Editor's note: scroll down the article to see additional commentary from MASECO and Third Financial on the state of the market.

MASECO Private Wealth, a UK-based firm specialising in helping US expats to obtain financial services in an increasingly onerous regulatory climate, announced it has signed a technology deal with front and middle office platform provider Third Financial.

The deal is being struck at a time when MASECO, founded more than two years ago by a team of former Citigroup senior employees who had been serving US expats, is seeking to tap demand for help at a time of mounting compliance costs. The recently passed HIRE Act, and provisions known by the acronym FATCA, impose tougher tax reporting requirements for expats. A number of bankers – most recently at the Swiss private bank Wegelin – have warned that this legislation has turned expat US nationals into “pariahs”.

MASECO was created by the former US expatriate team at Citigroup in New York and London. It was originally known as Maseco Financial.

“US expats, often married to non-US nationals, have specialised financial requirements in order to comply with increasingly complex US taxes and regulation together with multi-jurisdiction custody requirements. They have even been described as toxic citizens and the world’s financial refugees, as many banks are now declining to service them when living abroad because it is too expensive or too complicated,” according to a press release from MASECO and Third Financial.

“Maseco sees significant opportunities for growth and development in this niche market for US expats, and the new partnership with Third Financial will bring simplicity and flexibility to American clients’ global portfolios,” the statement said.

To view an article published with the firm's founders, click here.

Below, are some comments on the issues facing firms handling expat US clients and their tax issues from Stewart Foster, founding director of Third Financial, with additional regulatory insight which has been provided by Alex Eichorn, partner at MASECO Private Wealth.

What, approximately, do you see as being the size of this market in the UK, for example?

Third Financial is currently seeing significant growth in the UK market. Over the past year, they’ve doubled in size and look to expand into further markets throughout the course of the year. There is tremendous opportunity at the moment. From Maseco’s point of view, there is no available recent research on the number of US nationals or individuals with US tax reporting requirements living in the UK, however historic research indicates that there are typically about 150,000 US nationals based in the UK.  We are not currently aware what course of action is being taken by UK banks and investment institutions to meet the provisions laid out in the HIRE Act, however the FATCA (the Foreign Account Tax Compliance Act) provisions within the Act come into effect at the start of 2013 so it will be interesting to see what solutions come to market before then. 

How many firms have approached you about this?

Given MASECO’s niche in the marketplace, they needed a company with specific USPs that will enable them to look after US expats properly. MASECO chose to work with us because our tercero software allows them to aggregate information from multiple sources and therefore provide consolidated reporting to its internationally-focused clients.  Our investment management system also allows them to manage their discretionary portfolios in a more efficient manner.

Have you seen signs of firms having to change their systems, services, in response to legislation like the HIRE act?

There has been a general trend (and not just in the UK) over the last six months of financial institutions deciding to remove US expats as clients.  In many cases the cost of improving their controls, technology and infrastructure to handle US expats outweighs the value of keeping those clients given the new US rules coming into place over the next 18 months. Some wealth management firms are saying there looks to be too much risk in the future to keeping US expats as clients.  

Is legislation such as the HIRE Act driving demand for this sort of service?

The HIRE Act (and the FATCA provisions contained therein) has definitely increased enquiries to MASECO’s business from both private clients who are having their investment accounts closed by UK institutions and from UK advisors and institutions looking for ways to accommodate clients who are US nationals.