The ninth edition of Deloitte Luxembourg’s annual whitepaper “Outlook and future of an evolving sector” has just been published; it provides a detailed analysis of the Financial Sector Professionals (PSF) market in Luxembourg and presents the key developments and trends in this industry in the midst of a constantly changing environment.
Over the past year, PSFs have had to adapt to a number of regulatory changes, such as the coming into force of MiFID II in January 2018, the European General Data Protection Regulation at the end of May 2018, as well as the changes in the area of IT outsourcing with regards to professional secrecy.
“In a constantly evolving regulatory and technological environment, it is important for PSFs to concentrate on their core business and to adapt to the needs and changes of tomorrow,” explained Raphaël Charlier, Audit Partner and PSF Leader at Deloitte Luxembourg. “We are seeing changes in the licenses held by some organizations, indicating a better understanding of the licensing requirements depending on the services provided and a quest for synergies that translates into business concentration in certain specialist areas,” he added.
The strength and the reality of the industry
The number of PSFs decreased slightly (by 5%) from 304 in 2016 to 289 in 2017. This concentration, reflected mainly in the number of mergers, is largely explained by firms seeking to attain a critical size to cater for the additional compliance costs caused by regulatory changes (MiFID II & GDPR), to pool operating costs and to keep up the pace of digitization.
Of the three categories of PSF, specialist PSFs accounted for 38% of the total at the end of 2017, investment firms for 35% and companies operating mainly as support PSFs for 27%. However, employees of support PSFs represented 61% of the total number of PSF employees.
“The decline in the number of PSFs did not affect either aggregate net income for 2017, which increased by 11% relative to 2016, or the number of employees, which stood at 15,935 in 2017, an increase of 3% in one year,” commented Adil Sebbar, Audit Director at Deloitte Luxembourg.
Aggregate net income of PSFs increased from €514 million in the year ended 31 December 2016 to €572 million in the year to 31 December 2017. According to data as at 30 June 2018 issued by the CSSF (Finance Sector Supervisory Commission), PSFs as a whole obtained provisional net income of €343 million, indicating that the PSF sector continues to play an important role in the Luxembourg economy.
Annual forum dedicated to PSFs
The white paper “Outlook and future of an evolving sector - Situation of Financial Sector Professionals (PSFs) in Luxembourg” was presented at Deloitte’s ninth annual conference dedicated to the PSF sector, which was held in the Museum of Modern Art (Mudam) on Tuesday 4 December 2018, bringing together more than 100 participants. Incorporating the latest PSF figures along with explanations, this report analyses recent developments in the PSF sector and provides some insight into the factors driving change within this industry. It also features interviews with key players in the marketplace and articles by industry experts.