Below are some examples of the opportunities and challenges that we respond to on behalf of institutions that advise or support wealth owners and their families.
An international private bank had sold tax-efficient portfolios to high net-worth clients. The bank realised they had made mistakes in structuring several substantial portfolios, and may have breached regulatory rules by giving tax advice.
First we advised the bank on possible tax errors, and the extent to which they may have given tax advice. Then we advised the bank on how to approach the regulator. With our help, they explained the breach, what they were doing to resolve it, and the steps they would take to make sure that it did not happen again. Full disclosure – and a clear plan of action – helped limit regulatory action.
HMRC served an information notice on our client, an international bank with UK tax-resident clients.
We advised them on how to comply with the notice without breaching their confidentiality obligations to clients. We also looked at how the bank stored information to make sure they only disclosed the information they were legally required to. This delicate balancing act helped the bank meet all its regulatory obligations and minimise any damage to its reputation.
We helped an international bank understand where and how a new team – focused on ultra-high net worth clients – could offer services.
We worked with lawyers in our international network to put together a matrix of regulatory obligations. This made it easy for bankers to see which services they could offer in each country.
Investors are increasingly looking to banks for compensation when an investment doesn’t do what they expected it to. This increases the focus of the regulators on private banks.Segun Osuntokun, Partner - Commercial Dispute Resolution
Increasingly, banks are seen by UK and foreign authorities as part of the tax enforcement network.Damian Bloom, Partner - Head of Private Client
Banks with international clients need to comply with the relevant regulations in all the jurisdictions in which their bankers operate.Matthew Baker, Partner - Investment Management
A large private bank wanted to set up a multi-family office for new and existing clients.
We advised on how to structure a full-service office. The in-house team would offer structuring, financial services, investment advice, administrative reporting and consolidation services. Other specialist services – like security-risk analysis and multi-jurisdictional tax advice – could be bought in from a panel of vetted specialists.
The multi-family office now works closely with a number of ultra-high net worth families on a much broader range of services.
A bank wanted to expand their relationship with a wealthy family but the family’s main asset was shares in a publicly-listed company. The family did not want to sell the stock for the next few years and the bank could not finance against it.
We advised on a hedging-contract that put an upper and lower value limit on the stock. The bank was then able to provide finance against this hedged stock, and the family was able to use the borrowed funds to invest in a diversified portfolio.
High net worth clients have much more information now, and are actively benchmarking portfolios. Banks and fund managers need to work harder to retain key relationships.Damian Bloom, Partner - Head of Private Client
Ultra-high net worth clients expect to have the same access to investments and pay the same fees as institutional investors.Simon Phelps, Partner - Private Client
The private wealth division of a major bank wanted to make sure its bankers were selecting and managing investments that were appropriate for their clients’ tax position.
We developed a tax-risk toolkit for their senior bankers – a set of checklists and flowcharts that flagged up when investment or structuring decisions would create tax-risk. Staff would then refer flagged issues to the in-house tax team. The toolkit reduced tax-risk without causing delays.
We helped a bank improve the way it sold investment products to ultra-high net worth individuals.
We found two ways to help. First we created policies and procedures that set out which type of client would suit each product. Then we advised on one set of standard documentation for in-house and third-party advisers – this helped minimise tax and regulatory risk, and simplify the take-on process.
Our client, a non-UK private bank, wanted to enter the UK resident non-UK domiciled ultra-high net worth market.
We recommended changes to the way they structured their accounts and trades – across equities, bonds, funds, foreign exchange and structured products – that helped them meet the market’s gold-standard for service to non-doms. These changes also minimised the bank’s tax risk.
Tax authorities are increasingly starting to pursue institutions that facilitate tax evasion, as well as the individual tax evaders.Segun Osuntokun, Partner - Commerical Dispute Resolution
Private banks have to find the right balance between tax risk, compliance burdens and client demands.Damian Bloom, Partner - Head of Private Client
A major bank faced a claim from a high net-worth investor: he believed the bank had not properly explained a derivative product on which he had suffered a significant loss.
We interviewed bankers, reviewed the paper trail, advised the bank on the client’s claim and the risk that the bank had breached regulatory rules. Finally, we helped the bank settle the claim without litigation. The bank retained the client.
Our client, a bank, faced a claim from a disgruntled investor. The investor had lost a significant amount when the bank invested her money in one of its own funds. She claimed the bank had acted in its interests – not hers – and had breached an agreed mandate.
We reviewed the paperwork. This included the bank’s terms and conditions, correspondence with the investor and, importantly, the mandate. We advised that while there were conflict-of-interest issues, the terms of the mandate meant that the investor would still have lost the money even if the bank had invested in an equivalent third party fund. The investor dropped her claim.
Liabilities live in the gap between back office product development, and front office marketing.Segun Osuntokun, Partner - Commerical Dispute Resolution
For a bank in the ultra-high net worth space, reputation and client retention are often as important as the amount of any liability to clients.Damian Bloom, Partner - Head of Private Client
We advised a bank on how to upgrade their services for high-net worth individuals. First we reviewed their current procedures and operating model. Then we revised their terms and conditions and drew up agreements between the UK and offshore group companies to make sure they could provide the right services in the right locations.
The final component was a tax-risk framework that bankers would use when investing for clients.
A bank wanted to sell a non-UK business that provided services to high-net-worth individuals – but continue to offer similar services to that market. The bank asked us to advise on how to structure an entity that would use a mix of in-house and third-party services to meet their clients’ needs.
We drafted contracts between the in-house entities and negotiated those with third parties. We reviewed each contract at every stage to make sure that they would be fit for purpose, and that bank’s clients’ would be well served and protected.
The key to an effective ultra-high net worth service is to protect clients from tax risk, without limiting their investment options.Damian Bloom, Partner - Head of Private Client
Private banks need to offer a tax efficient investment service, without giving tax advice.Simon Phelps, Partner - Private Client
A UK investment manager asked us to test their on-boarding compliance process for UK resident non-UK domiciled clients.
We recommended that they change the risk-weighting of some factors – and add extra questions that would help make sure that relevant compliance issues were identified. These changes helped our client set a gold-standard for compliance – without the commercial handicap of a slow and overly cautious process.
Our client, a UK bank, was dissatisfied with their compliance process: the number and complexity of forms that international clients had to complete had grown over time.
We set out to make the process simpler for clients whilst avoiding exposing the bank to regulatory and tax risks. We prepared a simpler set of forms and halved the number that most clients would have to complete.
New tax regulations are putting risk on the desks of particular individuals in the bank. They now have a greater personal interest in minimising tax risk.Alison Cartin, Associate Director - Private Client
Compliance will never be perfect. But everyone wants to be better than average.Damian Bloom, Partner - Head of Private Client
“Liabilities live in the gap between back office product development, and front office marketing.”Segun Osuntokun, Partner - Commercial Dispute Resolution