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New UK wealth firm targets US expats

As it poaches Quilter Cheviot fund analyst to become head of research

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There are not many options for US expats in the financial services world, however one firm is looking to change that.

Wealth manager Shard Capital has set up a subsidiary called LeifBridge Investment Services, which will help high net worth US citizens living in the UK and abroad.

LeifBridge aims to assist clients in effectively investing and managing their wealth by integrating all aspects of global, multi-asset investing with the ability to navigate the complexities of cross-border tax.

The investment offering includes both a discretionary portfolio management service and an advisory service led by a dedicated team of investment managers, who will construct tailored investment strategies for each client.

While LeifBridge will not offer tax advice, its team will work closely with clients and their advisers to ensure that clients are well supported in navigating the US tax system.

Why set up the business?

International Adviser spoke to Neil Williams, partner at LeifBridge, about the firm and how it can help the around 200,000 US citizens estimated to live in the UK.

“Over the years the number of firms looking after US expats has risen due to increased demand,” Williams said. “There are certainly more firms in this space than they used to be. But that said, I still see it as a great opportunity.

“US expats face an enormous number of challenges in trying to navigate not only the investment world, but how the investment world marries up with the tax system.

“And that’s where we can help. We are not going to give tax advice, but we do work closely with a number of tax advisers who provide these services.

“We are focusing more on investment-led solutions, which is where we can most effectively help our clients.”

Future of Fatca

The US expat financial affairs are made much harder due to the complications of Fatca.

The law requires US citizens, and their foreign financial institutions, to report information to the Internal Revenue Service (IRS).

The core of the problem is that, unlike most other nations, the US taxes expats regardless of whether they have spent any of their adult life in the country. There are currently legal battles in European courts to get it scrapped.

Williams said: “I know that there have been some noises made from certain quarters around the citizenship-based taxation changing to a residency-based one.

“There will be a number of challenges to try and unwind the tax code as it’s currently drafted. It will be an enormous job.

“So, whatever happens it’s going to take a long time to implement, if it does ever change.

“Therefore, I still think we’ve got a good runway which allows us to build up a good client base, while the current regime is in place.”

Investment problems

Due to the US tax system, expats are limited in what they can invest into.

Foreign mutual funds will be classified as Passive Foreign Investment Companies (PFICs) by the IRS.

PFICs must be reported on a complicated US tax form and are punitively taxed.

“What Fatca did was really raise the profile around the tax implications of the advice that investment advisers were giving,” Williams added. “It didn’t actually change anything. Citizenship-based taxation in the US has been around for a lot longer than Fatca.

“So, in that regard, nothing’s really changed. But what it does mean is that the structure of our investment portfolios take into account some of those tax implications.

“PFICs are a big no-no for US expats. I think, if you look across the small number of firms that that advise Americans, there are different approaches in terms of how those firms structured their investment portfolios.

“From our point of view, where we think we are slightly different to most is that we place as much emphasis on managing risks as we do generating investment returns.”

Expansion

The firm has already started to expand its operation. It has hired Ernst Knacke, who has spent the last 12 years at Quilter, as head of research.

Ernst worked in both the discretionary wealth management business, Quilter Cheviot, where he acted as a fund selector and investment analyst, and in the multi-asset team at Quilter Investors, where he was responsible for equity manager selection.

Williams said that the firm is looking at the UK market for the moment, but it does have ambitions to help US expats further afield.

“We’ve definitely got ambitions to grow. However, we want to grow in the right way. We don’t want to grow too quickly,” he said. “We want to grow properly and consistently, and ultimately, that will be led as much by clients and their specific demands as it will from our own ambitions.

“One of the reasons that we set this business up is that we don’t harbour ambitions to be the biggest wealth manager in the UK, but we will certainly strive to be among the best. From our point of view, we don’t think that size should matter.

“If collectively between all the various stakeholders and the partnerships that we build we see increased desire to grow and expand then of course we will look to evolve our business in a sustainable way.”

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