Wave of optimism

Written by: Sophie McCarthy Posted: 16/11/2020

BL70_wave of optimismFrom New Zealand’s swift response to Singapore’s high-tech methods, countries around the world have tackled the Covid-19 crisis in a range of ways and with varying degrees of success. what impact did the Channel Islands’ approach have on its funds sector? And has it increased the overall appeal of the islands?

While Jersey, Guernsey and the Isle of Man deployed different approaches to quelling the spread of coronavirus, each has been a relative Covid-19 success story. 

At the time of writing in October, as the majority of the UK grapples with further restrictions and threats of a second nationwide lockdown, those in the islands are experiencing a near-to-normal life. 

Many offices have reopened, social distancing is largely a thing of the past, and Guernsey even hosted a music festival in late August – one of the few to take place around the world this year. So, how did the islands respond so well, and what impact has that had on the funds sector?  

Paul Smith, Chair of the Guernsey branch of the ICSA, the Chartered Governance Institute, and Group CEO of The House of Green, says legacy disaster recovery protocols explain the strong performance of the Channel Islands’ funds sector throughout this turbulent period. 

“This sort of planning has been on people’s radars for a long time – 30 years or more,” he says. “I remember when I was MD of Bank of Bermuda’s fund administration in the 1990s, we had a risk manager drawing up plans for what would happen in the event of a pandemic. 

“Everyone else was looking at business continuity and disaster recovery sites in case there was a fire or a flood. But he was looking into what would happen if there was an illness and no one could go to work. I thought it was bizarre at the time, but here we are.

“Lockdown reminded me of soldiers who are constantly in training. Eventually, when they get to fight, their mentality is: ‘This is what we’ve been training for’. 

“It was a bit like that with Covid-19 – we had all of these plans in place and immediately everyone’s mindset was: ‘OK, fine, let’s just do it’.”

Smith believes this is why the transition was so smooth. “We used to test our disaster recovery and continuity protocols all the time,” he says. “We’d call some people and say: ‘You can’t come into the office today, you need to work from home’, and then see how it worked out. 

“This also meant that we had all the systems in place to allow people to request to work from home for, say, a week, which was still quite unusual elsewhere. So, we were used to this set-up, albeit on a much smaller scale. I think that’s why the industry here was generally very well prepared for this scenario.”

Winning formula 

The idea that both islands have agility and resilience built into their systems crops up time and again when analysing their response to the pandemic. 

Tim Clipstone, Group Partner at Ogier, points out that, for many of those based in the Channel Islands, the experience of dealing with clients didn’t change much. 

“The focus was on making sure the service we delivered carried on being delivered as seamlessly as possible. 

“That’s a huge testament to the business culture here. The clients don’t care about your personal life or your island life – they want what they need and we’re very used to delivering that, no matter what’s going on around us.”

That’s a sentiment echoed by Jonathan Smith, Partner at Wyvern Partners. “When it comes to administering a fund or administering someone’s trust, this doesn’t just stop because there’s a pandemic. 

“In fact, we saw a lot of people, particularly private clients, taking the opportunity to get their affairs in order and think about inheritance planning. 

“Clients still need their services, regardless of what’s happening in the world. Come what may, if you’ve got a trust, you still need to be the trustee.”

Theo Brennand, a Partner at Deloitte, agrees that in many instances there was an uptake, not a decrease, in demand. “At the outset, around March, there was uncertainty in the markets and therefore there was also a slight slowdown in terms of new structures being launched and people looking at redomiciling. 

“But through July, August and September, my understanding is that there’s actually been significantly more activity than there would usually have been during those months – indeed, a lot more than people were forecasting when they did their budgets earlier in the year.” 

It’s apparent that, owing to their location and history, the islands were particularly well placed to respond to the crisis with greater speed and ease than some other jurisdictions. 

But what’s life like on the islands now? And what impact has the islands’ response had on their appeal?

“I wouldn’t say it’s like nothing has happened, because that’s obviously not the case,” says Paul Smith. “But, walking around the place now, it’s no different to how it was prior to Covid-19. And I think that has created an impression among those looking in. 

“People look at us and think: ‘Wow, what have they done right that others have done wrong? Is Guernsey the place to be now, because it seems to be getting these things right?’.” 

Community spirit 

The islands’ sense of community has played a huge part in getting the virus under control, he believes. 

“When the government told us to lock down, by and large everybody did. We haven’t seen demonstrations; we didn’t see people flocking to the beach – even though the weather was fantastic. 

“There’s been huge community engagement as well as very impressive, informative and effective communication campaigns from the government. 

“And all of this means people are recognising that this is an impressive place. That’s done wonders for our profile and it got people thinking: ‘This might be a good place for us to put our business, because they don’t falter when something like this happens’.” 

Brennand believes another factor may have had a positive impact on the islands’ funds sector. 

“This isn’t linked to Covid-19, but I imagine the challenges that some of the other jurisdictions, such as Cayman and Mauritius, have been facing around Know Your Customer and AML have meant people were looking to move tier activities to Jersey.” 

Brennand continues: “From a tax and regulatory perspective, Jersey has been strong, and I guess the uncertainty that Covid-19 has created has meant people have placed more value on that than they might have done in the past.” 

With all of this in mind, what does the future of the funds sector look like? 

“It’s always been a little bit sniffed at, although admittedly less so with the recent IPOs of JTC and Sanne,” says Jonathan Smith. “A year ago, you’d have struggled to promote admin companies against more glitzy, attractive alternatives. But with the performance during the pandemic, this sector is underscored. 

“Its resilience and its cash management ability, even in downtimes, means a lot of people will be thinking that this is a good place to put their money.” 

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