financial Technologies, a private wealth and asset management solutions and services provider, the Benelux region is its home territory-the vendor was founded in Luxembourg in 1995. Many of the largest regional private banks are Odyssey customers, including ING, Commerzbank, and Dresdner Bank.

"The private banking business in Benelux remains strong, and this hasn't been greatly impacted by the ongoing global credit crisis. In fact, investing in technology that streamlines operations is a top priority, as financial institutions recognize its importance in improving efficiency and enabling them to keep up with the increasing competition," says Francois Jacquemart, General Manager Benelux-France, Odyssey Financial Technologies. Jacquemart adds that Odyssey has seen larger private banks spread out, opening up offices in the Benelux region, and trying to get market share from smaller local private banks. All international private banks now have an office in Belgium, for example.

"However, private banks in Benelux don't seem to be competing with private banks in London, New York and Frankfurt. Private banking is still very much a people business that is based on strong local relationships between the client and the adviser," says Jacquemart. He adds that from a technical point of view, the impact of the Markets in Financial Instruments Directive (MiFID) hasn't been very profound, although Odyssey has enhanced and customized its private banking platform solution to provide banks with greater control, in terms of client categorization and risk profiling, to help meet the requirements of the directive.

MiFID has affected the region's private banks more in terms of internal organization and processes. Under the directive, financial institutions need to be more transparent, and provide clients with more information about the content and risks of their investment services.

Jacquemart says that as a result of this requirement, he has seen many Benelux financial institutions redefine their wealth management models. "Odyssey has seen a move from execution-only clients to 'structured advisory' propositions," he says. "Many firms have already re-classified, or are in the process of re-classifying client profiles, from execution-only to investment advisory, and are launching new service offerings and fee structures," he adds.

Jacquemart says one of the biggest trends at the moment is the "cockpit approach," or having one platform providing all the information, which allows a global, immediate view on the client's portfolio and situation.

"We also see a trend toward third-party managers, as private banking is still very much a people business. Client advisers who have worked in large private banks are starting to open up their own businesses and are taking over the 'advisory' part. Therefore, customer relationship management (CRM) and know your customer (KYC) tools are increasingly important for private banks to store client-relevant information, so they are less dependent on key personnel," he says. "E-banking in private banking has also become a trend. This offers an extra communication channel and helps private banks to differentiate themselves from their competitors."

He has also seen greater demand for application service provider (ASP) solutions in order to reduce costs.

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