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US Expats In UK Are Expanding Wealth Market Say New Business Founders
Tom Burroughes
19 December 2008
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James Sellon and Joshua Matthews, two former Citi managers who had specialised in catering to the wealth management needs of US expats in the UK, have become so convinced that this population is under-served that they have decided to strike out on their own. They recently launched the firm Maseco Financial. Their firm has been rolled out at a time when the
Coupled with political pressure on both sides of the Atlantic against so-called tax havens, there is plenty of scope for wealth management services targeted at expats in the
“We thought this gap in the market was rather large and we started to cater to this market when we were both at Citigroup. We founded and managed a team looking after Americans in the
“The tax situation in the
If the business is ready to expand, the next logical step for doing expatriate work would be
Speaking in the same conference call, Mr Matthews said one reason for starting the new firm was to avoid the problems of working in a big firm where there was high turnover in staff and constant change to business strategies, as this was a problem for staff and clients. “From a management perspective, there has been significant and regular turnover in wealth management firms and it can make it difficult for us as advisors and our clients to buy into changing strategies. So that was becoming increasingly frustrating for us and our clients as we were unable to acquire sufficient resources and personnel to service our best clients,” Mr Matthews said. With up to 500,000 US expats in the UK – estimates vary – these men say there is a potentially large market, although they are deliberately avoiding expanding their business too quickly, since they do not want to compromise service quality. Since launch in June, the firm has acquired about 100 clients, overseeing a total of about $150 million of client money. Mr Matthews said that no one bank, whatever its strengths, could be good at everything. For example, some banks were good for onshore accounts, others were better for offshore accounts. “No-one can do it all. We came to that conclusion a little while ago and that is why we chose to become independent,” he said. As a result of the UK non-domicile tax rules and other regulations, US citizens in the UK are “stuck between a rock and a hard place” because even if they did not have enough foreign assets to be forced to pay the UK annual £30,000 tax charge, they faced a complex set of decisions on the most tax efficient way to hold their investments, Mr Sellon said. For example, most non-domciled investors in the
The inverse situation also applies for US citizens investing in US mutual funds and exchange traded funds. The gains can be eligible for long-term capital gains taxes of 15 per cent in the US but would not be recognised by the UK As being tax-efficient and thus would be taxed at up to 40 per cent in the UK, Mr Seddon said. This is also true for other US investments such as certificates of deposit and money market accounts. To deal with this issue, Maseco has been able to take some investments that are tax efficient from a US perspective and get them UK distributor status. This would mean US investors could enjoy long term CGT of 15 per cent in the US and 18 per cent DGT in the UK, a huge potential saving.