Brave new world: Jersey in wake of economic crisis

Political change, economic volatility, a shifting regulatory landscape and public attitudes towards wealth planning are all having a significant impact on the global wealth management industry.

We are clearly living through an age of instability and uncertainty, with the situation in Europe in particular having reached a pivotal point. Political change in Greece and France, and economic uncertainty right across the eurozone, are two issues close to home, while we are simultaneously faced with a possible regime change in the US later this year.

Regulatory tsunami

Depending on the outcomes of the whole range of political and economic variables we are currently faced with, future policy making, business trends and cultural attitudes could be severely impacted in a variety of ways. The consequences for the international wealth management community are significant.

At the same time, the wealth management world is faced with something of a ‘regulatory tsunami’, driven by the US and the EU, which is hindering any sort of recovery. I cannot recollect having to deal with as much regulation and proposed regulation as ?we have today.

Also causing a fair amount of pain are the accompanying policies of austerity adopted by various Western governments, which are not helping wealth creation or economic recovery.

The focus of the onshore economies increasingly is on plugging their national deficits by attempting to recoup as much tax as they possibly can. This has led to ?a clamping down on so-called ‘egregious’ private and corporate tax avoidance schemes, and a subsequent blurring ?of the boundaries between legitimate ?tax planning, aggressive tax avoidance and tax evasion.

Private client lawyers are also identifying a growing public hostility towards the wealthy, who might ?be engaging in perfectly legitimate wealth planning arrangements, but who feel victimised and targeted by government policy.

All these political and regulatory issues are of interest to jurisdictions specialising in private client services. Those working in and on behalf of international finance centres need to follow these developments with keen interest.

While the challenges faced by the global wealth management sector are substantial, this is not to say that there aren’t a number of opportunities that jurisdictions that are alert and geared up cannot seize upon.

As the demands of private clients change, so too will jurisdictions have to adjust and evolve their products and services. For example, Jersey’s emphasis today has shifted away from simple trust and company structures to high-value and more complex structures involving trusts, companies, limited partnerships and, most recently, foundations.

How high-net-worth individuals ?and families manage their assets is changing, but this may well provide ?the most sophisticated jurisdictions, which have the experience and ?capability to manage complex cross-border transactions, the opportunity ?to specifically focus more on and ?grow their services for ultra high-net-worth individuals.

Emerging opportunities

In addition, retaining strong links ?with partners in key markets like London, while at the same time building new and stronger relationships with growing economies in Europe, China, India, the Gulf and South America, remains absolutely vital as new investment markets open up and investor demographics shift.

There is no doubt that the emerging economies will continue to provide ?good opportunities. Well-regulated, proactive international finance centres can look to build on their relationships with these markets and grow their private client services.

For example, Jersey has overseas offices in Hong Kong and Abu Dhabi, with representation in India and London, and undertakes regular visits to Russia, in order to build strong relationships with government authorities, financial intermediaries and regulators.

A good example of the success of this approach is Jersey’s foundation structure, introduced in 2009, which has seen particular success with advisers and their high-net-worth clients in markets including Hong Kong, the Middle East and Russia, as well as the UK.

Meanwhile, Africa, which has a distinct lack of financial intermediaries, and Saudi Arabia, which has the highest proportion of ultra high-net-worth individuals in the world, provide jurisdictions like Jersey with a real opportunity to grow new business.

The emphasis must be on a jurisdiction having a robust legal structure and mature court system in place, and being able to offer a safe, secure environment. Those qualities continue to be attractive to clients in these regions where often there is political and economic instability.

Reputational advantage is playing an increasingly vital role in the wealth management decisions of individuals and businesses too. Jersey for one has been quick to make its position as a robust, compliant and transparent financial centre absolutely clear.

Good press

Developing and maintaining a strong judicial and regulatory framework is critical in attracting the right kind of compliant and high-quality private client business. Jersey’s ability to develop high-quality legal and regulatory systems over the years, including a first-rate supporting infrastructure of legal, professional services and accountancy firms, has certainly earned it a global reputation as a leading centre for private client work.

Often, international finance centres are criticised for being defensive should they shout too loud in response to the claims made against them; stay silent and they are accused of being secretive. While there will continue to be detractors, critics and lobbying groups working against the international private client business, it is important that international finance centres are capable of making their case strongly.

Going forward, the top international finance centres will increasingly need to demonstrate their value and the importance of their role in the global marketplace, backed up by independent research and evidence, something that Jersey is focused on doing.

Since the publication of the Foot Report in 2009, expedited by the economic crisis and aided through groups like the IFC Forum, there is ?now more dialogue and greater cooperation between different international finance centres, and this ?can only be a good thing.

Armed with a comprehensive understanding of the socio-political ?and economic trends impacting the global wealth management arena, ?Jersey can remain ahead of the game and make the most of the high-quality private client opportunities that this brave new world presents.

Geoff Cook is chief executive of Jersey Finance