With the end of the year approaching and in the light of major international political changes, it is difficult to forecast how markets will evolve in the future.
Last Tuesday 15 November at the European Convention Center, I attended the Financial summit that addressed the topic “How to anticipate the next financial crisis”. Ian Bright - Managing Director at ING Group Research – expert in behavioural economics was invited to share his views on this topic.
Ian stressed the fact that it is all about the behavior of people and that this behaviour is not as rational as you might think.
With regards to the next financial crisis, he noted that the level of household debt is high and increasing in a majority of European countries. At the same time, evidence from the ING International Survey since its inception in 2012 shows consumer finances are fragile. I find it surprising that more than three Europeans in ten do not have any savings according to the surveys and for those that do have savings often these do not cover three months of expenses. It is easy to see how this is something we should all be anxious about.
Concerns extend beyond financial arithmetic. Many people appear unaware of the financial risks they take. Knowledge of basic financial concepts such as compound interest and the effect of inflation on purchasing power is low. And if people do not understand how such concepts can influence their financial situation, how could they possibly prepare themselves for a financial crisis? There is a clear need for better financial awareness. Even in Luxembourg, a key European financial player, only 53% could answer three of five basic questions about financial concepts correctly.
Moreover, 61% of people in Luxembourg agree with the statement “house prices never fall” while at the same 89% believe house prices to be expensive. This inconsistency coupled with low savings makes a dangerous combination. Ian Bright believes that people are trapped into buying a property even though they think it is expensive.
But it’s not a doomsday scenario! Ian doesn’t think we should be worrying about anticipating the next crisis. Instead, we should ensure structures – whether that be markets, insurance systems and knowledge bases - are developed that provide protection against the complexity of modern financial systems.
This is exactly why at ING Luxembourg we started our blog mymoney.lu: with easy to digest posts about everyday finance, we strive to help people understand better what is going on, what choices do they have and what risks they need to be aware of. Only by providing the right information can we empower people to stay a step ahead in life and in business.
Choosing the right formula for your home loan is not always based on a financial calculation, as the latest ING International Survey (IIS) on Home and Mortgages (June 2016) confirms.
In Luxembourg, 39% of foreign residents would choose a fixed rate if they took out a loan today, compared to 32% of national residents. Historically, Luxembourg nationals have always preferred home loans based on variable rates. This begs the question: is one better than the other?
Very low interest rates
I assume you have noticed the very low level of current interest rates. 21% of Luxembourg residents believe the fall in interest rates has had a positive effect on their housing situation. In January 2016, fixed and variable rates were at the same level. Borrowers might want to take advantage of this and lock in a very low fixed interest rate for the duration of their home loan, right? Surprisingly, the results of the IIS show a very different picture: when asked what rate they would choose if they were to take out a loan in June 2016, the preferences of Luxembourg residents were almost the same as in 2013, a time when interest rates were 2 to 3 times higher than today!
In this light, it comes as no surprise that almost 1 in 3 Luxembourg residents state that they don’t really know what they should do. However, this might actually be good news in disguise, considering that the interest rate is only one of many components of a home loan. At ING, we often refer to a home loan as a “complex product”: many variations are possible and one size does not fit all.
The interest rate, paired with the principal amount and the duration of the home loan, dictates the repayment instalments. Your ability to generate revenue determine your capacity to make good on those instalments. It is crucial for the bank to understand how you plan to repay the loan in order to design the best proposal: will you repay it using your monthly salary? Or using the rent you collect from another property? The creditor also needs to know whether you plan to repay the loan in part or in full at the end of the credit term or earlier than expected, for example because you expect an inheritance or you will sell the property once you move back to your home country. In many cases, the ideal choice is neither black nor white (fixed vs. variable rate) but rather a combination of both. Such a solution allows for a certain level of lending flexibility all the while benefiting from the advantages both interest rates offer.
