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by Zsolt Szemerszky

Zsolt Szemerszky

Unseen treasures for investors

Unseen treasures for investors

For many decades, Monaco and its registered businesses lived from the legacy of the Principality itself. It was easy because the name Monaco and/or Monte-Carlo already attracted people without making any serious efforts. The labels worked as great magnets to collect prospective clients. 

It is not a secret that in Monaco most of the companies are related in some way to the banking, wealth management, family office, and financial industry (or hospitality). The Principality is not really the place for commercial banking and only very few banks offer these solutions among their services. Most of them are specialised in asset management and wealth management. They altogether provide a significant part of the economic power in the Principality of Monaco. 

Suddenly in 2008-2009, just as every country on the globe, Monaco also felt the effect of the economic crisis. Unfortunately, some of the numbers dropped down and for a short period of time the Principality lost many residents. However, in the land of glamour and wealth, people (let’s be correct, at least some people) realised the wind of change and they grabbed this opportunity. 

To understand the way of capitalisation of a market gap, such as the economic crisis was, you need to start from the thesis that the value has always been a relative concept, which is based on the personal judgement of the customer. A real product has never had an absolute value, a product is worth as much as the buyer is willing to pay for it in exchange. Therefore, it was great that the financial advisors started to really focus on the personal needs as well by implementing many custom-tailored solutions. 

Monaco is a strong player in the wealth management industry and its local companies are one of the greatest competitors when it comes to credibility. 

For an experienced HNWI investor, trust is a very key issue, especially with high level investments. Many people tend to make the mistake of judging projects based on the promised profit and income and other so-called material factors behind them. However, the real value is not the promise, the real value at the end of the day is the result. 

The past years of the economic crisis clearly showed us that the numbers and indicators are not enough anymore for the HNWI investors to invest. The HNWI investors are becoming more educated and informed because of their loss during the economic crisis, and the personal trust in the wealth managers has become first priority. They increasingly shy away from big institutions because of their negative experiences with their sales-driven representatives and their bonus-oriented account officers. That is why they are looking for fair and sometimes independent partners who are in place for a lifetime, who strive to achieve the client’s “peace of mind” feeling, the nearly perfect match of personality and portfolio.  

I consider this as one of the reasons why so many new family offices have opened since 2009 – they have realised a market gap. At some point of the business development, we need to open to new markets as well. There is one point in the life cycle of all business, where by focusing on local businesses, there are no further possibilities. 

I believe that after experiencing the economic crisis, most of the HNWI investors are looking for long-term partners. Only those companies perform in the long term, which are not hunting for fast profit but gaining results with secured investments to show their client base their competency. Luckily, many companies in the Principality started to realise this. 

The HNWI investors are keen to find partners who they trust, trust which is not entirely based on pure numbers. HNWI investors are continuously looking for result-oriented, sharp-minded wealth managers and investment advisors. 

In 2012 when I talked with one of my investor friends, he provided me with a summary of the needs. HNWI investors are not looking for high return, they simply do not want to lose. They are also satisfied with small growth, but they hate to lose. The focus of the HNWI investors has changed. 

In the past ten years, the local financial players started to build up value for their wealth services. This converts a potentially valuable wealth management solution into a really valuable one. 

When we know that a client really wants something, then price does not really matter anymore. Because price is easy, everybody knows that the 7% interest rate is less than the 12% interest rate. However, after 2008, trust has become the number one priority. Everybody sees the promises, but wealth advisors in Monaco had to show the HNWI investors their values as well. 

Let’s see everything with the eye of an investor. Let’s say that we have two trees, which are representing two wealth management companies. Both trees have the similar size of crown but their trunks are different in size. Because of the difference of the trunk size, they have different types of roots as well. In the picture, the HNWI investor is standing between two trees. 

Illustration from the “NO EXCUSE! in business” book by Zsolt Szemerszky

In a calm economic situation and without being educated, this is how clients see the companies. The trees are the companies and usually everybody is looking at the tree crown, which is the biggest visible surface. Let us say it is the packaging of the tree, therefore all marketing, PR, and sales experts are aiming to present it in the most delicate and fancy way. 

When you are focusing only on the profit then you can easily be misled by the illusion of the crown. This is among the major reasons why so many investors have lost their funds all around the world. We have to accept that many banks around the Globe focus on the brand message instead of the intense growth of new clients. Maybe this was the biggest lesson to learn during the economic crisis. So, let uss change the focus of the HNWI investor from the tree crown to the roots of the tree. 

