London & Capital, an international "boutique" with strong connections to the US and now developing its Asia business, spoke to this publication about recent developments and its outlook for the future.

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.”