Maitland: Story of SA-seeded startup to multinational administering $280bn

Here’s a entrepreneurial success story of a bunch of low profile South Africans who have built a massive global business so far under the radar that most of their countrymen have never heard of CEO Steve Georgala and his mostly Matie-taught top team. The Maitland Group was established 40 years ago as the Luxembourg offshoot of SA legal firm Webber Wentzel. It is now one of the world’s leading players in managing the tax and investment affairs of the super rich and major multinationals. Through 15 offices worldwide and 1 200 employees, it administers a staggering $280bn in clients’ assets and has advised on some of the most complex global corporate transactions. Georgala has been with the firm for three decades and took over captaincy when founder Eric Pfaff passed away in 2009. On Friday, in the famous Lincoln’s Inn park in London, he told me Maitland story. – Alec Hogg 

I’m with Steve Georgala who is a chief executive of the Maitland Group. Steve we’ve just had a fabulous lunch here in London. We’re sitting in a park now and you were telling me the story of Maitland, which in a way was the offshoot of Webber Wentzel before it became independent.

That’s correct. We started off, most of the founding partners of Maitland were all partners of Webber Wentzel until the arrangement of Webber Wentzel was stopped. So in the early days when I became a partner I had to be approved by the partners of Webber Wentzel as well as the ones who were in Luxembourg, so we were very closely tied with them, but as our paths deviated and the devaluation of the Rand created the big drop between the two, it became harder and harder for us to equalise things like remuneration, etcetera and there was not much flow of clients between us, so we decided that… in fact, they decided that it will be best if we were apart and that’s what we did.

That was 40 years ago, that’s a long time ago that you started the business.

That’s right, not myself but Eric Pfaff started it in 1976. He had been in Chicago working for Baker & McKenzie, he had come back to Johannesburg, worked for Webber Wentzel, worked with Pierce Newton King who was then a partner at Webber Wentzel and the father of Nicky Newton-King, and then Eric decided he wanted to come to Europe and he was looking for places to come. He went to Paris at one point and then he ended up in Luxembourg, brought his family to Luxembourg, set up the office. Rory Kerr joined him shortly after that and by the time I got there, there were 15 other people already.

Your accent is clearly South African.

That’s correct and I don’t think you shed your accent unless of course you’re a Trevor Noah who’s got to learn to speak American so that the people can understand you.

You’re from Nelspruit originally?

That’s correct, born in Nelspruit. I went to school there and then left there at the age of 17 and started my journey to Stellenbosch and from there to Johannesburg.

At Stellenbosch, you met your wife, you did your law degree, you went to Webber Wentzel, and what brought you from Webber Wentzel as a young man still to Europe?

I was 27 years old. The day I had arrived at Webber Wentzel, I’d been taken around because I arrived after the other article clerks had and I had to be introduced on my own. I was introduced by one of the senior clerks called Gavin Routledge and Gavin had more interest for everybody than I did because they were all asking when are you going and I said where are you going. He said he’s going to Luxembourg. I said how come and he said he was going to go and work in the office. I found out that it was a possibility he was the first to go for a six-month stint and I made sure that I was in line. I went and two years later I was there.

As part of Webber Wentzel at that stage?

Yes, working for the firm called Webber Wentzel SARL, which was the Luxembourg firm. In fact, it used to Webber Wentzel & Company SARL.

At that stage it was law work really. I guess a bit of tax came into it, no doubt?

We did international legal consulting. We called ourselves international legal consultants because we couldn’t be local lawyers. The local law community tolerated us in that guise until 2008, so we did mostly law work but we’d started to do trust administration and that type of thing and company administration and so many of those 16 people that were there were looking after companies. When I got there it seemed obvious to me that, that was part of our business and the other partners weren’t as convinced and it was only in 1990, so five years on that we really set about setting up a fiduciary services business and in 1995 we set up a wealth services business and so we went on.

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16 people, there are 1 200 people today. Now that’s a mushrooming. Reading through the documentation about your history, perhaps one of the forks in the road was when you did start the wealth management business and discovered that hedge funds can actually fit quite well alongside legal services.