Illustration from the “NO EXCUSE! in business” book by Zsolt Szemerszky

The values are usually hidden, just as you cannot see the roots of the trees. As I mentioned before, in difficult economic situations people are looking for stability. When people are looking for stability their focuses are changing. They are not looking anymore at the fancy tree-bush, not even at the tree trunk, but at the roots. HNWI investors will try to make their decisions based on the roots of the tree. 

Every wealth manager knows that if their company is not able to generate profit, then it will not survive for a long time. But fewer wealth managers understand that if they cannot create value for their clients, they have no future at all. 

So, closing this example, the key to prosper is to focus on the values, to present our knowledge, heritage, and uniqueness to our prospective and current clients. And frankly the Principality of Monaco holds countless great values. Its location, economy, traditions, and heritage are all marvellous. 

Monaco was forced to change and to quickly adopt the economic changes.Most of their businesses understood that when the clients understand the values and can relate to them as well, then the business will prosper in the long term. 

As it is today, the Principality of Monaco offers exceptional possibilities for investors and wealthy individuals. If you are wise enough, you can find experts who are able to offer you diversified solutions to protect and increase your wealth, or at least maintain its level without losing any of your funds. 

But there is a saying in Las Vegas, in the city of gambling, which I would really consider in Monaco as well. When you go to Las Vegas with big ambitions to win millions at the poker table, or to spin your number at the roulette, you are full of positive energy and high expectations. However, to be fair, in most cases, you will leave the city with some major loss. As we know the casino system is not built on charity, it is among the most profitable industries around the world.  Taxi drivers used to say the following as an advanced warning on the way from the hotel to the airport: 

You are not here to become a millionaire, but to enjoy your stay.

Therefore, when you come to Monaco you have to be able to see under the surface, and you need to take your time to really understand its business methods, results, and reality. Without any doubt, you can find many great investment potentials, but to avoid any bad experiences I dedicated a chapter in this book for you, called “Traps and Fraud Alerts”. I would highly recommend reading it beside all the legal topics to secure the best outcome for your investments. 

But as scary it seems, I would like to highlight that for persistent people, Monaco offers exceptional values.

Just think about it – having 139 different nationalities among its residents, the Principality of Monaco offers colourful investment possibilities, no matter whether you invest in a traditional way, into tangible assets, to impact investments, or as an angel investor you will definitely find multiple interesting offers for your needs. Sometimes you can find really exotic or out-of-the-box types of investments as well. 

You can also get good starting points from the various events organised by local financial advisors, fund raisers, or specified associations. 

If you do not let the colours of the rainbow control you, and if you are ready to properly be informed about the possibilities and their backgrounds, then you will have a great chance to realise any return you deserve. 

Because at the end of the day there is no better place on earth than in the Principality of Monaco to learn from the influential business elite. Maybe you can find more leaders in New York or London, but there they are the “slave” of their daily routines in an absolutely goal-oriented mindset. 

In the Principality of Monaco, people are enjoying the quality of life that Monaco provides. It is more about relaxing, networking, and socialising. If you are smart enough you can meet and network with well-established people who will be ready to advise you and share with you their personal experiences and opinions. You can learn from the biggest industry players here through a very personal level of connection. 

And regarding any investments, if you are not confident where to invest, you can always follow them or even make investments in a syndicate way with people you trust or admire. Investing in a syndicate in venture capital investments, often only with small amounts such as 15,000 euros per person is becoming very popular in Monaco. This way, investors share the risk, while maintaining a diversified investment portfolio. 

I cannot highlight enough how protective Monaco is with its residents. However, you can also enjoy this protective mentality when you are willing to invest in Monaco. 

One of the reasons why Monaco is so secured for investment purposes is that its legal system works and reacts so quickly. Not to mention that thepolice has its own right to immediately interfere when the situation requires it. 

I have to admit that when a case is related to money, sometimes the court is even faster than you would expect , giving almost no chance to escape from the obligations. 

Monaco has different set of values, and thanks to its legal system, if the case seems clear and obvious, you can even force out a first-level court decision against the defendant without his/her presence. In these cases, the defendant has no right at all before the judgement since he/she is not even noticed, or let us say politely, he/she is not obliged to appear. 

Monaco has a very supportive police if you need any kind of help, and you should never forget that they are there to protect and even interfere. I believe this is a great advantage for all the investors to create and maintain investment portfolios, and also for business owners in the Principality of Monaco. It is a good and fair “co-operation” with Monaco built on trust.

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