Transatlantic Wealth House Eyes Changing US Tax Scene, Global Uncertainties

Tom Burroughes

7 May 2021

A new US presidency and Congress, a UK that is now outside the European Union and a global pandemic that disrupts normal business. As a combination of forces go, that’s quite a set of challenges for a wealth management firm specializing in cross-border clients.

For a business such as , one of a small number of firms catering to expat US clients and foreigners working in the US, the past year has been testing, coming after a year (2019) when Daniel Freedman, its chief executive, died suddenly. He was succeeded by Guy McGlashan.

However, there is more to L&C than the transatlantic dimension; the firm has had to decide where best to position itself now that the UK is out of the European Union.

The prospect of higher US taxes on the wealthy under the new Joe Biden administration is certainly getting the phone and Zoom lines buzzing at this firm. On top of this, the pandemic, and ongoing themes about inter-generational wealth transfer, provide plenty of work, Iain Tait, partner and head of the private investment office at London & Capital, told this news service.

The move politically leftward by the US administration and Congress is likely to mean a partial overthrow of some of the tax cuts made under Trump's administration, such as the doubling of estate tax exemptions. This is likely to drive estate/financial planning work for L&C among its American clients outside the US, he said. Over Christmas and the New Year, some of the firm's US clients moved quickly to take stock of the older tax regime before any changes were made.

When expat US citizens and others with US connections want to obtain financial advice, they are often quite worried about the bureaucracy and the issues involved with being an expat.

“We are actively moving assets from the older generation. There is a big transfer of assets, and we are seeing use of entities such as grantor trusts,” Tait said. “This wealth transferring is also evident in the UK market – clients are clear in the knowledge that further tax hikes are coming down the line.”

“For US reporting families, there aren’t many other people doing what we do. There are very few managers who have that expertise, the structuring and who can provide long-term discretionary wealth management under one roof,” he continued.

Other organizations that cater to US expats in the UK include operates in the space. On the other hand, when the US Foreign Account Taxation Compliance Act (FATCA) was signed into law in late 2010, some international financial firms outside the US such as good potential opportunity for L&C to build on and further its offering into new markets where we have limited traction but the scope to expand,” he said.

The firm’s overall philosophy hinges around defending the wealth of a client, he said.

“L&C has always practiced the ‘stay wealthy’ style of investment management. Preserve, compound and grow over the long term. This has typically been via higher quality businesses and inclusive of higher allocations to fixed income than our typical competitors. This (last point) changed from around the autumn of 2020 and we have now moved to a more overweight position in equities for the first time in a long time,” Tait said.