Yes, it wasn’t so much that. We had clients who, in the late seventies, early eighties we’d help them set up international businesses and then you’d find in the nineties, these guys sold their businesses and they would end up with big chunks of money. They had a relationship with you and there was nobody else and then the choice was how do we help them go from an active investment to a passive investment. We used to take them along to bankers we knew and say well here’s a client for you, do you want to speak to him? We charged time for that.

The client would make the decision. If it was a good decision, it was the client’s decision, if it was a bad decision, it was our fault, and we never made any money out of it. In 1995, by that time we’d already been working with hedge funds for five years and we concluded that, that seemed like a good way to go if we could get access to the best funds of the world and we could put our clients into those. Then the clients would ask us where shall I put my money. We’d simply say you can go here, this represents our view, and if you don’t like that then go on your own, so that we could really structure that and we teamed up with Permal at the time when Permal was a very different business to what it is now. It’s just been bought by Legg Mason.

It’s one of the world’s biggest companies but in those days the Per of Permal was Jean Perrette and he was a friend of ours and we had a joint venture with them where they provided their funds expertise and we provided the clients, but that didn’t really boost the business very much. It was the fund services businesses that really did because that has much more head count and when we bought the business called Fin Source in Cape Town, even then it had 120 odd people and by that time Maitland was already a bigger firm. We had 200 plus people across our European offices. That did boost us and the big head count growth has been in that sector.

Where did the name Maitland come from? isn’t it a suburb in the Cape?

It now is very funny because our building is almost at Maitland in the Cape. I think people probably sometimes see our sign and they think it’s the name of the town but the answer is that we bought this business in Geneva and it was an accounting firm, a small trust business, trust and accounting and we then adopted that name in our business when the time came for us to find a name other than a South African name to give to our clients who were concerned about the last throes of Apartheid in the early nineties, it seemed odd that they’d be using South African advisors when everybody considered us to be pariahs, therefore we had to come up with a name which wasn’t as obviously associated with South Africa, so we used the Maitland name.

As it happens it works quite well in the Cape.

That’s true. Our funds we called Constantia, so that was also a Cape name.

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You mentioned that you have a wealth service and what you haven’t mentioned yet is your relationship with the Oppenheimer family, which is in fact where the company started.

I think that one doesn’t want to overdo that. I think the key thing was for us when Eric went there in the early eighties, that whole group, the Oppenheimer family, De Beers and Anglo American did all the investments together in a fixed ratio funnily enough, when we got to Luxembourg that was the group of clients that we were assisting, mostly the companies, but also the central holdings which was their company, their local service company there.

Over the years we got more and more involved in that and sometimes through periods over the 40-year period less than others. Right now the links are very tenuous because they’ve set up their own parallel systems to ours and they’ve taken all of that in-house which makes for the family having liquidated their assets which we were participating in. As advisors to them, it makes a lot of sense to be on their own so they have a big infrastructure of their own, they don’t need our support.

Do you manage the affairs of other rich people around the world?

I think to use the word rich is sometimes provocative.

High net worth individuals, the one percent.

The one percent; I think the difficulty with the kinds of services that we offer in this world and one of the key features of business has been, we’ve always been a tax compliant business. We’ve always insisted that our clients not only be tax compliant in the South African context of exchange control compliance, so that meant that for much of the eighties and nineties we were excluded from what was one of the big gross markets, which the Channel Islands really absorbed and there are businesses in the Channel Islands today that really were developed on people back then committing breaches of exchange control etcetera.

We didn’t get into that business and so we were excluded from it. As the amnesty came in in 2003 I think it was, suddenly it became possible for us to claw back. We did and by then we had a South African Trust business and so we’ve slowly but surely been able to build that business out. The fact that the expertise that we deploy and the scale on which we have to deploy it is, you know it’s not for the mass affluent. You need to have complex problems; complex international problems and then we are for you. That’s when Maitland steps in.

A mass affluent, how would you describe them?

