Martin Graham, Chairman of the advisory board at global independent multi-family office and wealth consultancy Oracle Capital Group (orcap.co.uk) explains how they meet investment, wealth structuring, asset protection and lifestyle needs of affluent families through one, bespoke and personal service offering.
The number of high-net-worth individuals around the world is increasing despite the global economy still suffering in the aftermath of the financial crisis, and this trend is set to continue. According to a recent survey by Knight Frank, there were nearly 190,000 HNWIs (defined as individuals with next assets of over USD $30million) in the world in 2012. In Asia alone, which had approximately 44,000 HNWIs in 2012, their number will increase by a staggering 88% in the next 10 years.
These individuals and their families need a bespoke service to manage and protect their growing wealth, and to help them balance their successful business life with family life and commitments. They need a service that simplifies their lives, too.
Client-led, not product-led
The super-wealthy, just like the rest of us, have recently lost a lot of faith in financial institutions so they now increasingly turn to multi-family offices like ours. We are more in tune with their needs than traditional wealth managers such as private banks. Banks, in general, tend to sell products – that’s what drives them. The problem is these products are not always relevant to what their clients truly need.
At Oracle Capital Group, we work from a different premise – only when you really understand what your clients’ needs are, can you properly cater to these needs. It’s a listening consultancy type relationship, where we listen and learn and then try and solve the problems in our clients’ business and family lives.
Also, because the needs of the wealthy are diverse, the service offering must be diverse too, so we provide investment services, wealth management, structuring and wealth preservation, asset financing, insurance advice and legal help. Our property services include sale, acquisition and rental of premium, high-calibre properties in prime London locations. In fact, London is the place to be if you are a high-net-worth individual: according to the same recent survey, Britain’s capital is the second top city in the world by HNWI population (6,015 of the world’s HNWIs lived there in 2012), after New York. So, we help them with their relocation to London, and with their pre-immigration planning to ensure they don’t incur inadvertent and unforeseen tax liabilities when immigrating to the UK. We also help to get their children into the best private schools in the country.
Fundamentally, we provide all these services in-house. We are a one-stop-shop for everything a wealthy individual should ever need – the wealthy don’t have the time or inclination to go to 10 different places to get what they want. The services are unique, too – unique to each and every one of our clients, with whom we build very close, friendly and trusting relationships.
There’s no ‘typical’ client, but…
We built up our capabilities looking after a small number of individuals and we now leverage this to others. Historically, Oracle Capital Group has served mainly Eastern European clients – we are the largest multi-family office looking after these individuals and their families in London, overseeing the total client wealth of several billions of pounds. Now we’re looking towards the emerging wealthy classes of South East Asia.
Our clients are largely self-made people and fairly newly wealthy. Some MFOs require an HNWI to have at least £25 million in liquid assets before they take them on as a client, but we don’t operate in this way. Rather, it’s more about the right type of client, with the right background. We are very careful in client selection and spend a large amount of resource in checking that our clients are ‘legitimate’ and how they’ve made their money.
Then we take a view about how they are going to grow their wealth and how we can help them to do so.
Because of the volatile markets, many of these individuals have been focusing on preserving their wealth in the last year or two. Now they’re prepared to take more risks and we can give them investment opportunities with high absolute returns, yet at acceptable levels of risk. These investment opportunities are across many different asset classes – unlike some family offices, we are broadly focused in terms of asset structuring and management, diversifying our client’s portfolio and spreading the risk at the same time.
Cost- and time-efficiency
Some wealthy families set up private investment or single-family offices, but they end up having to outsource everything except one or two services. It’s a lot of hassle, and it costs a lot of time and money.
We can do all they need ‘under one roof’, using our considerable expertise and capability built over many years. Our services aren’t cheap, but the quality of service we offer means our clients generate better returns over time, both in terms of their wealth and in the smooth running of their lives.
Our intellectual capital – our people – ensure the quality of this service. I was Director of Markets and Head of AIM at the London Stock Exchange in the past and used to run various investment bank operations. Our in-house experts are the top talent, the crème de la crème, in the fields of investments, legal, property, insurance, tax, asset financing and wealth preservation. We combine our immense technical competence with huge, long-term client experience and with a drive to meet our clients’ every need. Also, we speak 22 languages between us – not bad for 100 staff!
Founded in 2002 and headquartered in Luxembourg, Oracle Capital Group provides comprehensive, tailored and confidential services for high-net-worth individuals and their families, including investment advisory (through their offices in Switzerland and the Bahamas), wealth structuring and asset protection, asset financing and insurance, legal case management, property development, and concierge services. Oracle Capital Group has 7 offices (London, Luxembourg, Geneva, Nassau, Moscow, Almaty and Limassol) and employs over 100 staff worldwide. www.orcap.co.uk
COVID-19 and PCL property – a market on the rise?
By Alpa Bhakta, CEO of Butterfield Mortgages Limited
Over the last five years, demand for prime central London (PCL) property has been fairly inconsistent. Sudden peaks in interest from buyers could be followed by periods of stagnate price growth. Nonetheless, the advantages of PCL property investment, particularly by international investors, has remained well known.
