Wealthy clients tend to be ‘citizens of the world’, with assets and interests spanning multiple jurisdictions along with income from a variety of sources. This can make lending – whether for residential or commercial purposes – far more complex for this client group than many realise. David Smylie writes
Often, we are approached by high net worth (HNW) clients at the point of a financing need, with the client under appreciating the time required to process loans for more complex cases, especially if these involve mainstream mortgage providers.
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Rather than weeks, a loan application for a HNW with more complex needs can sometimes take months if the transaction is not approached in the right way.
Navigating Traditional Lenders
While advances in anti-money laundering regulations are welcomed, many traditional lenders are ill-equipped to serve these ‘citizens of the world’ who may have multiple income sources and a variety of assets across multiple jurisdictions. The current KYC and due diligence requirements of many Banks and lenders around the world means that HNW clients who have more complex income and asset positions can find it harder to open accounts quickly and easily.
HNW clients can smooth the process by working with an experienced broker who can help navigate the ever-changing ‘lending-scape’ to get the best solution for that client – not just the best lending rate. Such brokers know exactly who to approach and how to position and articulate the application with different lenders – which can include securing lenders who specialises in HNW debt – saving clients huge amounts of time and ensuring that they secure the best deal across the market.
Clients can further help themselves by being fully transparent with their trusted broker from the very start of any engagement. It is not uncommon for wealthy clients to balk at the volume and detail of information required about their financial position, believing they can second guess what is most important for lenders and withholding some details. This is a false belief and can cause costly and inconvenient delays further into the process.
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By GlobalDataSimilarly, unpleasant last-minute surprises can occur if a property undervalues due to unrealistic expectations it’s value at the start of the underwriting process. This is often caused when proper due diligence has not been given to the valuation underpinning any Real Estate transaction. An experienced broker will ensure comparable evidence is available within the local market and include that evidence as part of any application submission. This ensures the client and lender has a realistic expectation of the property’s value prior to the formal valuation instruction by the Bank. This extra layer of due diligence can be vital in saving any nasty surprises and unnecessary costs.
As an independent asset manager as well as a debt broker, we are able to work very closely with clients and get a much deeper understanding of the clients and their wider wealth and financial situation. Clients really value working with a company who, under one roof, can help them with so many different things whilst at the same time remaining completely independent.
Debt Financing as Strategic Financial Planning
Financing and debt management is absolutely a core Private Banking service, though an important element often overlooked in the sector. In fact, lending can be used strategically as part of a wider financial plan such as using debt as a tool to reduce an inheritance tax liability.
Given the complex needs of many HNW clients, there are also a broader range of debt instruments available to them than many realise. These include Bridging finance, Securities backed lending, Revolving Mortgages, Corporate financing and Luxury Asset Financing
In conclusion, there is a real lack of understand about complex lending to HNW clients in general, and the intricacies involved in taking a lending application from start to finish. Coupled with the length of time it can take means that the lending conversation for HNW clients can often be neglected.
An experienced HNW broker should be engaged early, so that any complexities to the transaction can be understood and positioned/articulated to lenders to give the application the best opportunity of success.
In addition, engaging with a firm like ours means clients are not only introduced to a top tier HNW finance broker, but also a regulated asset manager. This dual capability means a wider view of the client’s financial position can be taken, and the most efficient borrowing solution that takes all assets and liabilities into account, can be implemented.
David Smylie is the Group Head of GSB Private