That depends on where you are on the scale of wealth and what your attitude to that is. I’m talking about people who have £500 000 to a £1m that they’ll be keeping in an offshore account and that’s not our business. These are people who have done very well; they have managed to gather a lot of money and in most people’s eyes would be considered to be, to use your word, ‘rich’. The reality of it is that the kinds of services that you can offer in that category are relatively limited because it’s so expensive to do as a percentage, so for a very wealthy person getting lawyers to look after it making sure that you’re not in breach of your tax rules especially when you’ve got family and children and they move countries and you’ve got the wealth and you need to make sure that they are able to enjoy the wealth and at the same time comply with the tax rules and that is the challenge and that costs money.

Do you have a big South African client base still?

We do. Clearly in the private client space one of our areas of pre-expertise, the area that we’ve actively, and again building on the theme of the amnesty has been this common reporting standard and so since that completely ties in with our whole ideology of tax compliance that we’ve been able to build a lot of expertise in that space.I have some colleagues who specialise in that and it so happens that because of the historic concerns that South Africa had with money and had about the future, there are many of them who even after the amnesty appear to have been in non-compliant situations and now for us we are being inundated with requests to help these people to make themselves compliant and suffer the consequences but so we have an opportunity but that problem is not unique to South Africa. We’re finding clients who need those services all over the world and particularly in Brazil funny enough. We have had quite a lot of success.

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You have 15 offices around the world. It is an industry that is becoming more and more in focus, no doubt helped along by the Panama Papers. Do you have any thoughts on those exposé’s?

Firstly, the real problem is what we saw yesterday ,that someone has been arrested for having stolen the papers, which is an interesting dilemma because you’ve now arrested someone who appears to have revealed a lot of criminality, which, let’s be clear that these people who have been non-tax compliant have committed most of the time crimes somewhere. They haven’t gotten the money as a result of crime but by not declaring your taxes that’s sometimes criminalised in their home country, so one can’t have too much sympathy for them.

The Panama Papers nevertheless is a massive breach of privacy, so when you go and see your lawyer, you don’t expect to have all of your private affairs spilled out particularly if there’s nothing wrong with what you’re doing and the bulk of this work, let’s be clear, the bulk of the industry today is completely tax compliant. People use international structures for reasons which are not related at all to taxation but the avoidance of taxation. It’s a myth, which is propagated by the Press and Journalists for Justice or whatever they call themselves and if they just bear to think about it and actually understand the basic principles of accounting they’ll know that you’re not going to find millions of Dollars in the Cayman Islands like they always say.

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You have the BBC reporter going down there and saying to indigent person, don’t you think it’s unfair that you’re sitting here in this crumby little shack and down the road there are banks full of Dollars, trillions of them. You know, I mean that’s almost irresponsible I would have thought to come up with that kind of idea, but there’s no doubt that the Panama Papers, it’s not the last we’re going to see of this. It’s not the first and I think that we’re going to see more and more of it as people are encouraged by it. It wouldn’t surprise me that as we speak they are already filtering through another 12 million documents stolen from somebody and amongst those they’re going to find many people who haven’t been compliant and I think it’s probably a good thing that they would be brought forward but how much time do you want to spend digging up the past? The key thing is that CRS and FATCA are cleaning up the future.

What is that, CRS and FATCA?

CRS is the Common Reporting Standard, which requires anybody who is an account holder to file that has, you’ll forgive me if I’m not right up to speed with technical jargon on this, but the reality of it is if you have a bank account in Luxembourg and your Luxembourg bank requires you to comply with the disclosure requirements, they need to be able to see where are you resident and where do you pay tax and you have to give them a tax number.

They will then send those data to your home state and now your home state will say actually when you fill out your tax return and if you make no mention of this, they will be asking you well why haven’t you made mention of it, so there’s no place to hide anymore. It’s not yet universal and there are still people that think somehow or other they can crawl under a rock somewhere but the reality is you can’t. FATCA is the father of CRS, it was US driven and it is much more specific and US focused but it’s essentially the same thing. You are obliged to disclose and your information will then be disclosed by the people to whom you disclose to your tax jurisdiction.

Amnesty or the fact that you’ve been inundated by amnesty request is no coincidence given these developments on a global scale?

