Wealth management work is booming as individuals and families from around the world seek UK legal advice on structuring their affairs
For many years private client work has been seen as the preserve of a handful of smaller, specialised firms acting for very rich people who live a privileged lifestyle alien to most. However, the environment is changing and firms based in the UK are now doing an incredible amount of international private client work.
While the work submitted for the Private Wealth Team of the Year category at The Lawyer Awards this year is hugely varied – ranging from matrimonial disputes to financing an art acquisition to succession planning – the linking factor is the cross-border nature. UK clients are in the minority, with foreign families and international banks very much to the fore.
Private client lawyers only expect this aspect of their work to increase as the growth of emerging economies creates an increasing number of spectacularly wealthy people needing advice on their business structures, tax planning and disputes.
As one of the world’s biggest law firms, Baker & McKenzie is not best-known for wealth management. But it is finding that its global presence is a bonus when it comes to advising high-net-worth clients and their businesses, particularly in the Middle East following the Arab Spring.
Work the firm has been instructured on recently includes advising in relation to multi-jurisdictional asset-tracing and freezing orders involving a number of jurisdictions and parties, including in the Middle East. The work involved applying the proceedings in countries that have historically been reticent about enforcing such orders.
The team, led by partner Ashley Crossley and senior associate Salpy Kouyoumijan, has also been acting for a Middle Eastern client on a range of issues covering corporate restructuring, sovereign risk mitigation and asset protection.
Bakers’ private wealth team features lawyers in several jurisdictions, but London, says Crossley, is a hub.
“London is really not just a UK city, it’s a major financial centre in the world and therefore it’s not surprising that the work law firms do in London is heavily international,” he points out. “It’s the future of private client.”
Like the other more general commercial firms on the shortlist, Bakers specialises in bridging the gap between private client and commercial for its high-net-worth clients.
“Most businesses outside the UK are owned by families and individuals,” says Crossley.
The increasing focus of EU authorities on tax is also creating work and despite adding lawyers last year, Crossley says his team’s main challenge is how busy it is now.
Legislative changes often have a significant impact on financial affairs, but usually there is a long timescale involved in making the changes.
Not so when the French government published a decree implementing laws affecting trusts and trustees. Although guidance was published in late December, the decree implementing the law was delayed several times and, when it was finally published, trustees had only a fortnight to submit the required declaration of trust assets.
That was where Burges Salmon stepped in for an institutional client. Just a week before the form was due, the client asked the firm for help with declarations for 58 trusts. Burges Salmon’s private wealth team, led on this matter by partner Beatrice Puoti, cracked on with familiarising themselves with the requirements under the law, drafting declarations in French, completing the forms and reviewing trust documentation for all the trusts involved.
The team split into sub-teams to review separate issues, while accountants and French advisers were also consulted. However, Puoti has developed some serious expertise in this area and has provided tailored training to clients on the issue.
Ultimately, after five days’ work, Burges Salmon met the 30 September deadline, saving its client from potentially severe fines for non-compliance. It also advised a number of other clients on the same issue.
Matrimonial cases rarely go to the Supreme Court, but then few matrimonial cases also include key issues of commercial law. That was the case for Farrer & Co, which is awaiting judgment in Petrodel Resources v Prest.
Farrers partner Jeremy Posnansky QC was instructed on the case in 2010, replacing another firm, for Yasmin Prest. Following a divorce from her husband Michael, the High Court’s family division heard arguments as to the division of wealth. Michael Prest, an oil and trade entrepeneur, held assets in a number of companies and Yasmin Prest had sought an award of £30.4m. The High Court judge Mr Justice Moylan criticised Michael Prest’s evidence, saying he had failed to provide full and frank disclosure.
Moylan J awarded Yasmin Prest £17.5m after finding that Michael Prest was both owner and controller of the Petrodel Group and that assets held within the group’s corporate structure were “effectively the husband’s property”. In making his order Moylan J said properties held in the name of Petrodel companies should be transferred to Yasmin Prest.
In the Court of Appeal (CoA) in October last year Lords Justice Rimer, Thorpe and Patten upheld the appeals brought by the companies but granted permission to take the case to the Supreme Court. The clash between family and commercial law principles made it a key case, and when it was heard in March seven Supreme Court Justices heard the arguments of Farrers’ counsel Richard Todd QC and Stephen Trowell of 1 Hare Court.
The firm also brought in Serle Court barrister Daniel Lightman to argue commercial points before the court.
Posnansky says the outcome could be crucial for spouses who find themselves unable to take advantage of a court order in their favour.
“When it comes to enforcement there’s been a history of spouses who obtained awards but weren’t able to enforce them because the teeth weren’t there,” he says.
The Prest case is an example of the type of matrimonial dispute involving high sums coming to London at present, and Farrers says its mix of expertise – including its media team – has enabled it to take a lead role on many of these cases.
At Field Fisher Waterhouse (FFW), partner Andrew Evans has developed a practice that acts in particular for high-net-worth individuals looking to buy or dispose of material assets such as artworks, yachts or jets. As with many of the shortlisted firms, cross-border issues are common.
