The provider of wealth protection solutions recently gained regulatory clearance to open in Singapore, the latest move for a firm aiming to bring something rather different to the market.
(An earlier version of this interview has been published on WealthBriefingAsia, sister news service to this one.)
Lombard International, which is headquartered out of Luxembourg and Philadelphia, is making waves and the expansion of this wealth solutions provider shows no sign of letting up any time soon. It is also open to the idea of making further acquisitions, one of its senior executives told this publication.
Last week the firm announced it had won regulatory clearance to open an office in Singapore, arguably Asia’s prime wealth management hub; the move adds to its office in Hong Kong. Autumn saw a flurry of high-ranking appointments: a head of Latin America, a distribution and business development boss for Switzerland and Northern Europe, as well as the opening of a Miami office. There is now a “transatlantic solutions” team. In January, Lombard International Assurance agreed to buy Zurich Eurolife Luxembourg's Private Banking Solutions business; it confirmed plans to expand into Asia with the appointment of Tammy Lu Tsui as CEO for Asia. Phew.
In a moment between such announcements, Axel Hörger, chief executive, Europe, of Lombard International, spoke to this news service about the firm’s direction of travel. Hörger has held his role since the start of February, when he joined to succeed John Van Der Wielen. Prior to this, he was CEO at UBS Deutschland. He has also held a senior role at Goldman Sachs Asset Management.
Hörger is very keen for Lombard International to be a fully global player in its field.
“We have built on the incredible expertise of wealth structuring and solutions,” he said. “This is now a meaty business. Global assets under administration stand at over $80 billion; Lombard International has, globally, more than 500 staff, including more than 60 technical experts specialising in 20-plus jurisdictions.”
He added: “That expertise is in demand like never before in part due to high net worth individuals becoming much more global in where they work and partly due to the global uncertainties facing individuals and families wondering about which jurisdictions to make a home in and where to put their money.” (We spoke after the 23 June Brexit vote and before the result of the US Presidential elections was known.)
The current climate is not particularly friendly to HNW individuals. For example, the UK has tightened the regime yet further for non-domiciled residents. Separately, dozens of countries are implementing, as is a legal requirement across jurisdictions, information swapping arrangements under the Common Reporting Standard. With a greater stress on transparency across international markets, there is a need for legally robust and effective ways to protect wealth. And that is where life insurance-based wealth solutions come in.
Lombard International, which is owned by the funds of Blackstone, the US-based investment house, is among a handful of firms, such as Swiss Life and Vie, that provide insurance policy structures that individuals can use to hold assets and transfer them in a way that assists in multi-generational succession planning, portability and mitigating the burden of tax. An example of these structures is private placement life insurance. This sector has not generated a great deal of noise in recent years, but awareness around it is growing.
About six years ago, Scorpio Partnership, the consultancy, noted that the as-yet unfulfilled potential of wealth insurance services was vast. In a report in 2010, Scorpio said demand for high net worth offshore insurance-linked investment in emerging markets was both large but also under-served by private banking firms. It estimated that less than 5 per cent of all wealth management portfolios in emerging markets included an insurance component. If that share rose to 15 per cent in five years, this would create a market of almost $1.2 trillion.
PPLI has been defined as products blending a life insurance policy with a separately managed investment portfolio. As such, they can be useful to high net worth individuals who want more sophisticated structures; the insurance structure comes with various tax advantages (these vary depending on jurisdictions); income and capital gains will accrue free from tax and the death benefit is not subject to inheritance or estate tax. PPLI policies may in certain circumstances allow policyholders some access to their capital within the fund while they are alive.
PPLI structures - sometimes referred to as “wrappers” in the US market – are only some of the solutions that life insurance can give rise to. Firms such as his, Hörger said, are well placed to fill a gap left by those private banks that have cut back on wealth planning staff to curb their costs. “Banks were just not seeing them as standalone profit centres,” he said. A continuing challenge in the wealth management sector is getting people to see the value of paying for wealth structuring and planning advice. “This for us is a strategic issue,” Hörger continued.
To some extent, Lombard International provides additional tools for bank advisors and independent wealth advisors, and is not directly competing with such groups for work. “We are not cannibalising any part of the B2B value chain,” he said. “We enjoy a certain neutrality in the market. In fact, we are not trying to steal market share but to expand that market.”
Hörger said Lombard International had been in an “aggressive” phase of organic expansion, as well as working to integrate acquisitions, such as the Zurich Eurolife business. “We integrated that business extremely well,” he said. “We would be very open to buying a bigger one [business]."
Another area of growth involves the firm looking to hire bankers so that it is more attractive to banks and understands their mentality better, he said.
The Asian expansion, as seen with new offices and senior hires, is important. Asked about China, Hörger said Asia’s second-largest economy was clearly a “big opportunity”, and referred to “huge” renminbi outflows via Hong Kong and the need to provide wealthy Chinese people with structures to hold and protect wealth.