Editor’s note: London & Capital, the
wealth management firm created a quarter of a century ago, is an international
business now with a presence in Asia as well as North America and Europe. The
firm has been prominent, for example, in explaining the impact of the US FATCA
Act on expat US citizens. In this interview, Iain Tait, partner at the firm,
talks about the business, prospects and strategy.

Background

“The firm was established as an independent
wealth manager some 25 years ago by our two founding partners, Daniel Freedman
and Richard Leigh; we remain independent. Headquartered in London, we are FSA,
SEC and SFC regulated, with additional offices in the Isle of Man and Hong
Kong, and a significant presence in the US.”

“In managing the wealth of HNW individuals
and their families, trusts and institutions, we have always worked closely with
accountants, lawyers, consultants and financial advisors. They have always
been, and remain, our principal introducers.”

Q, The Asia business - when was it set
up and what sort of work is it doing and looking for?

“Recognizing the tremendous wealth creation
taking place in the Greater Asia region, we established the Hong Kong office
just last year, opening for business in September.”

“In Asia, family wealth tends to be tied up
with the family business, and the institutions managing a family’s assets have
not, in the experience of our Asian partners, always been able to act
independently and in the client’s best interests. The clients’ needs have often
been overlooked as a number of teams, all profit centers in their own right,
have fought for a ‘piece of the action’. Our ten-strong team was assembled with
a view to offering the Asian HNW community a real alternative - a truly
holistic wealth management strategy - capable of providing comprehensive
M&A consultancy services as well as wealth management strategies for those
looking to invest the proceeds of a capital event. We are very much encouraged
by their early success.”

Q, How big is the firm now in terms of
assets, clients and rate of growth? 
What sort of growth and margins do you try and aim for?

“We are not driven by size or an ambition
to manage a particular number of clients, but by our desire to provide a
market-leading client experience, and to maintain an excellent ratio between
the private clients and families we serve and the number of employees in the
firm.”

“Nevertheless, we today manage client
assets in excess of $3.0 billion, for more than 500 private clients and
institutions, all over the world. Wealth managers have been operating in a
challenging environment in recent years, and we are very pleased not simply to
have retained our clients, but to have grown the business. We increased assets
under management in the region of 10 per cent last year, a margin of growth we
would be perfectly happy to see in more buoyant years.”

“Most of this growth has come through our
US team, who have been advising increasing numbers of US resident non-doms and
Green Card holders in the face of the onerous FATCA legislation, and through
our advisor solutions team, which is enjoying a tremendous amount of success
marketing a suite of model portfolios to intermediaries having to re-engineer
their business in the wake of RDR.”

[The Retail Distribution Review is a
program of reforms due to come into force at the end of this year in the UK,
which aims to drive out the use of commission payments and move the advisory
industry to a fee system instead.]

Q, What has been the biggest issue for
your business over the past few years and what do you think it will be going
forward?

“The financial crisis has had a significant
impact on wealth management firms like ourselves; the regulatory framework is
now more demanding and compliance more extreme. This has, ironically, been a
good thing for the business, forcing us to invest in our middle- and
back-office systems, and the quality of our reporting to key stakeholders and
introducers.”

“We have from the very outset worked with
international clients, but as families become more globalized, their business
affairs ever more complicated, we have found ourselves challenged by the
growing requirements of multi-jurisdictional families and their trustees. This
is presenting some promising opportunities.”

“Looking forward, and this has been an
issue for a few years now, the wealth management industry faces a considerable
challenge in managing client’s expectations. Clients’ appetite for risk has
waned, and their expectations as regards investment returns have also changed.
In a low interest rate, low growth environment, the wealth management industry
has its work cut out to demonstrate real added value.”

Q, The US FATCA Act and other
legislative / regulatory changes have been a big deal for you and your firm.
Explain what sort of work you are doing and how it fits with the rest of the
business?