Yes, when people realise that there is no place to hide they suddenly cease to be in denial. I haven’t had to deal with any of this directly myself but from what I can see, is that we have a lot of people who just might be perfectly legit but they might have concerns and then they’ll seed advice because suddenly there’s a sanction and there’s also an opportunity to get things into the open because let’s be frank, this could have happened generations ago. You could have inherited a bank account in Switzerland and you never knew about it, then someone called you up and told you and now it’s too late for you to disclose it or you’re uncertain etcetera. You don’t even know how to get your hands on the money and this might be a liberating exercise for you.

Steve, in the budget Pravin Gordhan announced, and I’m talking about South Africa’s budget, Pravin Gordhan announced that there was an amnesty and he was expecting quite a lot of money to come through. I think he was talking about billions of Rands, do you think that, that’s an overestimation?

It’s so hard to say. History has shown us that the amnesties which have happened in the last number of years, in the last 20 years or so, in Spain, in Italy, in South Africa before in the early 2000’s and now again, they do, the people suddenly get the message and it has to be coupled with something else. I know in the previous amnesties there wasn’t an automatic sanction that would have, there wasn’t a way of people finding you out but now it’s almost certain that you’ll be found out and if you don’t take advantage of this and you’re found out then the consequences are going to be dire and I think we’re going to see quite a lot of action. I would expect to see action, all people simply saying I can’t deal with this, I need to emigrate, so it’ll be an incentive for people to leave the area where they feel most exposed.

You have 15 offices around the world. You mentioned earlier, Brazil. You’ve just opened an office in Miami. Where else in the world are you represented?

To ring them off let’s start. We’re open in Miami but in the Caribbean we’ve had Cayman and the British Virgin Islands, in Richmond Virginia, New York, we have a representative office. Halifax Nova Scotia, Dublin, London, Luxembourg, Malta, and Mauritius.

This is a big international firm now and you have $280bn that you administer. Those are huge numbers. When you compare yourself in your industry globally where do you sit?

I think it’s a question of what the measure is that you’re using but if you’re using that as a measure you know the leaders have trillions of Dollars, so that’s to put it in perspective, I think you’re probably in the just under, between 10 and 15 position, depending on what people count. Sometimes they double count etcetera but round about that. We are one of the larger administrators and certainly the largest one which is not owned by a bank or owned by a private equity and I’m confident about that statistic.

Lots of South Africans in your line up in the company.

As our staff, yes, we have obviously. Half of our staff are in South Africa, but yes we have hundreds of South Africans and we create many jobs. At any given point in time I think we have 60 interns in Cape Town alone.

Of your top team were there many like you who came from Webber Wentzel and stayed with Maitland.

Yes, I think that just through the passing of time thinned us out a bit. Rupert Worsdale is still very active in Cape Town. He was there before me and Rupert is a real expert in all things tax and CRS etcetera and he’s running the team in Cape Town. He chose to go and live in Cape Town, it was his long-term dream to go back there and I’d say he’s the last one of those, of us, the original team who came from Webber’s but we have many South Africans in the top echelons of the business.

You don’t have a head office?

Interestingly enough not; we have a senior holding company that’s in Malta. I sit in London. Most of my executive team are spread across Luxembourg, London, and Cape Town.

That must bring communication challenges.

In international business you have communications challenges anyway so there’s no optimum place to be, but these days with VoIP dialling our communication costs are lower than they were before. We spend more time on the phone, video conferencing etcetera. At any given point in time one of the features of our business, we run it as one firm, so we don’t have local offices or regional head offices and those types of things.

Everything comes to the centre and so that means that in servicing our clients we’ll often have a team of people made up from five different jurisdictions that might be working together on solving a particular client’s problem and they will all have to work together in one way or another and in the same way we need to be able to produce invoices which can go to that client. He doesn’t want to get ten invoices, he want’s one and our accounting system has to be able to deliver that. That means we have to have quite a lot of synchronisation between all of our teams and that we have.

Steve, you’re dealing in many respects with the one percent of the one percent. How are these people feeling about an apparent concerted effort to isolate them, to take their money away? There is pressure against the really seriously wealthy.