“The people who can afford to buy the art, jets and super-yachts tend to be Middle Eastern or Russian,” Evans says.
FFW’s entry for the awards centred around the financing of an art collection. The firm advised a leading investment bank on a revolving facility granted to a wealthy individual for an extensive art collection.
Evans explains that the work was complex due to title issues. The art was not in the possession of the borrower, as is common when an individual buys a piece of art that is then displayed in the offices of a company owned by that individual.
“The issue with that is that if a lender allows somebody other than the owner possession of the art, that person can sell the art to a third party and give the title to a third party,” he says.
The successful completion of the deal, Evans believes, could encourage the bank to lend money to other clients for portfolios of art in the possession of third parties.
Deals for banks are the bread and butter of FFW’s wealth management work, but the firm also has a number of individuals on its books, advising them not only on issues related to their assets, but also on tax planning and structuring issues.
Maurice Turnor Gardner
The piece of work submitted for this category by specialist private client firm Maurice Turnor Gardner reflects the way the practice is developing, says partner Arabella Murphy.
“Our bread and butter is dealing with clients from around the world who may have nothing to do with the UK,” Murphy explains. “They simply want some kind of structure that is going to streamline their affairs.”
The firm recently advised an ultra-high-net-worth European family with assets of well over £1bn who were looking for a way to invest and manage the assets. The main aim was to ensure that the family heirs would be able to benefit from the wealth without having direct access to it. The final structure had to ensure there was no unnecessary taxation involved, although tax planning was not top of the agenda.
Maurice Turnor Gardner associate Corinne Staves led the work. A decision was made to look for a suitable partnership structure to fit in with the local forced heirship laws of the family’s home jurisdiction. A Jersey limited partnership proved to be the best fit and also suited the firm’s expertise, as it had contributed to working parties reforming English limited partnership rules to bring them closer to those of Jersey.
Murphy says familiarity is something clients often ask for, rather than cutting-edge solutions.
“Most of what we do is risk management,” she adds.
The issue of succession planning is now key, Murphy adds, accentuated by geopolitical dynamics such as the Arab Spring and families becoming more aware of the need to protect themselves against events which could affect their assets.
As a result of such work, four years on from spinning out of Allen & Overy, Maurice Turnor Gardner has almost doubled in size and is in good shape for the future.
The private wealth team at Pinsent Masons has grown enormously since the merger between Pinsent Masons and McGrigors in 2012, with McGrigors’ strength in tax adding a new dimension to Pinsents’ private client work.
In late 2012 Pinsents partner Michael Pulford and associate Kate Francis took a long-running dispute on behalf of client Adnan Sharbatly to the Court of Appeal (CoA). Sharbatly had married Maha Shagroon in an Islamic ceremony in London in 1994, but the relationship broke down in 2001. A divorce petition in 2002 saw a settlement after a “hard day’s negotiation”, according to the CoA.
Over the next 10 years the couple fought over “almost every aspect of the financial relationship created by the consent order” and the case returned to the courts in 2012.
At first instance Shagroon successfully argued that the English court had jurisdiction over the case. But at the CoA, 1 King’s Bench Walk silk James Turner, assisted by Deepak Nagpal, argued successfully that the marriage was not valid in England and Wales. Therefore, while the ‘talaq’ divorce pronounced by Sharbatly in Saudi Arabia was valid, the marriage was not, and English jurisdiction was not engaged.
Pulford says the decision could have relevance for many couples, centring as it did around the question of when a marriage is a marriage. “Sharbatly shows what the implications could be when the marriage breaks down,” he says. “Cross-jurisdictional family issues are central to many families.”
The Sharbatly case, he adds, is representative of the type of work Pinsents is doing, with a strong client list of ultra-high net worth individuals in the Middle East. However, Pulford adds that the firm’s differentiating factor in this field is its commercial expertise and clients with “new money”.
“We like people who do things with their money,” he concludes.
Withers’ wealth management team enjoyed a good 2011/12, with a significant increase in turnover and plenty of activity. Partner Christopher Groves says Withers prides itself on being able to manage “incredibly complex issues” for entrepreneurs and high-net worth individuals in-house, providing a range of services across the board that are not simply concerned with their private client affairs.
An example of the work Withers does for its clients was submitted for the awards. Family and business planning head Patricia Milner led a team acting for the family and estate of a private equity businessman and keen philanthropist who died suddenly in early 2012. The estate was valued for probate at more than £200m, and a team from across the firm was drafted in to support Milner in managing the variety of issues which arose – including media coverage, corporate transactions, banking issues and relationships with the FSA.
“It’s about being there to provide support for the family,” says Groves, describing Milner as a “lynchpin” for the businessman’s family.
While he admits that not every private client is looking for full-service advice, Groves does believe that Withers’ approach is becoming more common. He adds that international services are also now crucial for a wealth planning group.
“There’s a generation now where these people who’ve made their money through the 1980s and 1990s are selling their businesses,” he says.
“Capital became much more global in the early part of this century. The kind of work we’re seeing these days is very international.”