Well-funded development and neighbourhood re-generation schemes, alongside an influx of overseas investment, has resulted in a vibrant market with a diverse range of opportunities for prospective buyers.
Nonetheless, the PCL market has not been immune to the impact of the COVID-19 pandemic. During the first half of the year, the lockdown meant physical valuations and onsite inspections could not take place. People in the UK were also discouraged from moving properties unless they found themselves in extreme circumstances.
However, as we now enter the final weeks of 2020, I believe there’re plenty of reasons to be optimistic about the future prospects of the PCL property market. Buyer demand has resulted in a new wave of activity, and this is resulting in significant house price growth. Indeed, it was recently revealed by Halifax that the average rate of house price growth in November was at a four-year high.
Obviously, there are multiple factors that have helped sustain this strong level of house price growth. Most notably, the Stamp Duty Land Tax (SDLT) holiday has succeeded in coaxing buyers back to the property market––be they seasoned buy-to-let (BTL) investors or first-time buyers––by offering up to £15,000 in tax savings on any given property purchase.
However, it’s worth considering the other factors underway in London’s property market. With the UK in a second national lockdown, many investors will be keen on hedging against future COVID-imbued market uncertainty through acquiring safe-haven assets like British property. As you’ll read below, this is having a positive impact on the PCL market.
Investors are flocking to PCL opportunities
The PCL property market has managed to be one of the most active areas of the UK’s real estate market during the whole of 2020. When discussing why this is so, we must first begin by understanding the behaviours of overseas buyers.
Given that international investors represented over half (55%) of all the PCL property purchases recorded in the second half of 2019, anything to further incentivise or dissuade such foreign actors would hugely impact PCL property transaction figures.
Earlier in the year, alongside the announcement of the aforementioned SDLT holiday, UK Chancellor Rishi Sunak indeed announced that he would be implementing 2% SDLT surcharge for non-UK based buyers of British property from April 2021 onwards.
So, for those seeking properties worth over £5 million in the UK capital, a 2% additional cost may represent a substantial amount of wealth. To avoid this, many overseas buyers who may have been contemplating a PCL property acquisition have rushed to buy such properties before this surcharge is applicable. This trend will undoubtedly continue until 1 April, 2021.
Remote working and PCL
On the topic of the PCL market’s future, many property speculators were concerned earlier this year that London’s property market would potentially collapse entirely as a result of remote working. With homeworking set to remain the norm for the foreseeable future, commentators predicted that professionals would escape the capital en-masse in favour of roomier, cheaper properties farther from their London employer’s offices.
While there have been some signs of shifting demand from urban London neighbourhoods to suburban ones, according to Rightmove statistics, there has been no recordable effect on the UK’s property market as a result.
Conversely, property specialists Savills have actually discovered that over half of all transactions including properties worth more than £5 million in the UK this year were all located in just five central London postcodes.
A busy few months
Given the performance of the PCL property sector in 2020, I only foresee this market growing stronger and stronger in the years ahead. Recent developments in the production of COVID-19 vaccine have many hoping that we may return to normality by Spring 2021, which would represent fantastic news for those involved in bricks and mortar, should it transpire.
In the coming months, I anticipate a surge in activity across the PCL market as buyers look to take advantage of the tax breaks on offer. As such, it will be important that these buyers have access to the financing needed to complete these transactions quickly. If not, there is a risk any purchase they attempt might be concluded in April 2021 when the current tax breaks in place are removed.
Overall, I cannot help but be impressed by the performance of the property market more generally during the pandemic. Having experienced slow growth in the years following the EU referendum in June 2016, it is clear that buyers are eager to take advantage of the opportunities on offer. This is particularly true when it comes to PCL property.
An outlook on equities and bonds
By Rupert Thompson, Chief Investment Officer at Kingswood
The equity market rally paused last week with global equities little changed in local currency terms. Even so, this still leaves markets up a hefty 10% so far this month with UK equities gaining as much as 14%.
The November rally started with the US election results but gathered momentum with the recent very encouraging vaccine news. This continued today with the AstraZeneca/Oxford vaccine proving to be up to 90% effective in preventing Covid infections. This is slightly below the 95% efficacy of the Pfizer and Moderna vaccines already reported but this one has the advantage of not needing to be stored at ultra-cold temperatures. One or more of these vaccines now looks very likely to start being rolled out within a few weeks.
Of course, these vaccines will do little to halt the current surge in infections. Cases may now be starting to moderate in the UK and some countries in Europe but the trend remains sharply upwards in the US. The damage lockdowns are doing to the recovery was highlighted today with the news that business confidence in the UK and Europe fell back into recessionary territory in November.
Markets, however, are likely to continue to look through this weakness to the prospect of a strong global recovery next year. While equities may have little additional upside near term, they should see further significant gains next year. Their current high valuations should be supported by the very low level of interest rates, leaving a rebound in earnings to drive markets higher.
Prospective returns over the coming year look markedly higher for equities than for bonds, where return prospects are very limited. As for the downside risks for equities, they appear much reduced with the recent vaccine news and central banks making it clear they are still intent on doing all they can to support growth.