Look I don’t think that we’ve seen in the world’s time and from what I can see maybe in the Roman times or whatever they could have had kind of wealth around, but if you think about it, the street we walked earlier today we didn’t count them off but we probably walked past ten motor cars which cost north of GBP250 000. That’s more than any normal person can expect to only earn in their lifetime. There’s no doubt that there is pressure but then how did these people get their wealth?

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I think if you read somebody like Piketty’s book, he talks about everybody as being somehow or other have gotten their wealth by illegitimate means. Would you say that of Bill Gates? Would you say that of Warren Buffett even? The answer is no. These guys made their money, they worked, but they focused on making money. They accumulated capital. The question is should their children be entitled to take that wealth and live the same life that their parents lived? I’m not so sure about that, but many of them are struggling to do just that. That’s the challenge; how do you ensure that your wealth perpetuates, how do you ensure that your children are looked after, which is a legitimate concern for anybody.

Looked after but not overly pampered.

You have different approaches in different families. Some families would dish out money and people would never work. All they do is they live off the capital. I have very little sympathy for those, but the John F Kennedy’s school of thought was get your kids out there, every one of them has got to make their own way even though they were very wealthy and there are many families which do just that and they, in fact who don’t even give money to their children but you still have the advantage coming from a civilised society where you have generations of ancestors who have education. You can’t eradicate that. That is a true wealth and that’s the relative poverty that we see. It’s a much bigger gap there than in sheer money terms.

Somebody could walk out the bush tomorrow with a diamond and be a millionaire but he’s still not going to have the history and he’s going to lose the money immediately or could lose the money immediately, whereas I think transmitting that thing is more my concern; education. You could take money away but why is the state going to be a better allocator of capital than Warren Buffett is, I don’t think so. I don’t think there’s any pre-condition that makes it. We’ve seen the government’s make huge mistakes in allocating capital. It’s all about who allocates the capital, isn’t it? I don’t care if people accumulate it. Every Lamborghini you see has been built by people who has been paid a wage.

That allocation of capital is an interesting topic as well because many of the billionaires are now themselves trying to allocate that philanthropy. Often one hears them say it’s more difficult to give it away than to have made it.

I’m in the fortunate position of actually having that experience myself because I’m doing that for a client and I can assure you that it is. It is very difficult if you don’t want to be discriminating as to how you get it, if you have an objective to achieve a goal then it’s as difficult as investing except that you’re investing for a social outcome rather than for a monetary outcome and you can cover the entire spectrum of investing as well with the associated costs. It’s almost exactly the parallel of investment but in the negative, in the inverse proposition and so I think that it’s no easy thing to give money away. It’s easy to waste money, but that’s just it, you’re destroying a part of capital if you do that and then when it’s gone somebody else has got it.

It’s against the fibre of someone who has spent their whole life building up the capital but before we finish, you’ve lived in the UK for a few years now, can you give me your thoughts on Brexit, not the way you’re going to vote but whether you think that Britain should leave the European Union or if it’s in its worst interest to do so?

Firstly, I can’t vote but this is the first time since 1994 when we had the first election in South Africa that I’ve wanted to vote but I can’t. I could then but I can’t now and I think that we should vote to stay in. I think that it’s a no-brainer. The UK has certain attributes which are valuable to Europe and Europe has many attributes which are valuable to the UK. I think that it’ll be completely foolish. I think even the idea is a stupid idea. The idea of leaving the European Union is a ridiculous proposition as far as I can see and I think it will impoverish everybody from all sorts of points of view, not just monetary.

There’s going to be a change in the mind-set in a way which will be counter-productive and the dream of hooking up with the US or whatever, it’s just too far away. You can get in your car and drive across to Paris today as we speak right now and we’re close. The UK flies to 80 destinations in Europe from London and the UK airports. It’s hugely connected into Europe. Where are these people going to go after that? They’re just going to carry on going on holiday in Spain. Every day the airports are choked with Europeans. The UK people going to Europe on holiday, it’s part of their stamping ground now. Brexit will cut that off, and it certainly will affect that because you’d need visa travel, you’d need all of those things, why do it? I just can’t even get my head around the idea, so there you go.

Steve Georgala is the Chief Executive of the Maitland Group.