These and other factors of your life that might not seem directly related to your housing situation are key when taking out a home loan. It is no wonder that 35% of IIS respondents stated that their biggest worry when applying for a home loan was making the right choice between different offers. So make sure you receive relevant advice from your banker, explain your plans and do not be afraid to ask questions! The 2016 SNL Home & Living fair currently held at the Luxexpo is a great opportunity to test your knowledge – whether you are looking to buy or not. We would be happy to welcome you in our mobile branch in Hall 9 until Sunday, 23 October!
Get ready – save up!
Your first studio; a larger apartment with your partner; a house with a garden where your kids can play, your pets can roam and you can receive guests; an apartment in the suburbs now that the kids are all grown up; a holiday residence… Most of us have a housing-related dream or next step in mind. When asked what they were doing in order to be able to buy a house in the near future, 45% of Luxembourg residents replied that they were “saving money for a deposit”. This is actually a great strategy. If you already own some property, the proceeds from the sale can help with the deposit but chances are you sell to buy something bigger/better and, therefore, more expensive. We recommend you build your wealth steadily with intelligent financial products such as our Invest Plan (remember, interest rates are currently so low that traditional savings accounts yield next to nothing!).
And just so you know: buying in Luxembourg still seems to be a good idea, with 78% of IIS respondents expecting prices to continue to rise over the next 12 months!
We at ING believe every project is worth pursuing. We believe all sustainable progress is driven by people with the imagination and determination to improve their future and the futures of those around them. We empower people and organisations to realise their own vision for a better future – however modest or grand. Our purpose therefore is: Empowering people to stay a step ahead in life and in business.
And this is not only for our core business. For the fifth year in a row we just opened applications to the ING Solidarity Awards. We are happy and honored to support associations working hard for a better future.
As in previous editions, there are two ways to compete: a public vote online where the 40 associations that gather most votes will be awarded €1,000 each and the project vote where associations can win up to €6,000.
As from last year, we also offer the winners the opportunity to gain new resources via a new form of fundraising. In partnership with KissKissBankBank, a well-known online crowdfunding platform, winners have the chance to get to know this financing alternative better and raise additional funds.
Every project is worth pursuing and every project stands a chance to win. And everyone can help by spreading the word and voting! I leave you here the key dates of the competition:
12 September - 10 October 2016: Registrations
18 October - 8 November 2016 at 12p.m.: online votes
15 November: Prize ceremony
Watch here what the winners have been able to accomplish in the past thanks to the ING Solidarity Awards:
When it comes to making financial choices, it’s obviously important to understand what you’re choosing, but it’s also vital to know why you’re choosing it. What are the deeper reasons behind our financial behaviour and choices.
This is why ING together with other experts (Microsoft, Dimension Date, EMC 2 and CEPR) initiated the Think Forward initiative.
The Think Forward initiative is basically a multi-year movement bringing a range of experts and research to find out how and why we make financial choices.
We live in a time where people are more and more expected to look after themselves, set their own goals, be self-reliant and therefore rely less on the welfare state. In other words, people are expected to gain mastery over their lives, become more empowered. But how do empowered people in Europe really feel?
Bridging the empowerment divide is the latest report commanded by ING in the context of the Think Forward Initiative and I wanted to share it with you.
No, this is not a post about how to magically become a millionaire. That's not ING's style and, as those of you who know me personally can confirm, neither is it mine.
This is a both-feet-on-the-ground post about being good at managing your money and soundly building your wealth. All financial advisors agree: the sooner you start putting money aside, the better off you will be. When you’re retired, but also at any point in life, there might come a time where you need a little extra: a larger house, a well-deserved holiday, education fees that exceed your expectations or - knock on wood this remains hypothetical - emergency funds in case of adverse scenarios.
You’ve got a savings account? Good. That's your immediate buffer, ideally paired with an automatic savings plan so you don't even need to think about it and you keep saving regularly. Putting money aside in a savings account nowadays isn't what it used to be, though. Your money is merely asleep, waiting for the day you'll use it. And following ECB chief Mario Draghi's latest statements, that situation isn't going to change for some time... How about instead (or even on top of) letting your money hibernate, you put it to work?
When I began my professional life, my dad urged me to start putting money aside in investment funds. He spoke about retirement and what not, so I ignored his advice. When I turned 30, he nagged me again. And that time, I listened.