Both factors mean we have taken the decision to increase our equity exposure. While our portfolios already have significant allocations to equities and have benefited from the rally in recent months, we are now moving our allocations into line with the levels we would expect to hold over the long term.
Our new equity allocations will be focused on the ‘value’ areas of the market. The last few weeks have seen a significant rotation out of expensive high ‘growth’ sectors such as technology into cheaper and more cyclical areas such as financials, materials and industrials. Similarly, countries and regions, such as the UK which look particularly cheap, have fared well just recently.
We think this rotation has further to run and will be adding to our UK exposure. This does not mean we have suddenly become converts to Boris’s rose-tinted post-Brexit view of the UK’s economic prospects. Instead, this more favourable backdrop for cheap markets is likely to favour the UK.
We will also be adding to US equities. Again, this does not represent a change in our longstanding caution on the US market overall due to its high valuation. Rather, we will be investing in the cheaper areas of the US which have significant catch-up potential.
We are also making a change to our Asia ex Japan equity holdings. We will be focusing some of this exposure on China which we believe deserves a specific allocation due to the strong performance of late of that economy and the sheer size of the Chinese equity market.
On the fixed income side, we will be reducing our allocation to short maturity high quality UK corporate bonds, where return prospects look particularly limited. We are also taking the opportunity to add an allocation to inflation-linked bonds in our lower risk, fixed income heavy, portfolios. These have little protection against a rise in inflation unlike our higher risk portfolios, which are protected through their equity holdings.
Optimising tax reclaim through tech: What wealth managers need to know in trying times
By Christophe Lapaire, Head Advanced Tax Services, Swiss Stock Exchange
This has been a year of trials: first, a global pandemic and, now, many countries facing the very real possibility of a recession. For investors, private banks, and wealth managers, these tumultuous times have manifested largely in asset price volatility, ultra-low interest rates and uncertainty about when things may level out, as well as questions about what can be done to safeguard portfolio performance.
The answer here lies within identifying and creating efficiencies to maximise performance and minimise cost, and while there is a slew of options as to how to do this, they are often siloed or have a single USP. Tax optimisation, on the other hand, provides benefits to all, not just in increasing returns for investors, but also in creating economies of scale across stakeholders, creating millions – if not billions – in savings for banks.
Evolving tax reclaim
The tax reclaim process used to be a tedious one banks had to manage themselves, and required detailed, industry and country-specific knowledge to stay on top of constantly shifting requirements and regulations. And when we consider that many countries – such as the UK – allow for capital gains exemptions, tax optimisation may not seem like an integral part of the process. However, this isn’t the case for all countries, and can lead to severe after-tax implications on global portfolios.
Furthermore, even if you’re able to avoid double taxation, getting the money back is not always as simple as it sounds. This, combined with the fact that countries often have contradictory taxation rules or requirements, makes navigating the tax reclaim space a challenge even for those with the right expertise and experience.
Ultimately, providing tax optimisation to investors ends up being a heavy lift for private banks and wealth managers, who often don’t have the right solutions, are relying on outdated technology and manual processes. While this is generally fine for business, it is no longer fit for the purpose when it comes to tax optimisation. To date, knowledge and expertise have been the key to protecting and maintaining profitable investments and avoiding tax leakage. However, through tax optimisation services starting to emerge, portfolio managers can now manage and reinvest easily.
Today, technology has evolved the process so that banks are able to access and submit tax reclaim – and the relevant documentation – online, leaving the tech provider to coordinate next steps with custodians and tax authorities behind the scenes. In essence, taking the legwork out of the process while assuring consistency and completeness in execution.
Simplifying tax through tech
While tax optimisation may seem like an easy choice in theory, it is not always the go-to for every private bank or wealth manager. Without the right supports and setup, including innovative technologies and automation, tax reporting must be done manually, leading to labour intensive processes and huge time wastage. Changing these processes can be overwhelming for those used to a certain way of operating.
By making tax reclaim digital, banks will be more able to optimise returns and gain efficiencies while reducing redundancies and unnecessary complexities. Cloud based solutions or platforms can offer a safe and secure solution for banks, wealth managers, and investors to access and submit any information required, processing the data automatically for conformity and completeness.
It is critical that providers who intend to offer tax services are able to do so efficiently with the right software and data processing capabilities. Not only does this drive continuity in service and efficiencies in process, but it is the only sustainable way to handle such a complex landscape sustainably without wasting time or money.
End-to-end, technologically driven tax services offer a huge number of advantages to private banks and wealth managers, the most important of which is the ability to provide continuity through tumultuous times. As we move through the end of 2020 into 2021 this will only be increasingly important as banks, managers and investors look to provide new services to clients and strengthen existing relationships in a difficult market.
As investors seek to find returns amid the global economic downturn, the demand for innovative solutions will only increase. Technology like cloud-based software, AI, and data optimisation can all serve to improve not just the tax reclaim processes, but the overall client experience within capital markets. Private banks and wealth managers are suitably equipped to provide these innovative solutions, but those who do not prepare themselves effectively and keep ahead of trends will run the risk of losing current and new clients to someone who can offer more for less.
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