BL Magazine Issue 60 January/February 2019 by BL Magazine

BUSINESSLIFE

ISSUE 60 JANUARY/FEBRUARY 2019

Refocusing on China Project managemenT • Automation Directors' duties • Private equity • US tax changes

BUSINESSLIFE

What to expect from the next 12 months ISSUE 60 JANUARY/FEBRUARY 2019

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Welcome

A taste of what’s to come TAKING ON A new editorship is always tough. You have to work out what the major issues are, identify key players in the region and learn to walk in your readers’ shoes, all within the space of a single production cycle. For my first issue of Businesslife, I’ve been lucky enough to have been given a huge helping hand by a panel of experts from across the islands, who have been generous with their time and insight to assist us in producing our outlook for 2019 (page 28). The clear consensus is that we start what promises to be an ‘interesting’ year in excellent health. The funds sector has witnessed record levels of fund assets and experienced great momentum behind new fund launches. Within banking, increases in lending continue and private client colleagues take on bigger and more complex opportunities. Challenges Of course, with opportunities come challenges. Finding – and holding on to – good people with the right skills and expertise to help deliver growth will continue to tax many organisations throughout 2019. Competition from onshore jurisdictions such as Luxembourg, Malta and Singapore is expected to increase, which means we will collectively need to step up our game in broadcasting the role that the Channel Islands can play and the quality of service and solutions they have to offer. Louise Bracken-Smith, CEO of Fairway Group and the subject of our interview for this issue, has much to say on the Channel Islands’ strengths in this regard (page 22). And then there’s the small matter of Brexit. At the time of writing, it’s hard to say who will be in 10 Downing Street on ‘Brexit Day’, let alone what the shape of the final exit deal will be. Whatever the outcome, though, there will be collective relief to see an end to the uncertainty endured by businesses and investors since the EU referendum took place in June 2016. Trends Thanks to its unique position as a bridge between the UK and the EU, the Channel Islands offers investors affected by Brexit stable and continued access to the EU market. Those investors are likely to be encouraged by the islands’ economic and political stability, and its well-regulated environment. In 2019, businesses across the islands should be fully prepared to

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capitalise on this post-Brexit opportunity. Other trends we are likely to witness in the next 12 months include: a growing demand for ethical investment opportunities; a need to help private clients prepare for one of the greatest transfers of wealth between generations ever witnessed; continued consolidation across several sectors as smaller firms struggle to comply with growing regulatory burdens; and pressure to harness new technology such as artificial intelligence to deliver improved efficiency and enhanced customer experience. Not forgetting China. For some years, the Channel Islands have been laying the foundations for a strong relationship with China and many local businesses have set up satellite operations there. With Beijing increasingly looking beyond its own borders for investment opportunities, 2019 could be the year when the islands reap the rewards of their investment in the relationship with China. Above all, however, it will be a year in which the jurisdiction offers clients continuity and stability in an otherwise unpredictable global environment. Evolution At Businesslife, we’ll be taking a leaf out of the same book. On a recent visit to Jersey, I was encouraged to hear just how much the local business community values the contribution that this publication makes to discussion and debate. That is, of course, thanks to the fantastic work that former Editor-in-Chief Nick Kirby and the team have done over the past decade to make the title what it is. And it’s convinced me that any changes we introduce to the magazine should be a case of evolution, not revolution. As part of that evolution, we have bid farewell to The Agenda and introduced The Knowledge – a new section of ‘brain food for the busy business professional’ (page 69). A mix of reviews, interviews, profiles and top tips, we hope you’ll find something in there to make you think, make you smile or even help you to start a conversation. Enjoy the read, and I would love to hear your thoughts on this new section or any of our other articles: eila.madden@blglobal.co.uk. n

The clear consensus is that we start what promises to be an ‘interesting’ year in excellent health