Like me back then, you might not know a lot about investment funds. Or funds altogether. And you might not have that much money to put aside each month. No worries, that's where solutions like ING’s Invest Plan come in. Starting with as little as €50 per month, you can put your money to work and see it grow steadily (watch the video)
I repeat, there’s no magic at work here! The ING Aria Lion Funds invest in best-in-class investment funds internationally and this diversification generally results in higher returns and increased control of the risks. Plus, the longer you invest, the higher the chances that your Invest Plan will outperform your savings account (see, this is why my father was so insistent!). Just take a look at this illustrative graph.
Why Invest Plan? Because it's simple. Because it's flexible. Because it's easy to manage, whether together with your trusted banker or online from your smartphone, tablet or desktop computer. Because at ING, we believe every project is worth pursuing, and Invest Plan can be the first step toward realising your dreams.
I am the Marketing Manager of ING Luxembourg but that doesn't make the above any less true. Just google it. Be good at money and start building your wealth now!
When I first heard about Pokémon Go I thought to myself: "New hype that won't last more than 2 weeks." Boy, was I wrong! I still haven't downloaded the app and joined in the frenzy but I'd like to share with you 5 impressive numbers to explain what is going on.
- 75 million downloads in 25 days in iOS and Android, although it's only available in 32 countries. It's the most downloaded game in the history of the US;
- 121% increase in the value of Nintendo shares in just over a week after 6 July. Granted, they have gone down again, but they are still about 50% more valuable than before Pokémon Go was launched;
- €9,813 per minute! This much revenue is generated by Pokémon Go through in-app sales. Popular games like Cash of Clans or Candy Crush produce €2,312 and €1,173 per minute;
- 23 million active daily users in the US alone, another record for Pokémon Go ahead of Candy Crush (which achieved 22 million active daily users when it launched in 2013);
- more than 30 minutes per day is the average time players spend on the game, more than what they spend on favourite lifestyle apps like Facebook or Snapchat.
Much like with financial investments, also here past performances do not guarantee future profits. We'll see if after the summer if Pokémon Go continues to produce such amazing results for the companies involved!
A few weeks ago, UNICEF Luxembourg came to present its mission and its experience in the field at our office; there, I had the opportunity to meet Paul Heber, Head of Communication for UNICEF Luxembourg, who explained to me why it was so important to raise awareness at company level.
In Luxembourg, ING has had a long-standing partnership with UNICEF for more than a decade. While both ING and UNICEF have their own individual strengths, working together and combining these strengths achieve even better results for children.
The presentation was a great opportunity to show what has already been achieved. It was a means to show the impact of UNICEF’s daily work for children and talking to a live audience allows them to better connect with people interested in their work.
At some stage I wanted to know more about the mission UNICEF Luxembourg did in Jordan and why they chose this place in particular.
UNICEF works in more than 190 countries and territories around the world, including all those affected by the Syrian conflict and migration crisis as well as Syria itself. In fact, UNICEF is one of the last remaining international organisations in Syria.
In this case they picked Jordan, because it felt like a natural next step after they had focused a lot of their attention on refugee and migrant children at the end of 2015. While, at the end of last year, they looked at the whole situation from a European angle, this year they wanted to show that the migration issue has many more sides to it. In fact, 4.6 million Syrian refugees currently live in Syria's neighbouring countries. That is four times as many as in the whole of Europe, and it is putting a lot of strain on those countries.
The conference ended with a unique experience for all attendees: trying the Samsung Gear (360°) glasses to discover a Syrian refugee camp in Jordan. During more or less 5 minutes, I had the chance to “spend time" with Sidra, a young Syrian girl, eat dinner with her family, explore the camp and play football with all the children. It was impressive how real it all was and how touching.
The Virtual reality (VR) glasses had been tested as a possible tool for awareness raising by UNICEF's Innovation Team in 2015, but had yet to make it into the open. About a year ago, UNICEF Luxembourg had the opportunity to test them and quickly realised their potential for communication purposes in Luxembourg. It is the cheapest and fastest way to get the audience to experience the work of UNICEF first-hand. The VR glasses take story-telling to a whole new level.
