25/04/19

CROWN DEPENDENCIES: Jersey report highlights value of HNWs to the economy.

As published on jerseyeveningpost.com, Thursday 18^th April, 2019.

 

A new, independent Jersey Private Wealth Report has been produced, which highlights the value high-net-worth residents bring to the Island’s economy.

The report author, Gibson Strategy chief executive Dr Stuart Gibson, said the wealth of new high-value residents (HVRs) coming to Jersey had substantially increased.

‘Those who have been coming in are coming, not with £10 or £20 million, but £100 million. I spoke to someone who came in with about £20 million and he felt he was a poor 2(1)e,’ he said. 2(1)e is the new entitled status replacing 1(1)k.

Compiled by Gibson Strategy – a business consulting firm specialising in research, education and strategy consulting in the global financial services industry – the report was compiled following interviews with 40 HVRs and 42 private-wealth professionals.

Dr Gibson studied long-standing and new high-value residents. He explained: ‘There wasn’t a single similarity with those individuals, some are marketing, some tech, some retail, young and old; so the only pattern I found was that they were all very self-driven and single-minded. I didn’t meet any arrogance in the HVRs I interviewed, they were just very genuine people and families.

‘For those individuals who come to Jersey, it’s not about money, it’s not about tax saving, most who come want to come because of the safety of children, it’s the balance. It’s not about where can I save money, where can I be more tax efficient? Most of the individuals come because they like the lifestyle in Jersey, and when they have come here they have introduced friends. A large number I spoke to had fears and worries about security in the UK, and wanted to move to a safer area.’

Government regulations state that to be considered for 2(1)e status, you need to show that you have annual worldwide earnings comfortably in excess of £725,000 per year, and this must be sustainable income. The minimum tax payable on your income is £145,000 per year. Individuals are also expected to contribute to the community in other ways.

The report found that Jersey private clients were extremely generous and philanthropic, but most want to remain anonymous. Wealthy families also want to create their own structures, partly because they are concerned about the large administration costs of big charities, and they want to be involved and retain control.

The report also covers those firms in Jersey that deal with global family offices. The patriarch or matriarch may not move to Jersey, but they set up a family office here and employ individuals who have the skills.

‘You wouldn’t get a Middle Eastern family moving to Jersey in reality, whereas they might set up a family office here,’ said Dr Gibson. ‘Family offices are going to increase over the next few years. It’s certainly a service that we do really well, along with fund administration.’

Substance regulations now mean that anyone wanting a family office in the Island needs to have local employees.

‘They do very much want to be seen as transparent but also want to have rights to privacy, so the fact the UK wants to have a public beneficial owner’s register, they’re not keen on. Just because you have wealth doesn’t mean you should give up the right to privacy and have everyone digging around your financial assets,’ he added.

One of the interesting findings is that the private clients say they have the relationship with the individual private-wealth professional and not the company or service provider. Personal relationships and trust are critical as too are ‘like-minded’, similar in age profiles.

84% of successful HVR applicants between 2013 and 2017 came from the UK, and the political upheavals there could have an impact on applicants.

‘I think it will drive more interest to the Crown Dependencies if Labour get in,’ commented Dr Gibon. ‘Brexit here is not a concern because it will be business as usual. I think the big issue is if the Labour party get in. There are real concerns at the moment.’

One change, which could spell some concerns for the future, is the amendent to the rules which now allow HVRs to purchase more than one property in the Island.

‘There are a number of wealthy individuals buying three, four, five properties, renovating them and selling them on,’ said Dr Gibson, ‘We might have a housing issue in ten years’ time. How does Jersey accommodate high-end property in the future?’

Dr Gibson, who lives in Jersey, said he wanted to produce a positive report on the wealth industry following the Paradise Papers.

The report was compiled for the private clients themselves and private client professionals. It will also be given to prospective HVR applicants . Dr Gibson’s company is currently compiling the first Guernsey report and will then look at the Isle of Man. The Jersey report will be repeated every two years.

Dr Gibson said: ‘The choice between Jersey or Guernsey is an individual one. Jersey is a bit more glitzy in the sense we have more Michelin-star restaurants, there are 40 odd Ferraris here but far fewer in Guernsey. You have that anonymity because the Island is so big. Jersey has a lot more efficient transport links, it becomes more of a suburb of London than Guernsey.

‘Jersey is a jurisdiction of choice for families of wealth in the UK and I think that will certainly rise if there is a possibility of Corbyn getting in.’