Sunday, 8th November 2009

 

17 July 2008 - James Rutter

Rathbones decides offshore is not worth the risk

The decision by Rathbone Brothers, the UK wealth manager, to sell its offshore trust operations was driven by the negative view clients take of the business, according to chief executive Andy Pomfret.

"It has become apparent that the offshore trust business is generally under pressure from regulators globally." said Pomfret. "The perception of clients, rightly or wrongly, is that they are wary when such a group is owned by a UK-listed investment manager."

Rathbones announced this morning that it was planning to sell its Jersey and Singapore trust companies to their management and reviewing options for its British Virgin Islands and Swiss operations.

Pomfret said the potential reputational risk of owning offshore trusts has increased.

"These businesses can be seen as being too close to the UK. You only have to look at the mess that UBS has got into in the US, or at Barclays being forced to provide details of offshore client accounts to UK tax authorities, to see that. There is the perception that these businesses could be open to interference because of their ownership."

A UK court ruling in 2006 forced Barclays to disclose confidential information about clients' accounts in offshore jurisdictions including Jersey and Guernsey.

UBS and Lichtenstein bank LGT are being pursued by authorities in the US for allegedly aiding tax evasion through the use of offshore accounts.

Pomfret said Rathbones' offshore trust businesses would have a better chance of growing as indepedent entities.

The management buyout of the Jersey and Singapore operations could yet fall through and, given uncertain market conditions, finding an alternative buyer could be tricky, but Pomfret said the long-term goal was not to be involved in the offshore trust sector.

He suggested the market for offshore trust services was "unlikely to expand greatly", which meant the obvious route to growing businesses would be consolidation.

Rathbones, which is listed in the UK, decided to announce its intentions ahead of its interim results next week.

"Generally, investment management businesses are higher rated than trust businesses," said Pomfret.

Rathbone Brothers' share price was up 2.4% at 747pence at 12.10pm. Its share price has halved in the past year.

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