By Tom Burroughes Group Editor in London, WealthBriefing

Some wealth management firms outside the US may be turning down American expat clients due to their being seen as a compliance nightmare but as far as UK-headquartered Vestra Wealth goes, this is a customer segment worth catering to.

Last week, the firm – set up almost five years ago by former UBS senior manager David Scott and other colleagues – announced it was creating Vestra US Wealth Management, designed specifically for US clients facing the kind of complex tax and financial issues raised by the recently-enacted FATCA Act.

FATCA – or Foreign Account Tax Compliance Act – is taking effect over the next few years, forcing foreign financial institutions to report to the US Internal Revenue Service about US clients, a move designed to combat offshore tax evasion. FFIs that do not show they are compliant with these new rules face a 30 per cent withholding tax.

Already, some big firms, such as HSBC and Deutsche Bank, have reportedly closed the doors on US expats and Green Card holders, and a number of other businesses have told this publication they are wary of doing business with US clients because of the compliance issue. Vestra, however, considers the expat market an opportunity.

“The primary reason for the setting up this new service was that we felt a lot of US citizens were not getting joined up advice. The problem is that people were getting advice about tax and other related UK/US issues from their accountants and lawyers but the investment products did not necessarily fit with the requirements that were set out,” Scott told WealthBriefing in an interview.

“There was a gap in the marketplace for someone who could understand the investment as well as the tax and reporting sides,” he said.

Not just FATCA

Even without FATCA, there is an opportunity that Vestra has seen to develop a service to cater to Americans’ financial and investment needs, Scott said.

“A lot of expat Americans have had difficulties in getting good advice or been on the receiving end of inappropriate advice. We recognised there was an opportunity to service those clients by putting together a dedicated team who are able to consider the UK and US consequences of making investment decisions,” he said.

Scott’s colleague, Neil Williams – a director at Vestra – noted that according to reports, the IRS estimates there are more than seven million Americans living abroad. However in 2007 the IRS received roughly 460,000 annual tax returns with a non-US address.

“What differentiates us is the flexibility of our client service offering and our ability to work in conjunction with our clients’ other professional advisors. Each client has different needs so everything we do is done on an individual or case-by-case basis. Given the tax and reporting complexities which face US citizens abroad, we always look to work closely with our clients’ accountants and legal advisors to ensure we are all working towards the same goals,” he said.

(Besides Williams, the other Vestra director leading the US business is Paul Dixon.)

There are other firms making a point of serving US expats and others with a “transatlantic” financial connection, such as RBC Wealth Management and London & Capital, for example. (Both these firms, as well as the new Vestra business, are registered with the US Securities and Exchange Commission.)

Vestra Wealth already oversees (as of 30 April this year) £3.5 billion ($5.32 billion) of assets and has more than 150 staff and 20 executive partners. It has come a fair distance since its inception shortly before the financial crisis of 2008.

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