Jersey Finance CEO Joe Moynihan (right) and Global Head of Business Development Allan Wood (below) explain how the organisation is standing ready to support the future of wealth management
JOE MOYNIHAN
The future of the wealth management industry is difficult to predict at this time, while businesses across all industries are reacting to a crisis never before experienced on such a massive level in living memory – coupled with an ever-changing (almost daily) economic, political and social landscape.
If you had asked me in January about the future of wealth management for Jersey’s international finance centre, I would have pointed to our island’s continued focus on growth markets such as Africa, the US, Far East and Middle East, harnessing the rapid evolution of digital and fintech developments and working closely with government, Digital Jersey and the JFSC to ensure a consolidated, ‘one stop shop’ approach for clients.
Looking at today’s situation, this position still holds true, just in a different context. These strengths are even more crucial now to ensure our ongoing success as a world-leading international finance centre.
Digital connectivity
Connectivity remains essential at the current time as the majority of us work, communicate and transact online.
Thanks to Jersey’s forward-thinking digital strategy, which has been developing at pace over recent years, our robust digital infrastructure has allowed our financial services industry to maintain its high-quality services to a global client base, adapting easily to working from home during the pandemic.
As a result of our strategy, we have all the enablers in place to support business innovation and growth, and strategies to continue to improve. For example, Jersey ranks third in the World Broadband Speed League – delivering high-speed 1 Gigabit fibre connectivity to every household and office on the island.
In addition, we are home to more than 400 digital and creative businesses and a community of more than 3,000 digital and enabled technology professionals.
We continue to develop relationships and client networks in key growth markets and are proud to offer a modern and sophisticated legal framework, as well as a range of products and services to meet the wealth planning needs of clients worldwide.
Resilience and certainty
I believe Jersey’s resilience, and the added certainty this can offer investors, is a positive differentiator for our jurisdiction. These factors are at the forefront of investors’ minds now, and will no doubt continue to be a key consideration for multinational private clients in the future.
This was clearly demonstrated through quick reactions by the Government of Jersey, the Jersey Financial Services Commission (our regulator) and our industry to ensure that business could continue despite the challenges posed by the current environment.
From a regulatory perspective, meanwhile, the Jersey Registry has been able to continue to incorporate new entities, while the decision of the Jersey authorities to provide flexibility around economic substance rules at an early stage has given firms the ability to ensure compliance by using technology to hold virtual board meetings.
In addition, new legislation brought in in April 2020 has enabled Jersey wills to be signed and witnessed via video link. We are also seeing more Jersey businesses putting in place secure platforms for enabling electronic signatures – helping clients transact remotely.
Our quick reaction and resilience have promoted a positive response from clients in the Gulf Cooperation Council states (GCC) in particular.
Our experience in the GCC is that families appreciate the joined-up forward-thinking and level of high-quality support Jersey is demonstrating, to help them navigate these tricky times, ensure compliance with regulations and keep an eye on their long-term objectives.
This strategic collaboration at a time of global crisis once again demonstrates the strength of the tried, tested and trusted partnership between GCC-based families and businesses and their Jersey-based partners.
The speed at which Jersey provided reassurance to the business community at home and abroad is, we believe, somewhat unique. With the cost of the pandemic becoming clearer as the weeks pass, and experts predicting that economies may take years to recover, Jersey’s ability to be nimble will be key in protecting its clients and its expert industry.
Secure capital flows
Expertise, governance, robust platforms and solid advice will be increasingly sought, as moving capital from multiple sources securely, rapidly and efficiently to where it is needed becomes more and more important.
The scale and complexity of the impact investment and stimulus being coordinated internationally need to be targeted, large scale and secure – and this is where Jersey is ready to play a key role.
In Africa, for instance, a coordinated international support across the continent will be vital for the continent’s economic recovery. Jersey is in a strong position to support international impact investment into Africa as the continent battles Covid-19.
Jersey businesses are already telling us that they have pipelines of Africa-bound work ready to go as and when conditions allow. This is testament to the efforts Jersey has put into building strong relationships with Africa over the years.
Expertise
A key strength lies in our expert workforce of almost 14,000 employees, which includes the largest number of STEP (Society of Trust and Estate Practitioners) professionally qualified practitioners in the world. They have been working to safeguard assets and enable families to pursue their global objectives for the past 60 years.
Our highly skilled workforce and key stakeholders work together to develop products and services to enhance the futures of investors and positively impact both local and global economies.
A focus on the future
While much remains uncertain in the future, for me there are many good reasons for Jersey to remain positive. We are committed to the communities and clients we work with; we are resilient, future-focused and adaptable. At almost 60 years old, our industry offers a clear vision for global investors and economies alike.
ALLAN WOOD
At times of crisis, you want a calm and professional influence to help guide you forwards. This is where Jersey, as an international finance centre (IFC), has always been at the fore – both in the current situation and for ever before.
For almost 60 years, Jersey’s modern and sophisticated legal framework, ongoing stability and robust regulatory adherence have enabled it to lead the way in delivering private client services, proving vital in safeguarding assets and enabling families to pursue their global objectives.
For instance, its innovative foundations law has led to the growth in the number of Jersey foundations, with 391 formed since 2009. Added to this, Jersey has one of the largest branches of Society of Trust and Estate Practitioners (STEP) globally.