Eila Madden, Editor-in-Chief, Businesslife

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Combined strength. The Private Clients team in Jersey is committed to providing a personalised service that is tailored to each individual client, taking the time to understand what is important to our clients and providing intelligent solutions. Our Client Advisors have access to global UBS resources and ensure that every client receives the best possible wealth management advice. Michael Clarke, Head of Private Clients UBS AG, Jersey Branch 1, IFC St Helier, Jersey JE2 3BX 01534 701148 michael.clarke@ubs.com

www.ubs.com/jersey UBS AG, Jersey Branch is authorised and regulated by the Jersey Financial Services Commission for the conduct of banking, trust, funds and investment business. ÂŠ UBS 2019. All rights reserved.

Contents

INSIDE

58 14 bl guernsey

The latest financial and business news and views from the bailiwick

BUSINESSLIFE

Businesslife is published six times a year by Chameleon Group +44 1534 615886 www.blglobal.co.uk

CEO, CHAMELEON GROUP Carl Methven carl.methven@blglobal.co.uk EDITOR-IN-CHIEF Eila Madden ART DIRECTOR Angela Lyons

28 7 News

28 predictions

A round-up of the latest Channel Island business news

What can we expect from 2019? Our panel of experts responds

12 Appointments

44 china

The latest people moves in firms across Guernsey and Jersey

Is it time for the Channel Islands to renew its focus on the world’s second largest economy?

22 Interview Louise Bracken-Smith, CEO of Fairway Group, on staying independent

SUB EDITOR Kate Wheal

Why projects need professionals at their helm to succeed

ADVERTISING sales@blglobal.co.uk NEWS AND EDITORIAL news@blglobal.co.uk GENERAL ENQUIRIES enquiries@blglobal.co.uk

48 project management

54 automation

Some are calling for employers to share the spoils of automation with their staff

58 Corporate governance Board directors come under increasing pressure to go beyond their statutory duties

62 US tax

18 bl Jersey A review of the main business developments and finance news stories

What President Donald Trump’s Tax Cuts and Jobs Act means for the Channel Islands

65 private equity PE houses change tack on origination and exit strategies as competition for targets hots up

82 20 questions

The knowledge

Sure’s Charlotte Dunsterville on parachuting out of old Russian planes and solving the Rubik’s cube

Check out our new section, packed with brain food for the busy business professional

contributors The BL Global Discussion Forum

JESSICA FURSETH

Follow us @blglobalnews Office: Meadowlands, La Rue a la Dame, St Saviour, Jersey JE2 7NQ © Chameleon Group Limited, all rights reserved. Reproduction in whole or in part without written permission is prohibited. Views expressed by our contributors are their own and do not necessarily represent the views or policies of Chameleon Group. While every effort is made to achieve total accuracy, Chameleon Group cannot be held responsible for any errors or omissions.

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Technology writer Jessica finds out why automation isn’t all bad news for employees. Firms that have introduced four-day weeks tell her that financial and staff performance is growing.

ALEXANDER GARRETT

Former Fleet Street journalist Alex is the brains behind our new section, The Knowledge. Elsewhere in this issue, he asks what went wrong at high-street bakers Pattiserie Valerie.

CHRISTOPHER MENON

Everyone’s talking about a resurgent China. Business writer Chris looks at how well placed Guernsey and Jersey are to capitalise on their existing links with the Middle Kingdom.

JON WATKINS

Business editor and writer Jon delves into the normally secret world of private equity to tease out its lessons for success and asks whether other businesses can learn from PE’s approach.

january/february 2019 5

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Ravenscroft expands to Monaco

INVESTMENT SERVICES GROUP Ravenscroft has opened an office in Monaco. It has formed a partnership with Tavira, a global execution service for commodities, derivatives and equities, which has offices in Monaco, London and Dubai. The joint venture, Tavira Ravenscroft, has had its application to operate approved by the CCAF (Commission de Contrôle des Activités Financières) in Monaco. Ravenscroft Group Managing Director Mark Bousfield commented: “The company’s long-term growth strategy is to offer our range of services in jurisdictions that share similar characteristics to the Channel Islands, where we have our headquarters. “Tavira Ravenscroft will offer our key services – such as execution-only trading, advisory investment and discretionary investment management – to Monaco’s residents,” he added.

