Stock market veteran Koen Hoffman: 'Stop turning tax knobs every two years'

Energy provider EnergyVision will kick off its long-awaited IPO on Friday. It is the first IPO on the Brussels Stock Exchange since Azelis listed in 2021. Koen Hoffman, the CEO of equity boutique Value Square and a veteran of listing Belgian companies, is sounding the alarm about the waning stock market culture. 'Are there any financially literate people left in politics?'

Take a list of the companies that went public in the 1990s and chances are very good that Koen Hoffman, as an investment banker at KBC Securities, (co-)managed the operation. From 2012 to 2016, he then led the bank-insurer's brokerage house. Even after his departure, he remained active in investing, as CEO of Ghent-based asset manager Value Square, good for nearly 1 billion euros of assets under management.

With that career, it is not surprising that Hoffman is a great defender of stock culture and investing in general. On the eve of EnergyVision's IPO, he says he has to watch with sorrow how poor it is in our country.

'People underestimate how important investing is. We used to have the 'Belgian dentist': the modal, hard-working professional - in both the public and private sectors - who not only saved, but also actively invested in stocks, funds and retirement savings products. That figure has all but disappeared today. In his office in a beautifully renovated building in Sint-Denijs-Westrem, some memorabilia are displayed on a sleek dresser, including a hand puppet recalling the IPO of the pharmacy maker Fagron and a yellow N-VA campaign gnome making the V sign. "I thought they fit together funny.

'Investing is too often dismissed as risky or elitist, when it is just an essential tool for building long-term financial security,' Hoffman says. Perhaps the 'Belgian dentist' still exists today and simply prefers to invest in ETFs with low costs, we suggest. ETF stands for Exchange Traded Fund and is a mutual fund traded on the stock exchange. 'I don't think so. I'm not saying such instruments are bad, quite the contrary. I'm already happy if someone saves through an ETF every month. That's already a start. But such an instrument does not attract to the stock market. It is not a capital provider for new companies. We still need active investors.

"Are these ETFs really that cheap, by the way?" wonders Hoffman. 'A lot of people think an ETF costs 0.2 percent in annual ongoing fees. In reality, I think you're averaging 0.6 percent. With us, the average customer doesn't pay a full percent fee. He does get explanation and guidance for that. I don't see that with an ETF.'

Pension gap

One of the most disturbing consequences of Belgium's waning stock market culture, according to Hoffman, is the widening pension gap. 'Take two people with the same gross monthly salary, for example a judge and a top executive in the private sector. On paper they earn the same amount, say about 10,000 euros gross per month, but their pensions differ enormously. Civil servants have a high statutory pension that automatically rises with the index, while employees in the private sector have to provide for their standard of living after their careers themselves with what they save or invest.'

'I calculated that once. Over an entire career and retirement period, that difference can amount to more than 1 million euros. Surely all mouths should fall open at that? If the government wants to cream off the investor again in the form of new investor taxes, it should at least have the courage to reconsider civil service pensions as well.'

Hoffman believes the government has a role to play. Not by inventing new burdens all the time, but by rewarding long-term structural investing. 'Give people stable ground rules. Stop turning tax knobs every two years.'

American model

'I have long advocated a Belgian equivalent of the American 401K plan (such a plan allows employees to contribute part of their pre-tax income to a retirement account, which is then invested in funds, ed.). Allow people to set aside a portion of their wages in a tax-friendly manner, without having the accumulated gains taxed again at the slightest political gust. Those who save and invest reduce the pressure on social security. That is good for the citizen as well as for the state.

According to Hoffman, other incentives can be imagined. "Exemptions for insurers and pension funds that commit to long-term stakes in Belgian companies or a 'market maker' system for smaller listed companies, to guarantee liquidity and encourage research.

In addition, he insists on education. 'We must make financial literacy compulsory in education - not just investing, but also borrowing, taxes, everything. Without knowledge, investing remains something for the happy few, whereas it can be just about the greatest democratization of capital.'

Hoffman thinks Belgium should be careful. If the tax burden becomes too great and legal certainty is lacking, capital will simply look elsewhere. 'I received a message yesterday from Johan Van Overtveldt (politician for the N-VA and former finance minister, ed.): 'Spain, Italy and Greece are the top countries at the moment.' How come? Rich people go there because they get, for example, a flat tax deal with the government, a ruling they can discuss.'

'Van Overtveldt was the last finance minister to bring the financial sector to the table,' Hoffman says. 'Now we hear nothing from policymakers. Are there any economists in parliament at all? There won't be many.'

Light points

Yet Hoffman also sees bright spots. He refers to the planned IPO of EnergyVision. The growth company active in green energy would become the first new entrant on the Brussels stock exchange since Azelis in 2021. 'I am genuinely proud of that. An IPO like this proves that it can still be done: a healthy company that raises money from a wide audience, lets people benefit from the energy transition and mobilizes capital for the future. That is the engine we need.

For Hoffman, this should not remain an exception. 'Give Belgium ten companies like VGP (the developer of logistics parks, ed.). Companies that grow step by step, raise capital on the stock market and grow into European top companies within the echelons of the stock market. But this is only possible if we once again build a solid ecosystem in which investors, intermediaries and analysts can play their part. Today, with the exception of KBC Securities, all Belgian market makers have disappeared, and you can count the number of independent stock houses on two hands. In other countries, there are dozens. That is unhealthy. Without those links, the market does not flourish.'

According to Hoffman, the political debate on investing must finally get past the ideological crunch. 'This is not a left-right issue. A healthy stock market culture is a buffer against poverty, a lever for innovation and an opportunity for everyone to build wealth. Anyone who demonizes that is putting our prosperity at risk.'

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