In Luxembourg, UNICEF decided to spearhead the use of VR glasses and took the initiative to push its development. In their spare time, they started to test different glasses ranging from cheap cardboard models to more sophisticated ones. In the end they settled for the ones providing best VR experience, which is crucial, because you only have one chance to convince people. Every person who has tried the glasses so far has been very impressed, both because of the innovative technology, as well as Sidra's compelling story.
On an international level, UNICEF plans to show more of its work through VR in the coming years, proving that the right technology can indeed have a positive impact on modern development work. It has been very exciting so far and we are very proud of our cooperation with UNICEF Luxembourg.
Do you know a 22-year-old that can afford to spend $20,000 on a Rolex? If you do, he’s most probably a professional athlete… As the hype of the EURO2016 dies down I’d like to share with you an article from our colleagues at eZonomics about the importance of money management – based on the lives of footballers. They earn astronomical figures but their careers are short. They need to be especially good at money to avoid being bankrupt by the age of 40. Maybe we can all learn something from their mistakes?
A unique earning path
Part of the reason might be that when others are studying, future sport heroes put in endless hours practising hard on the pitch. Most footballers leave school very early, do nothing but play football for the next several years and are paid a fortune for it. In money management terms, a pro-athlete can be like a twenty-something lottery winner who has not learnt the basics of budgeting or keeping receipts.
According to the Professional Football Association (PFA), Premier League footballers typically earn £25,000-£35,000 per week, Championship players can expect £4,000-£5,000, League One players £1,700-£2,500 and League Two players £1,300 to £1,500. However, an average footballer’s career lasts just eight years. This relatively short earning period magnifies the retirement problem. Even extravagant wealth can dissipate over the remaining decades of a footballer’s lifetime.
Financial advisors calls this the problem of the $20,000 Rolex. If a 22-year-old spends $20,000 on a watch or on a big night out at a nightclub, that money is either depreciating or gone. But if they invested it in a five percent, Triple A insured, tax-free bond for a period of 30 years that $20,000 would be worth $86,000 at that tax-free rate of return. And needless to say, they could buy more than one $20,000 Rolex.
What are the reasons?
Financial ruin can have many contributing causes, but it often boils down to bad advice. It can be easy to hire the wrong advisers and then trust them far too much. Financial advisors call this "the problem of the $20,000 Rolex”. Michael Seymour, UNI Private Wealth Strategies founder, explains: “If a 22-year-old spends $20,000 on a watch or on a big night out at a nightclub, that money is either depreciating or gone. But if they invested in a five percent, Triple A insured, tax-free bond for a period of 30 years that $20,000 would be worth $86,000 at that tax-free rate of return. And needless to say, they buy more than one $20,000."
Another problem is that the tangible is more thrilling. Many people, including athletes, do not understand the stock market. Securities are not just boring but invisible too, when compared with property, nightclubs or car dealerships. Huge lifestyle changes can be more likely too when the player has retired, the peak earnings period long over. And what if there’s an expensive divorce settlement?
Richard Lapchick, director of the University of Central Florida's DeVos Sport Business Management programme, says the thorniest question for a pro athlete can be how to handle the new people suddenly emerging in their lives who expect help, money or jobs. Often ex-players haven’t learnt how to say no.
An age-old story
A few may capitalise on their athletic experience and remain in the public eye forever, like David Beckham or Gary Lineker, which often skews our perceptions but most retire without a plan and may earn very little for the rest of their lives. Others successfully switch industries. Liverpool striker Michael Owen runs a racing stable, training racehorses and breeding winners. Some become coaches, and there are plenty of real estate moguls. Tottenham Hotspur’s Swiss former centre-half now develops luxury hotels and Frank Lampard signed a book deal to produce stories for children.
Typically, however, their post-retirement roles pay nowhere near what they have been used to, and the financial pressure can become too much. Top players who have gone bankrupt include former Aston Villa midfielder Lee Hendrie, who earned £30,000 a week at the peak of his career. Hendrie was declared bankrupt in 2012 after his £10 million property portfolio collapsed. Other bankruptcies include former England goalkeeper David James, who earned an estimated £20 million during his career, and Newcastle winger Keith Gillespie, who gambled away some £7 million.
