London-based fintech company Nucoro, which provides bespoke white-labelled technology focused on delivering digital investment solutions to third parties, has announced it plans to start targeting financial institutions in Ireland, claiming the country has one of the fastest growing wealth management sectors in Europe.
Nikolai Hack, Nucoro COO, says: “Ireland has had quite an interesting path of economic development over the past decade which makes it an attractive place to do business.”
Factors fuelling strong growth in Ireland’s wealth management sector include a rapid increase in the country’s population of mass affluent and wealthy citizens – the country has one of the fastest rates of growth in Europe; one of the toughest inheritance tax regimes in the world; a rapidly increasing pool of inter-generational wealth being transferred; and a growing pool of young investors fuelled by the increasing number of tech and financial companies based in Ireland – partly due to Brexit.
Ireland’s wealth management sector will also get a further boost from the country’s new auto-enrolment defined contribution (DC) pension savings system scheduled to go live by 2022, the firm says.
“The introduction of auto enrolment, as it exists in the UK, for the first time, means that for a lot of people it’s not just that their employer will have to enrol them in a pension plan but that they will have to think about their financial life. There will be an uptake and accelerated interest in investment solutions or offerings,” Hack says.
“Across western society, the baby boomer generation is in or near retirement and will pass on their wealth and for the vast percentage of parents who have a relationship with a wealth manager or a financial adviser, that relationship doesn’t exist with their kids. So, the next generation down, these people are interested in and will look for other offerings. Digital natives use challenger banks and are interested in very different user experiences. So, a lot of change will happen to how these people will consume wealth management”
Analysis of industry data by Nucoro reveals there are some 77,984 millionaires in Ireland today, an increase of around 32 per cent since 2013. The corresponding percentage increases for Germany, France and the UK are 15 per cent, 10 per cent and 12 per cent respectively, and for Europe it’s 14 per cent. Nucoro’s analysis reveals that between 2018 and 2023, some 17,830 new millionaires could be created in Ireland, a rise of 23 per cent.
Ireland’s inheritance tax rate is among the top 10 highest in the OECD, Nucoro says. However, it has been estimated that the total inter-generational wealth transfer at death in Ireland is currently running at an annual rate of EUR5.5-6 billion. However, this could rise to somewhere between EUR9.6 billion and EUR14 billion per annum by the end of the 2017-2036 period, depending on the assumed rate of growth in wealth. This suggests a potential 20-year total inter-generational wealth transfer at death figure of at least EUR122 billion and perhaps up to EUR185 billion in the 2017-2036 period.
Nucoro also comments that Dublin’s financial and tech sectors are enjoying strong growth, and this has been partly fuelled by Brexit. Dublin is proving to be the most popular destination for companies relocating all or some of their staff from the UK, with over 5,000 jobs being created in Ireland because of this, with many of these people being financially savvy and users of wealth management services.