UK discretionary investment managers can no longer serve financial advisors and their clients operating in Europe without a physical presence there, creating plenty of opportunity for client assets and investment teams to change hands.

“One of the main reasons we left Rathbones is that they haven’t got an EU proposition and a MIFID licence,” Maurice Keane, managing director and head of International business at , although the firm held on to passporting rights by establishing Investec Europe as a MIFID subsidiary to run its other financial activities in Ireland.

Around 14,000 funds are currently administered from Ireland representing around €5 trillion in assets. Ireland is also the leading centre for European exchange traded funds, with 50 per cent of the bloc’s total ETF market.

EU Commissioner for Financial Services, Mairead McGuiness, is keeping a close watch on what direction the UK will take as its strikes out on its own. She has been abundantly clear that the EU is in no rush to hand the UK a package of equivalency measures. There will be no “oven ready” plan, as the UK prime minister had suggested, and “I am not a light-touch commissioner,” she said.

A new listings regime endorsed by the Treasury this month to attract more companies to list on London exchanges and plans to boost UK fintech prospects have begun to signal the UK’s global position in this new financial services era. Some of the recent moves by Westminster have rattled the EU and the degree to which the UK plans to diverge.

Even so, Bezant believes that the EU has the stronger hand.

“If it doesn’t give the UK access, it can build its own wealth management solutions and keep the tax dollars.” This is the reason behind much of the delay, he said.

“We are running with the assumption that an equivalence decision won’t be made any time soon. If it does, it will be years,” Bezant suggested, using the Swiss stock exchange agreement as an example. “After years and years of negotiations, they got a year of equivalence, and it ran on a year-to-year basis, and the Swiss said, we can’t operate like this….”

“If you build your European franchise from London on the assumption that equivalence is going to be given, and it is going to stay, then fine, you are very brave. But we don’t think that’s a good business model. We can’t suddenly, three months down the line, tell all of our clients they have to go somewhere else,” Bezant said

Opening up a fully-fledged subsidiary in a European base, however, is not a cheap exercise. The gamble is that by doing it now, you may be too late.

“A lot of firms in different areas of financial services are trying,” Keane said, and it is creating a massive backlog, “even for registering funds right now.”

It is difficult on a cost basis and the regulators are quite tough on UK firms, he added. “You will never get away with a post box now.”

For a European hub with real boots on the ground, Luxembourg is looking for 10 to 15 people for the equivalent of a fully-owned subsidiary start-up, Keane said. “You also have to factor in that you are late to the game, so the opportunity size is smaller."

If firms want more than a sales and marketing presence to manage money, that requires a lot of infrastructure, a compliance officer, suitably qualified investment managers, and so forth.

“And this is into an environment where the salaries are higher and the real estate costs are now a lot higher than they used to be because everyone is in Dublin now. In fact a lot of firms are moving out of Dublin because it is too expensive,” Bezant added.

“There is massive cost to set up and you’ve got to have those people in an office, paying their salaries for about six months or more of that time, without being able to do any business.”

“Where other managers have been successful, and it has been the larger ones, is where they have planned ahead and thought, 'you know what, this is not going to go well, we will put the infrastructure in place now, and it is going to take one or two years.' And they were ready and they were right,” Bezant said.