This news service caught up with the wealth structuring firm Lombard International about its global ambitions.
A number of reports have highlighted that the growth of the global high net worth market has fueled demand for life insurance products, particularly among individuals and families with complex estate and tax planning needs. One player in the space that has cropped up frequently in recent months is Lombard International, which since its integration with Philadelphia Financial in September 2015 has taken a number of steps to expand its global presence.
In November 2015, the firm appointed Joan Young as a senior managing director of business development in the US, focused on working with family offices. The same month it also made two senior hires to accelerate the company's US growth and enhance its product offerings targeting family offices, private banks and institutions. More recently, it launched an office in the Big Apple in April.
In today's environment of high taxes, lower expected returns and an intense focus on global transparency, wealthy individuals and families are looking for even more effective ways to grow and preserve their wealth - and life insurance products are increasingly on their radar, said John Hillman, executive chairman at Lombard International.
“Families increasingly operate on a global level, meaning they have 'touch points' in more than one geographic location and so are subject to more than one regulatory regime,” Hillman said. “We are building out our suite of solutions that anticipate what we refer to as the 'diaspora of wealth', which we see increasing on an increasing basis, so to speak.”
The private banking and wealth management sector globally has also been under the regulatory microscope in recent years, with the roll-out of legislation such as the Common Reporting Standard and the Foreign Account Tax Compliance Act, to give just two examples.
The CRS requires jurisdictions to obtain information from their financial institutions, about their clients, and automatically exchange that information with other jurisdictions annually as part of a global crackdown on tax evasion. It builds on the Foreign Account Tax Compliance Act, which came into force in 2014 and requires foreign financial institutions to provide the US government with information on accounts held by US taxpayers.
“We think life insurance solutions, as a wealth planning tool, fit perfectly with these changes. We are creating truly compliant, well-understood services that many firms will be challenged to provide,” Hillman said. “What the industry and clients need are solutions that can withstand heightened service scrutiny. The life insurance-based solutions we are creating will work across multiple jurisdictions, and carry a number of benefits including assistance with wealth transfer and liquidity planning.”
Ultra high net worth individuals (those with over $30 million in investable assets) and "mid-tier millionaires" (those with between $5 million and $30 million in investable assets) are the primary buyers of high-value universal life policies, according to a 2015 report by Reinsurance Group of America. Indeed, this market is “growing across the globe,” Hillman said. “And we see each region as presenting a unique business opportunity. We will continue to expand the very strong presence we have already in Europe; we are building out new distribution channels in the US; and we have just opened a brokerage organisation in Hong Kong to sell death benefit products in Asia.”
The firm is also working on the creation of a new product for Latin American clients - which it expects to announce soon - and recently rolled out a “passport” series of products that qualify as insurance in multiple jurisdictions. As regards the latter, the first two sets of countries are Germany and the US, and the UK and US, with several other jurisdictions to be launched shortly.
Expanding on regional trends, Hillman noted that the use of death benefit products, a large lump-sum payment from a life insurance policy, is much higher in Asia than in Europe, where there is a stronger focus on asset accumulation products. Meanwhile, in the US, because of the country's high income and estate tax rates, both strategies are prevalent. Hillman described Latin America as an evolving market, where there are opportunities for Lombard International to build on its prior success in the region.
In terms of anticipated business growth, Hillman expects each region within which the firm operates to grow in the 7-to-8 per cent range, on average, over the next three years, with Asia-Pacific leading the way. “This is a tremendous opportunity for us,” Hillman said. “We are running head-on into the intensifying complexity of the world that many firms are running away from. We are seeing firms divest parts of their organisation that deal with US citizens, for example, whereas we are turning what are being widely seen as challenges into opportunities.”