Wealth-X – driving the change
With the Great Wealth Transfer set to pass on an estimated $15trn to the next generation by 2030 (Wealth-X), wealthy families are already focusing on how their investment decisions could make a positive impact on the world.
To secure the longevity of their wealth, families are looking at ways to diversify, both geographically and in terms of strategy. Research suggests, for instance, that the next generation is seeking more innovative and sustainable investment strategies. UBS’s Global Family Office Report 2019 predicts portfolio shares in sustainable investing will rise from 19% to 32% within the next five years.
Of course, there is now a very immediate issue to address in the form of the pandemic, and the various situations that will arise from it. Wealthy families have it in their power to make a difference in a targeted and values-driven way.
A robust foundation of governance
Family offices are becoming increasingly complex: global, multi-faceted, multi-generational, digitally driven and facing ever greater rafts of regulation and reporting requirements.
However, knowing ‘how’ wealth is managed can help to avoid rifts between siblings and parents, as well as build on the family’s values in a way that suits everyone involved – and Jersey Finance’s recent research on the evolution of family offices in Asia backs this up.
In the context of the Gulf region, findings in PwC’s Future-proofing Middle East family businesses report showed that less than one-third of large family businesses in the region had effective policies and practices in place to govern the family business.
Specifically, they lacked policies to address challenging family dynamics and common conflicts – a significant finding given that family businesses make up 90% of the private sector.
Encouragingly, there has been a trend for the next generation to work more closely with external advisers to professionalise family wealth structures. In Asia, for example, historically families have relied on basic succession tools such as simple wills or holding companies to manage wealth transition.
Now, it is increasingly common for the founder generation in Asian families to bring in the next generation and integrate them into the business, working with external professional advisers.
A digital future
Families that are becoming increasingly international in nature are exploring digital opportunities to help professionalise their infrastructure, bolster their governance capabilities, and communicate better with each other across borders and time zones.
It’s why Jersey, as a forward-thinking IFC, has a leading digital strategy that ensures the delivery of high-speed fibre connectivity to every household and office on the island – a strategy that has enabled more than 400 digital and creative businesses and a community of more than 3,000 digital and technology professionals to flourish in Jersey.
Because of this long-term investment, the financial services industry has been able to maintain its high-quality services to a global client base, with the island’s company registry continuing to facilitate new incorporations and transfers – largely unaffected by the crisis – and the majority of financial services businesses working from home in a seamless manner.
Regional differences
Jersey Finance prides itself on understanding regional discrepancies between wealthy individuals and families, so that its member firms can provide a highly tailored approach to their work.
A piece of fieldwork that Jersey Finance undertook with family offices last year, Jersey: The Clear Choice for Family Offices, found that, while there are similarities in the behaviours and needs of ultra-high-net-worth (UHNW) families, there is also huge diversity across the family office space and significant differences that are unique to different markets.
Jersey Finance’s experts, with their global experience spanning not only the UK and Europe, but the Gulf region, Asia, Africa and the US too, are focused on understanding the specific needs of families in those markets, to ensure a smooth generational wealth transfer, and to support their distinct ambitions.
For example, we see that families with a US connection look predominantly for bespoke, tailored solutions. Meanwhile in Asia, the traditional ‘command and control’ style of business is being challenged by the next generation, who are looking for innovative ways to change leadership models.
In Africa, wealth creation is on the rise and the number of millionaires is set to increase – by 16% in South Africa, 22% in Kenya and 11% in Nigeria, according to Knight Frank – and families are spreading that wealth due to the trend for children to be educated and to settle in the West.
Meanwhile, the Gulf region has become home to a pool of talented women who are actively contributing to shaping their countries’ financial future.
In addition, there is a strong push by governments to become front-runners in adopting new technologies such as the internet of things, AI and blockchain.
Understanding and identifying these regional differences and the impact they have on wealth management is what really gives Jersey firms the edge and makes them attractive to clients the world over.
A values-driven approach
One universal similarity is that wealthy families are more focused on aligning their investments with their values than ever before. Given the Covid-19 pandemic, this is likely to be heightened even further when the dust begins to settle, and it is important that IFCs are alive to this.
In the US, for instance – home to more UHNWIs than Asia and Europe combined, according to Knight Frank – impact investing is growing at a rapid rate. This pursuit for ‘doing good’ matches up with the findings of Knight Frank’s 2019 Wealth Report, with almost 70% of respondents saying their clients’ philanthropic activities were increasing.
It is at times like this that the groundwork which has already been set by IFCs such as Jersey is proving to be invaluable. Knowing and understanding the subtle discrepancies between regions and generations is key to providing a truly long-term, sensitive and professional service for clients around the world.
The Covid-19 pandemic has indeed sharpened the focus on the fundamentals required by family offices from their IFC partners – stability, flexibility, service quality and international connectivity – as they look to enhance their governance credentials and meet their principles-driven investment aspirations in the years ahead.
Jersey is flying the flag in this area and is ready and armed with knowledge and understanding to help an international client base move forwards and make a positive difference.
• These sponsored articles were first published in Businesslife's Future View supplement in June 2020