TISE launches green market segment

Eliot Goodfellow, the founder and Chief Executive of Tavira, said: “We recognised that there was a need for a different investment approach for Monaco residents, so we are delighted we have found a partner in Ravenscroft. It will allow us to expand our offering, not only to existing clients, but prospective ones as well.” Following the approval from CCAF, Ravenscroft and Tavira put together a team to enable it to progress the plans and work closely with Monaco’s Department for Economic Expansion. Ravenscroft Head of Trading and Market Making Dale Acton, who has been with the company in Guernsey since its inception in 2005, has moved to Monaco as Director of the new business. He will be joined by Head of Fund Dealing and Services Debbie Wilson, who has worked for Ravenscroft’s investment management team since 2008. n

Seaton Place acquires Gaspé house INVESTMENT ADVISER SEATON Place has purchased Gaspé House, in what is said to be the largest single commercial office acquisition in the Channel Islands. The Grade A building stands in a prime waterfront location in St Helier’s new business district, the Esplanade Quarter. It was completed in 2016 and consists of more than 164,000 square feet of open-plan office space spread over six floors. The building is fully let on long leases to Royal Bank of Canada, First Names Group, Collas Crill and Deloitte. The purchaser, Seaton Place, sources, structures and purchases commercial real estate assets to provide investment solutions

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for international ultra-high-net-worth individuals, family offices and wealth managers. Director Andy Seaman said: “We are pleased to be able to secure Gaspé House in spite of tremendous competition from large global institutional investors. We intend to roll out our strategy of utilising high-quality income from commercial real estate and bonds to provide bespoke targeted portfolio solutions for investors across fixed income and property asset classes.” Seaton Place was advised by Carey Olsen. CBRE Jersey acted as property adviser, with Smith & Williamson providing tax advice and financial due diligence and Praxis Fund Services providing corporate services. n

THE INTERNATIONAL STOCK Exchange (TISE) has launched a green market segment, TISE GREEN, to enhance the visibility of investments that make a positive impact on the environment. TISE GREEN is open to all types of green investments, including bonds, funds and trading companies, from any jurisdiction. An appropriate third party needs to provide verification that the investment meets an internationally recognised standard of green finance. The investment must first be admitted to TISE’s Official List, but there is no additional charge for the subsequent entry to, and presence on, TISE GREEN. Fiona Le Poidevin, CEO of The International Stock Exchange Group, said: “There is an increasing pool of investors who are mandated either to only invest, or to invest a certain proportion of their assets, into investments that, alongside traditional financial return, provide environmental benefits. “TISE GREEN will enable those seeking funding for environmentally beneficial initiatives to highlight their green credentials. It will also ease access for investors looking to allocate to investments verified as meeting globally recognised standards in green finance.” n

january/february 2019 7

News

Global survey highlights staff threat A GLOBAL SURVEY of chief information officers (CIOs) has reported that 56% of those polled identified lack of awareness and mistakes by staff as major security threats for their firm – second only to malware and ransomware, cited as a major issue by 68%. The findings are part of the Logicalis Global CIO survey of more than 800 CIOs. It provides industry-specific detail about how the role of CIOs and IT departments is evolving and how our use of technology has changed. Tom Bale, Business Development and Technical Director at Logicalis CI, said: “The findings reflect the conversations we have had with our Channel Island customers.” One of the most important aspects of the study was not just the findings but the suggested solutions, he added. “The focus on human error means we know that investment in training and helping staff to become a strength rather than a weakness is vital – especially as more and more businesses are using cloud-based solutions. These drive efficiency but can also make systems vulnerable to attack. “Locking the door on attacks is virtually impossible, so investment in breach management, continuity and recovery support and solutions is a sensible precaution,” he added. “The profile of attackers has changed enormously and procuring data is now a massive criminal enterprise rather than a malicious one. We might not be able shut them all out, but just closing a couple of doors can save you a huge headache.” The survey covered a range of areas, from business intelligence and its use in different sectors to the General Data Protection Regulation. In the main, most respondents gave positive reports of the implementation of GDPR and a high level of investment in it. n