“For US HNW citizens whose business or
personal interests keep them in the UK, FATCA has become an increasingly
onerous burden. We are working ever more closely with our clients’ legal and
taxation advisors to ensure we manage and report across their investment
affairs in a compliant fashion, from both a UK and a US perspective.”

“It is easy to fall foul of the
regulations, and to make simple investment mistakes, with UK tax free wrappers,
for example. To that end, just last year, we launched a range of US compliant
model portfolios. These have proved a popular investment solution for those concerned
over the increasingly onerous reporting requirements."

Q, How do you think the rest of the
non-US financial industry is responding to FATCA? We keep hearing that firms
are shutting their doors to Americans. Are they brewing trouble?

“We have long been SEC regulated, and have
worked with US clients from the very outset. In recent years changes to the
investment regulations applying to US citizens and Green Card holders living
outside of the US have presented significant issues not just for HNW individuals
but for the financial services industry at large. Where once we maintained a US
office, we now service all of our US clients out of the UK, visiting many of
our clients on a regular basis, and win most of our US business in our own back
yard.”

“Few advisors or institutions are regulated
to handle US business, and with the investment necessary to build compliant
systems reaching new highs, many are withdrawing from the market and closing
their doors to US clients. That is presenting countless opportunities for our
US team, who are inundated with enquiries from those seeking to partner with
London & Capital or identify compliant investment solutions.”

Q, How has the profile of L&C
changed in the US? Any developments in the pipeline?

“We are now seen as experts in US
tax-compliant portfolios and investment solutions. We are gaining a lot of
referrals from other wealth managers, accountants, IFAs and banks who due to
the lack of reporting capabilities can no longer manage their US clients’
wealth. This is great for us and we will continue to see new business arise
form the on-going regulations set out by the IRS.”

Q, Besides Asia, are there other regions
of particular interest, and why?

“We launched the Hong Kong office in
September last year. Given the latent potential of the Greater Asia region, and
the fact that this office is at an embryonic stage, this is our focus outside
of the UK right now. Our captive insurance business is also a key focal point,
and we continue to attract some of the most prestigious mandates, the Caribbean
proving a good hunting ground.”

“Closer to home, we have over the past
12-24 months, reasserted our presence in the UK offshore jurisdictions. We are
working ever more closely with a growing band of trust companies, with a
particular focus on the Channel Islands.”

Q, Your branding and image: how do you
think you are seen from outside and are you looking to change this or develop
it?

“We are a multi-faceted business, working
with clients across no fewer than five different sales channels.  Each will have different needs, and
whereas the private client business has always been associated with discretion
and anonymity, other clients place great store in the strength and profile of
the brand.”

“The re-launch of our company website, last
November, was perhaps the most important element of a comprehensive rebranding
exercise, at the heart of which was the need to satisfy differing client
requirements. We recognized the need to be flexible and believe the rebrand
successfully accommodates those differing requirements.”

“Well-known London landmarks have been
replaced by London & Capital employees, and that makes complete sense, for
ours is a people business.  Clients
want to experience exceptional service, particularly in troubled times, when
they are looking for a client manager they can trust, and who truly understands
their investment requirement. As HNW clients they expect to access their
relationship manager on a frequent basis, and our client/adviser ratios mean
they can do just that.”

“Our new brand imagery reflects the people
focus in our business. We have had some excellent feedback, and I believe the
new branding goes a long way in communicating the access and the personal touch
clients enjoy with an independent, boutique firm.”

Q, Where do you see your firm vis-à-vis
other firms in this space?

There are five strands to our business –
the US team, the UK private client division, sports wealth management, advisor
solutions and a captive insurance business – and whilst ‘unique’ is a much
maligned term, we are to that end different. However, what really distinguishes
us, and what makes us feel proud, is the level of service we are able to
provide as an independent, boutique firm – and it isn’t simply about size.  It is an attitude to look after clients
and their assets as if they were your own.”