The causes of bankruptcy can be complex. However, with footballers a pattern often emerges of breath-taking over-spending, poor investment choices and a failure to keep the taxman happy – mistakes to which many non-athletes can relate.
The ING Unseen Talent Award is a joint initiative started in 2013 by ING and Unseen Photo Fair Amsterdam that gives to emerging photographic talents a platform to show their work on a global scale.
As from 12 May 2016 to 3 July 2016, Neumünster Abbey exhibits all the nominees from the past three years, including the winners. An exclusive exhibition space is dedicated to the work of Sophie Jung, an artist from Luxembourg, who won last year.
Supporting young talents is important to ING. The aim of the ING Unseen Talent Award is to give talented artists the opportunity to raise their level. It is more than just financial support. As a matter of fact, it gives young artists what they really need: a platform, a network and expertise.
Every year the five best European talents of photography are shortlisted by ING Art Management as well as Unseen and rewarded with an extensive empowerment programme. This includes coaching sessions with an internationally established artist, like Rineke Dijkstra, and a range of workshops with different professionals of this specific field – not to mention the chance to create a work of art for the ING Collection on a dedicated theme. The final work of these new talents is shown at the Unseen Photo Fair, giving them the opportunity to present their work to the international art world.
The exhibition in Neumünster Abbey furthers one of the main goals of the ING Unseen Talent Award: to give new talented artists public exposure and support them at the very beginning of their career.
ING thinks that art inspires, reflects the world in which we live and push us to think.
One week ago, ING and Unseen announced the five finalists selected for the launch of the European edition of the ING Unseen Talent Award. Once again, Luxembourg will be represented. This time by the artist, Laurianne Bixhain. The winner of this 2016 edition will be announced at the Award Ceremony on 22 September. We will keep you posted.
In the meantime, don’t miss the opportunity to visit the exhibition at Neumünster Abbay. It is free and opened from 10:00 to 18:00!
In the month of June there is at least one orange "goodie" in every household in Luxembourg. This year: a foam finger, a keychain, a running T-shirt... and every year: one or several hats.
The day of the ING Night Marathon Luxembourg people wait expectant for our volunteers to start distributing the acclaimed gadgets. And once we start giving them away, they literally tear them from our hands! As you can imagine, this makes my team very happy; after all we spend quite a lot of time choosing and designing the goodies - so thank you all!
A couple of years ago we came up with the idea of producing even better goodies: promotional items we could sell to all our fans. But, of course, we're a bank not a retailer, so our goodies had to be sold at cost... or better yet: we could sell them at a small profit and donate all proceeds to an NGO. And voilà! the idea of the Express Shop was born.
Figuring out how to put the idea in place took longer than we expected. How would we display the items? How many different items did we need? Would people actually pay for ING stuff? So we did a test run during the 10th edition of the ING Night Marathon in 2015 with running related ING items. Guess how much money we raised for Medecins Sans Frontières? Over €2,000 in 1.5 days! And just to be really sure, we tested it again during the ING Route du vin last September where we managed to raise €1,230 for Unicef in support of Syrian refugee children.
Now we have an Express Shop in our Headquarters. Employees, clients and visitors alike can acquire the carefully designed ING items from the automated vending machine. It is our purpose to empower people to stay a step ahead in life and in business, so we try to design goodies that achieve that in some form. A mobile device charger; a notebook for great ideas; a travel mug; a handy shopping bag… And the profits go to Unicef as part of our partnership to help young Zambians via the “Power for Youth” programme to acquire the education and social skills required to manage everyday problems responsibly and independently.
My kids are big fans of our youth mascot, Sam, and they are looking forward to trying out the armbands in the pool this summer. And I’ll get an ING football for our next barbecue – it’s what everybody is talking about anyhow!
You too can show your love for ING and your support to Unicef! We look forward to receiving you at 52 route d’Esch in Luxembourg city.