“Several years ago, a lot of people in France lost access to the BBC. I was at a client meeting in the country at the time, and one of our local partners said to me: ‘Guess how many of our clients have called us asking how to fix their television?’ The answer was 63%,” says John Stone, chairman at Blevins Franks. “Our advisers are seen as the fount of all knowledge.”
Perhaps the perception of the company is related to its age; it began 40 years ago, an anniversary it is currently preparing for.
It started life as a group of chartered accountants providing general finance services, but after finding an interest from clients abroad, its focus turned towards the European market.
These days, the company focuses solely on providing advice to British nationals living in its main jurisdictions of France, Spain, Portugal and Malta, where its administrative headquarters and trust company is based, and Cyprus, where it targets the retired expat community.
“We are by far the biggest player in that market,” says Stone, who sits in Blevins Frank’s UK office next to John Simmonds, the current chief executive.
The pair joined in February 2013, eight months after they were part of a management buyout of the Blevins Franks financial advisory group.
The MBO saw company founders William Blevins and David Franks sell their stakes in the business after Blevins left due to health issues while Franks retired soon after.
Simmonds joined from Bluefin Advisory Services, a UK employee benefits, actuary and wealth management company where he was executive chairman.
Prior to that, he was chief executive at Towry Law for four years until it was sold to private equity firm Palamon Capital Partners.
For 20 years, Stone was chairman of Lombard International Assurance, a Luxembourg-based life assurance company which he founded, specialising in estate and tax-planning solutions for high-net-worth individuals and families.
Plan of action
When they took control of Blevins Franks, Stone and Simmonds said they planned to take the company from a 20-adviser operation with around €1.5bn (£1.1bn) in assets under management (AUM) to one with 40 advisers and €3bn AUM.
“It was a huge change to the business. There was a massive potential client base that hadn’t previously been explored,” says Stone.
So far, it seems the plan is working.
The company spent six months meeting with clients.
They then began to bring in investment committees, a board and a non-executive in the UK and Malta. “We put in processes associated with a much larger company. If a client has entrusted their money with us, they expect us to have the appropriate board and compliance controls,” says Simmonds.
Prior to the MBO, the business had not been designed for growth. To combat this, Stone and Simmonds introduced a management team consisting of a finance director and an operations and marketing director.
They also worked on a rebrand and brought in Credit Suisse’s Jason Porter to focus on business development.
They are currently looking to make further recruitments of UK advisers.
Perhaps the biggest change came last November, when the company acquired French advisory firm Siddalls to “accelerate its growth” in the country.
The acquisition boosted its AUM to €2.2bn across its 20 offices, and its total staff to 140.
As it is now privately owned, all the Blevins Franks staff own personal equity stakes in the company.
Stone says clients have so far found advisers’ vested interest in the company attractive, as it implies a level of loyalty absent from similar firms.
The company offers an open-architecture investment management service on both a discretionary and an advisory service.
It does not have any in-house products and avoids risky products such as structured products, hedge funds and student accommodation funds.
Stone says its motto is “if it looks too good, stay away from it”.
A typical Blevins client has around €1m in invested assets, although this number does vary.
Usually, they have retired to Europe after working most of their life in the UK, and require some guidance through the new tax regime.
The complication, and where Blevins Franks sees its niche, is in navigating the different nuances in tax law between European countries.
“You have to take into account that the client is still going to be UK domiciled for inheritance tax, and will have family in the UK,” says Stone.
“A client might say, ‘Well, hang on, I have this French succession tax but I’m still subject to UK IHT. How does that work?’ I think we are unique in being able to advise on both the foreign and UK ends.”
Reacting to change
An example of a problem in this field has been wealth taxes or, as Stone calls it, the “horror tax”. It applies to the entirety of a client’s assets, including property and assets held offshore, and has been introduced over a certain amount of assets in France and Spain, with a top rate of 1.5% in the former and 2.5% in the latter.
Another recent issue was the last minute introduction of taxes on trusts in Portugal in January.
Announced in December 2014, a mere month before coming into legislation, a distribution paid out of a trust in the country will now be taxed at 28%. Additionally, when a trust is wound up, gains on assets distributed to settlers will also be taxed at 28%.
Previously, trusts had fallen outside the country’s tax code.
Blevins Franks wrote to all its Portugal-based clients between 17-31 December telling them about the issue.
During the period, it helped 199 clients wind up their trusts and assign assets back into their own name.
“We reacted how we had to at the time because of the changes, but we will review these clients’ affairs over the next quarter and reassess what we can do,” says Simmonds. “A lot of these people wanted to give money to their grandchildren, and now they are going to have to rewrite their wills and redo their estate planning to take the place of what the trust was doing for them before.”
Such complications have led the pair to agree that, whether it is from Blevins or not, advice is necessary when moving out of the UK.
“It’s surprising how few people do their research,” says Stone. “Quite often our clients move permanently into their holiday home. However, the implication of this is that you become tax-resident in the country you move to.
“The key is to get a client’s affairs in order before they move. Gone are the days when you could just fly into Spain to avoid tax payments. European tax legislation is mostly on an equal level everywhere now.”
Another focus for the company is the return of expats to the UK – a key driver behind the current strengthening of its British position.
Blevins Franks has a team of advisers known as private client managers dedicated to looking after existing clients.
This includes the reorganisation of their tax affairs upon their UK return.
“We’re seeing more and more people returning to the UK and we want to make sure we have the resources to provide advice, as they will have to reorganise their affairs,” says Stone. “We aren’t trying to be a big UK IFA. Our business is growing there because the natural cycle is for people to eventually return home.”
When issuing advice on life assurance, the company checks to see that policies are compliant with the country in which the relevant client is based. “We could never use a product based in the Isle of Man as it would have to be compliant with the European countries in which our clients are based,” says Simmonds. “We are cross-border rather than offshore.”
“Policies issued by Isle of Man companies are the same no matter where a client lives, and usually rely on non-disclosure. We are advising solutions that can be disclosed to the authorities in the country in which a client is based,” adds Stone.
Doing what they do best
The company uses a combination of fee and commission-based remuneration on advice.
In the UK, it is compliant with the retail distribution review.
However, the company continues to receive commission across many of its European jurisdictions.
According to Simmonds, the Markets in Financial Instruments Directive II, which aims to increase the transparency of European markets, has started to change the general direction of remuneration in the region.
However, he says Blevins Franks is well prepared for any changes the directive may bring. “Our advisers are all trained to UK standards and we are regulated by the Financial Conduct Authority.
“We do what we see as appropriate in each jurisdiction. There is a direction of travel in each that we keep an eye on, altering our practices accordingly.”
Looking ahead, the company does not plan to complete any acquisitions in the same manner as Siddalls. Simmonds says there are currently few businesses targeting clients in the same way as Blevins Franks.
For the time being, the company will continue to capitalise on the market potential in the jurisdictions where it already exists.
“The best thing to do is to bed in the business now we have acquired Siddalls, because it has taken client time and management time. Even though we have been in them for a long time, we have hardly scratched the surface with our existing markets,” he adds. “It might be boring but, for the time being, we are going to stick to what we do.”
