Following Jersey Finance’s recent annual Private Client Conference, Geoff Cook, chief executive of Jersey Finance, highlights some of the opportunities and challenges for international finance centres.
We are undoubtedly living through an age of instability and uncertainty, with the situation in Europe in particular having reached a pivotal point. 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.
The policies of austerity adopted by various Western governments are not helping wealth creation or economic recovery, whilst the focus of the onshore economies increasingly is on plugging their national deficits by attempting to recoup as much tax as they can.
This has led to a clamping down on ‘aggressive’ private and corporate tax avoidance schemes, and a subsequent blurring of the boundaries between legitimate tax planning, tax avoidance and tax evasion.
All these cultural, political and regulatory issues are of interest to jurisdictions specialising in private client services.
Adjust and Evolve
Against this backdrop, how high net worth individuals and families manage their assets is changing, but this may well provide 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.
The Jersey trust vehicle, for instance, has been the cornerstone of Jersey’s offering since the 1960s and has been imitated in other jurisdictions. Today, though, the emphasis has shifted away from the simpler trust and company structures to high value structures involving trusts, companies, limited partnerships and foundations.
Foundations, only introduced onto the statute in Jersey in 2009, have undoubtedly been a success, adding to the choice of structure available to professional advisers and their high net worth clients. There has been growing demand from clients in Hong Kong, Russia and the UK and to date more than 160 foundations have been established.
Limited partnerships were also enhanced in 2011 and widened the choice of structures and the options available to wealth management strategists.
Jersey is keen to maintain its competitive position by implementing appropriate enhancements. The latest amendments to its trust laws take into account the direction in which trust business is moving and are designed to bring clarity and certainty in a number of key areas. They include making it possible to establish ‘ownership only’ trusts so that merely holding shares will be permitted as a valid purpose under the law, and the introduction of a more clearly defined definition of ‘a protector’.
These and other changes will make Jersey a more attractive destination overall for private client business. But there is no complacency in the industry and the next series of legislative enhancements are already under consultation.
In addition, Jersey has maintained its tax neutral environment for clients and in 2011 adjusted its zero ten tax regime so that it was fully in line with the requirements of the EU’s Code of Conduct on business taxation, resulting in certainty that Jersey’s easy to understand tax regime for international clients will be maintained for the long term.
There is no question that London remains the primary market for Jersey based wealth management professionals. However, the emerging economies cannot be ignored and the potential for the introduction of new business from these regions remains significant.
Jersey has well established overseas offices in Hong Kong and Abu Dhabi, with representation in India, and undertakes regular visits to Russia, in order to build strong relationships with government authorities, financial intermediaries and regulators.
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 an opportunity to grow new business too.
The emphasis must be on a jurisdiction having a robust legal structure and mature court system in place, within a secure, stable environment – particularly for clients in regions where often there is political and economic instability.
Jersey maintains all such qualities and continues to have an enduring appeal to international investors, a trend evident in the GFCI survey that ranks various international finance centres. Jersey continues to be listed as the number one offshore location and the only offshore jurisdiction to feature in the top ten jurisdictions for wealth management and private banking, alongside European centres such as London, Zurich, Geneva and Frankfurt.
Developing and maintaining a strong judicial and regulatory framework is critical in attracting the right kind of high quality private client business. Jersey’s ability to develop first rate legal and regulatory systems over the years, including a supporting infrastructure of legal, professional services and accountancy firms, has certainly helped it earn a global reputation as a leading centre for private client work.
For example, Jersey volunteered to be one of the first jurisdictions to be assessed by the Global Forum on Transparency and Exchange of Information for Tax Purposes. The Peer Review Group undertook a probing analysis in 2010 to define how well Jersey had responded to the international standards on tax information exchange. Jersey’s response to information exchange requests was described by the Group as being ‘effective and expeditious.’
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. 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.
During a period in which concentrations of wealth are shifting more to the east and the regulatory landscape continues to change, Jersey has in place the mechanisms and the infrastructure to respond effectively to the marketplace as it diversifies further and make the most of high quality private client opportunities as they arise.
Geoff Cook is an experienced Chair and non-executive director. He has led significant business enterprises for more than three decades and helped major international groups to grow and prosper. As a Chartered Director, Geoff has deep knowledge of corporate governance, global regulation, and risk management. He has authored numerous articles and papers on cross border investment and the role of International Finance Centres (IFCs) in the global financial system. Geoff is a non-executive director to a select number of Family Office, Private Capital, Banking and Advisory boards. He was appointed Chair of Mourant Regulatory Consulting in 2021 and Chair of Quilter Cheviot International in 2019 to lead and develop the firm's international strategy. Geoff is also a Board member of Apex FS (Jersey) Ltd, a leading fiduciary and is presently Chair of the Society of Trustee and Estate Practitioners (STEP) Global Public Policy Committee. He was formerly the CEO of Jersey Finance and Head of Wealth Management HSBC with extensive international cross border experience across various sectors.