Print this article
Jersey Finance Guest Comment: Wealth Management Industry In A Brave New World
Geoff Cook
Jersey Finance
29 May 2012
Jersey Finance held its annual Private Client Conference at the British Museum in London in mid-May, attended by over 200 wealth management professionals. Geoff Cook, chief executive of Jersey Finance, highlights some of the key issues discussed at the event and explores the opportunities and challenges for international finance centres. These views are not necessarily endorsed by this publication, but as ever, it is grateful to be able to add to the debate. Political change, economic volatility, a shifting regulatory landscape, and public attitudes towards wealth planning: all of these are having a significant impact on the global wealth management industry, and were discussed at length by the speakers and panellists at Jersey Finance’s recent Private Client Conference in London. It is clear that we are living through an age of instability, with the situation in Europe in particular having reached a pivotal point. Political change and uncertainty in the eurozone is one issue, and we are simultaneously faced with a possible regime change in the US later this year. There are a whole range of political and economic variables that, depending on the outcomes, could impact future policy making, business trends and cultural attitudes in a variety of ways. The consequences for the international wealth management community are significant. Regulatory “tsunami” 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. The policies of austerity adopted by various Western governments are also causing a fair amount of pain and not helping wealth creation or economic recovery. The focus of the onshore economies increasingly is on plugging their national deficits by clamping down on private and corporate tax avoidance, and this is leading to a blurring of the boundaries between legitimate tax planning, aggressive tax avoidance and tax evasion. 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. 17 June, dubbed “Super Sunday”, will be a particularly interesting day to look out for, as the Greek elections take place and France gets going with the first round of its legislative elections – all just ahead of the G20 Summit in Mexico on 18 and 19 June. Opportunities The challenges faced by the wealth management sector are substantial, but this is not to say that those jurisdictions that are alert and geared up cannot seize on a number of opportunities. Jurisdictions have to adjust to the demands of private clients and evolve their products and services accordingly. For example, whilst Jersey has been a prominent player in trust administration since the 1960s, the 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 on and grow their services for ultra high net worth individuals. In addition, retaining strong links with partners in key markets such as London, whilst 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’s Foundation structure, introduced in 2009, has seen particular success with advisors and their HNW 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, provides 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. Reputation 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. Developing and maintaining a strong judicial and regulatory framework is critical in attracting the right kind of compliant and high-quality private client business, and certainly Jersey’s ability to develop high-quality legal and regulatory systems over the years has earned it a global reputation as a leading centre for private client work. A clear message to come out of this particular conference was that Jersey should take confidence in knowing that the private wealth management services it offers are world class, and that it should continue to focus on what it does best in order to succeed in an increasingly challenging world. In the first Global Financial Centres Index of 2012, for example, Jersey was the top offshore jurisdiction for the sixth consecutive index, and the only offshore jurisdiction named in the top ten centres globally for private banking and wealth management. Going forward, the top international finance centres will increasingly need to demonstrate their value and the importance of their role in the global marketplace - something that Jersey is certainly focused on doing. 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.