Since FATCA was announced in 2010, there have been concerns the reporting requirements would be so onerous as to make having American clients uneconomical for institutions.
These fears were in part justified, as an initial draft of the legislation would have meant so-called foreign financial institutions (FFIs) would have had to report directly to the US Internal Revenue Service (IRS).
However, the “model one intergovernmental agreement”, means FFIs are not required to have direct correspondence with the IRS, instead reporting to their domestic tax authority, which will then feed to the IRS.
According to Vestra US Wealth Management’s Paul Nixon, there are common misunderstandings which perpetuate the idea that having US clients after the implementation, which began on 1 July, of FATCA will be overly burdensome.
“FATCA hasn’t changed the rules, just increased the reporting requirements for those who have to deal with American clients,” said Nixon.
“Everyone seems confused about what FATCA is and what it’s trying to do. The average person on the street doesn’t have to do FATCA reporting, the institutions do. Fundamentally FATCA has not changed the way a US person should be advised.”
Nixon helped Vestra Wealth launch its dual UK and American regulated company, Vestra US, in May last year, with a view to capitalising on the opportunity created by FATCA to capture clients with a “transatlantic footprint”. However, Vestra is not alone in offering wealth management solutions to US clients and more may be about to join its ranks.
Andy Thompson, director of operations at the UK’s Wealth Management Association, said early indications are that at least 90 out of 115 members have registered as a FFI with the IRS.
“Firms have to adapt,” said Thompson. “There were lots of grumbles at the beginning about the US wielding its big stick, but in a couple of years we are going to have 50 jurisdictions all sharing the OECD model of tax transparency. [Being FATCA compliant is] a badge they can hold up.”
James Sellon, managing partner at Maseco, a UK-headquartered American expat specialist, echoed Nixon and said the reticence of some firms to deal with US clients, could “potentially lead to the creation of companies who actively seek US citizens who have been dropped by other firms”.
