A world of opportunity

Around 300 private client professionals gathered in
London in May for Jersey Finance’s annual private client conference, A World of Opportunity, where the growing international agenda for tax transparency and philanthropic
structures were top of the bill.

Keynote speaker Stephanie Flanders, chief market strategist for the UK and Europe at J.P. Morgan and former BBC economics editor, provided an insight into the financial crisis focusing on the economic recovery in the UK and Europe. She considered the impact the recovery may have on the private client industry, explaining that reaching a stage of ‘normalisation’ in the economy would take longer than previously expected.

Furthermore, she referred to UK business optimism as being at its highest since 1968. Though the country remains in austere times, she believes that, on balance, there should be no further tightening of budget policy this coming financial year.

Richard Hay, Stikeman Elliott tax partner and head of private banking practice, gave the second keynote address discussing tax and information exchange. He said transparency is here to stay and would have a wide-ranging impact on advisers. “Governments will be pushed to use their tools to raise money for the benefit of those that favour redistribution.”

Hay also joined an expert session, Transparency in Practice, to further expand on the global transparency agenda. Moderated by Flanders, the panel comprised senator Ian Gorst, chief minister of the States of Jersey; David McNair, head of growth, equity and sustainable livelihoods at Save the Children UK; and Alan Binnington, president of JATCo and private client director at RBC Wealth Management. (Pictured above Richard Hay, left, and Ian Gorst.)

A lively debate ensued with
the value of a public register of
beneficial ownership questioned, and
the suggestion that it was the quality
of the information collected and shared with law enforcement agencies that should be of supreme importance.

McNair said: “We live in a world where 800 million people go hungry at night. If you really want to get to the root of the problem, you need to deal with poor governance.

“We need to follow the money.
Find out where the money is going. All too often the money ends up in secret bank accounts in rich countries.

“We want to engage with organisations and improve transparency. We welcome the moves on transparency that the prime minister [David Cameron] showed at the G8. We want to move transparency further forward but in a way that is measured, that doesn’t undermine investment and supports tax authorities.”

Data collection

Jersey’s framework for supervising corporate and trust service providers,
and collecting good data was highlighted as being ahead of other jurisdictions, including the UK.

Binnington said: “In terms of transparency, we in Jersey are well ahead of the curve. However, I have severe doubts over the usefulness of the UK’s register of beneficial ownership because until they regulate service providers,
the information that is placed on
there is dubious.”

The panel agreed that more efficient quality data flows should be implemented on a global playing field basis to assist with law enforcement. They underscored Jersey’s role in helping to raise global standards and claimed that the focus should shift to how it could assist similar jurisdictions and engage with developing countries to support data exchange frameworks.

Hay said: “What we want is a complete and accurate data picture. Jersey is more successful at data capture than any other jurisdiction. We want accurate information for tax and
law enforcement.”

Evolving markets

Dr Greg B Davies, managing
director and head of behavioural
and quantitative investment philosophy at Barclays Wealth and Investment Management, opened the afternoon session with perhaps the most
thought-provoking talks of the day.
Davies discussed behavioural finance and its impact on an investment decisions.

“Figuring out the right answers
for investors isn’t as difficult as we might think,” he said. “The big problem is not providing them with the right answers; the problem is in actually carrying it out.”

Davies argued that short-term emotional needs dominate our thinking and that most people fail to prepare for their long-term financial needs. “The average investor underperforms by 300 basis points due to their need for emotional comfort,” he said.

“Instead of aiming for risk adjustment returns, we should aim for what people really want to invest in: the best possible performance you can get, relative to the strength, discomfort and anxiety a client is willing to endure across the investment journey.”

The final panel session of the day, Evolution or Revolution, took a practical and detailed look at the role of the trust structure in the 21st century. The participants debated if and how trusts have changed in line with the emergence of new geographical markets, in terms of what is being used for and in the context of an evolving governance and disclosure model.

Flanders moderated the session, joined by Ken McCracken, joint managing director of Withers Consulting Group; Neel Sahai, director at Minerva Trust & Corporate Services; Maya Prabhu, managing director of Coutts Institute; Salpy Kouyoumjian, in-house counsel at Baker & McKenzie; and Nick Williams, partner at Ogier Legal Jersey.

In the debate that followed, the panellists emphasised that high net
worth individuals were comfortable
with jurisdictions that have robust disclosure frameworks in place. They
also discussed how clients were increasingly looking for multidisciplinary services capable of catering for their bespoke family, philanthropic and commercial requirements.

Prabhu described how trusts are
set up her own practice and the effect of family dynamics as ‘keeping the
mice from the cheese’. “It is all about balance and control,” she said. “Balancing the empowerment of the heirs with control.”

Kouyoumjian added: “I see clients across many jurisdictions, but tax is not the driver in families trying to preserve and protect their wealth. There are
many factors, tax is just one of them.”

Jersey’s appeal as a jurisdiction for international wealth planning was underscored by its 30-year history of trusts and its fifth anniversary of foundations. Some 21 foundations
were formed in the first quarter of this year, which is around 60 per cent higher than the overall average
quarterly formation during the
previous five years.

This structure was finding particular favour with clients from EU countries, as well as Switzerland, Russia, Latin America and the Middle East. More than 250 foundations are established on the island, a third of those having a charitable or philanthropic objective.

Sahai suggested that the recent update to the jurisdiction’s charity law presented a modern approach for families to engage with philanthropy, with McCracken adding that families needed to continue growing their wealth and taking an entrepreneurial approach.

There was room for some humour as well when Financial Times management columnist Lucy Kellaway closed the event with a speech, poking fun at management fads and jargon.

After the event, Jersey Finance chief executive Geoff Cook said: “Jersey is extremely well placed and held in very high regard by London professionals, who are seeking robust, professional support for their clients.

“What they are looking for is frequently not about tax, but asset protection, security and estate planning and, given the strength of Jersey’s law, its commitment to being a leader in transparency, its expertise and its range
of products, the opportunities for
Jersey are global.” 

John van der Luit-Drummond is legal reporter for Private
Client Adviser’s sister title Solicitors Journal