Cape Town-based Paul Nicholson loves to fly his retired clients out to Robben Island for a round tour, taking in Table Mountain, and then, after landing back in the beautiful setting of the Stellenbosch Flying Club, giving them a chance to sample wines at one of the local vineyards.
The vintage aircraft he pilots, a 1937 Boeing Stearman, an ex-military trainer aircraft, a Cessna 180, adds another twist to the experience, which is one of the obvious distinguishing features of the service offering at St James Global, which Nicholson set up 12 years ago just as the financial services industry started to become regulated in South Africa.
This seems like a far cry from his early UK career in the ’80s when he worked for what was then London Life, a non-commission-paying life office in direct competition with the better-known Equitable Life.
He was selling pension funds to City brokers, but what propelled him to South Africa was a later move to a wholly-owned subsidiary of Old Mutual International called Finexco International.
This came when he was asked to relocate to South Africa with Finexco International, which made perfect sense given his family background and other ties. His parents, who owned a furniture factory in north London, had decided to emigrate to Zimbabwe, then called Rhodesia, and Nicholson lived the first 14 years of his life there, finishing his schooling in South Africa.
Old Mutual International was in its early days, looking to create a presence in Africa by setting up Finexco International with a sister company called Pioneer, run out of Tel Aviv specifically to help South African residents who had control or influence over some type of foreign assets. The idea was to help protect those assets through their trust company, then known as Fairbairn Reads Trust Company.
“South Africans were probably some of the best money launderers in the world and they accumulated substantial assets, most of which was grey money held offshore.
For 10 years running, at Finexco International we were party to a lot of these transactions. That was just before regulations were introduced,” says Nicholson.
“I thought it was about time to set up my own company and I couldn’t really do that prior to regulations being introduced because it was such a clandestine grey market. So I successfully managed to get the majority of my clients through the amnesty process, which helped them legitimise their foreign assets.”
Our mutual friend
In 2002, St James Global became one of the first 100 financial services firms to be regulated, and Nicholson continued to work with Old Mutual International and its trust company and products.
One of the client groups Nicholson and his team of nine advisers specialise in covering is expats impacted by South Africa’s residency laws relating to worldwide assets.
“There are expat trends developing in South Africa, where many Brits initially visit the country as ‘swallows’, purchase their golf property, establish a degree of permanency and before they realise it, they are deemed a permanent resident in the eyes of the South African Revenue Service.”
This scenario could have significant tax, probate and succession-planning consequences should they fail to arrange their offshore affairs in the correct way prior to becoming a permanent resident, says Nicholson.
“Many British nationals settle in South Africa and their UK advisers have little experience in dealing with their financial affairs from a South African perspective.
“Our focus is on providing alternative and compliant offshore structures to some 70,000 offshore discretionary trusts with South African resident settlors and beneficiaries, which could be challenged by the South African Revenue Services.”
Many of these outdated trust arrangements were established in pre-amnesty days, and St James Global addressed this by using tax professionals in conjunction with a small number of well-known corporate trustees in the Channel Islands, to put together what Nicholson describes as “the most appropriate and compliant offshore structure for South African resident offshore investors”.
Besides expat clients, around 70% British and 30% a mix of German, Swiss and French, there is also the ‘old money’ in South Africa, comprising those who have come from Malawi, Zambia, and Zimbabwe, and South African residents who move money overseas using their four million rand exchange control annual allowance.
The growing black middle class is part of the picture, too. St James Global has just employed Tim Morake as part of the firm’s objective to build a team that, Nicholson says specifically targets black empowered people.
According to Nicholson, government requirements to employ a certain number of South Africans in industry to give them equal opportunity offers the firm points on a scorecard arrangement for employing black people.
“We have to empower, educate and train them, and give them equal opportunity in terms of all the people who we are employing.”
And now that Nelson Mandela has gone, what changes has he seen?
“A lot of people were under the impression that when Nelson passed there would be chaos in the country and that clearly hasn’t happened. It hasn’t had an influence on our business, bearing in mind that our target market is predominantly international business.”
But he says he is definitely seeing a lot more local indigenous people wanting to take money offshore because they are becoming a lot more educated, more sophisticated and international.
“I’ve seen so many more young black entrepreneurs over the past three or four years and I think that trend will continue. That’s a new niche target market for us – your young black entrepreneurs.
“They are the future, they are the youth of South Africa and these are the people who will ultimately be the heads of industry.”