IFAs are geared towards the UK, so much so that anything non-UK is treated as “dodgy” meaning there is little competition for the country’s expat community on the mainland.
This is according to Finn Houlihan, managing director of Arlo Group UK, a subsidiary of boutique wealth management firm Arlo International.
“A typical IFA company or a network is so geared up to the UK market. They’re constantly thinking about managing their risk as a firm,” Houlihan told FTAdviser.
“But actually, when we look at PI [professional indemnity] cover, for example, it doesn't affect the premium having non-residents [as clients].
“All PI firms want to know at the moment is ‘what's our involvement with DB [defined benefit] pensions?’ That's where the risk is in our market at the moment.”
Houlihan said there seems to be a perception in the UK that “anything non-UK is dodgy”.
“It’s this feeling of ‘no, no, we would touch that’. It's that unknown. And I think for a lot of IFA companies, there's enough business for them to operate in the UK. They don't need to entertain going outside of the UK.”
Arlo Group UK was set up after its parent company in the Middle East found an increasing number of clients returning with their wealth to the UK from cities such as Dubai.
In the past two years, it’s gone from £5mn to £140mn in assets under management, and grown from one to 17 advisers.
The majority of advisers who have joined the team come from overseas, having struggled to find a solution for their returning UK expats.
The firm is regulated by the Financial Conduct Authority, has set up an attached tax company ‘ATC Tax’, and uses both Novia Financial and Novia Global to allow clients to more easily switch assets between platforms when on or off-shore.
“The competition isn’t that high [in the UK]. Most of our competition is outside of the UK,” said Houlihan, citing overseas competitors such as AES International, Globaleye, and DeVere Group.
“These are all international IFAs. They're very much chasing the DB pensions and they're doing commission[-based] financial planning. That’s not a space we're in,” said Houlihan.
Thinking of UK companies offering the service Arlo Group UK does, Houlihan mentioned the Fry Group, his previous employer of five years. “But to be honest with you, I can’t really think of any other examples.”
According to Houlihan, Dubai as a place to work is often pitched as a place where professionals can earn a lot without incurring the sorts of taxes to which UK-based workers are used.
In the United Arab Emirates, unlike the UK, there is no capital gains tax or income tax, and workers are often offered packages which subsidise accommodation and children’s education. Capital gains are taxed as part of regular business profits.