8 January/february 2019

Done Deals Carey Olsen’s investment funds team in Jersey has advised private equity firm Epiris on the launch and final closing of its UK-focused buyout fund, Epiris Fund II, at £821 million. The fund will target UKbased businesses with an enterprise value of £75 million to £500 million. Working with onshore counsel Clifford Chance, Carey Olsen advised on the establishment of the Jersey fund structure and all Jersey-released corporate and regulatory aspects of its launch. Partner James Mulholland was assisted by Senior Associate Nienke Malan. Voisin Law has acted for Jersey-based company 4Group in connection with its sale to UK privately owned rental firm the GAP Group. The Voisin team, led by Associate Howard O’Toole, advised on all of the legal and regulatory aspects of the sale. 4Group comprises three businesses – 4Hire, 4Safety and 4Fleet – which offer integrated business support services spanning transport, training, fleet and equipment solutions. An Ogier team in Guernsey has advised Merian Chrysalis Investment Company, a newly incorporated Guernsey-registered investment scheme, on its initial public offering and admission to trading on the Main Market of the London Stock Exchange. The team led by Group Partner Craig Cordle and Senior Associate Michelle Watson Bunn advised on the Guernsey law aspects of the launch, working with the fund’s administrators, Maitland. London law firm Travers Smith advised on the launch, Deloitte acted as reporting accountant, and KPMG in Guernsey will be Merian Chrysalis’ auditor. Jersey-based law firm Ward Yates has advised Katara Hospitality, a global hotel developer and operator based in Qatar, on the acquisition of the Grosvenor House Hotel on Park Lane, London, in conjunction with Linklaters. Katara is owned by the sovereign wealth fund Qatar Investment Authority, and the hotel is leased to Marriott Hotels. The Ward Yates team was led by Partner Victoria Yates, with the Linklaters team led by Real Estate and Hospitality Partner Simon Price. Walkers’ Guernsey office has advised Stafford Capital Partners on its takeover of

Phaunos Timber Fund, a Guernsey-based closed-ended investment company that provides shareholders with a diversified portfolio of timberland and timber-related investments. The takeover has been implemented by way of an all-cash offer of $0.52 per Phaunos share, valuing the company at $259.1 million. The Walkers Guernsey team has been led by Senior Counsel Kim Paiva, assisted by Associate Juliana Atere. Collas Crill has advised Intertrust on its recent €500 million bond issuance and the refinance of its existing debt facility, with a combined value of €935 million. Working alongside Simpson Thacher and Bartlett, Intertrust group’s lead counsel for the transaction, Collas Crill’s transaction team was led by Senior Associate Simon Heggs, assisted by Associate Annabel Bishop, paralegal Ben Newton and under the supervision of Group Partner Paul Wilkes. Collas Crill has also assisted Royal Bank of Scotland International (RBSI) with the amendment and restatement of a £23 million facility to Bazaar Investments, Provincial Investments, Dandi Harrow Regeneration and Dandi Four to refinance a portfolio of residential properties in London. The deal also included an element of development finance to enable the borrowers to grow their portfolio. The transaction involved advising on an English law finance package, a security suite consisting of English and Guernsey law security, and Guernsey corporate law matters. The Collas Crill team was led by Group Partner Paul Wilkes, assisted by Senior Associate Tristan Ozanne and Associate Ben Le Page. A Collas Crill team led by Group Partner Wayne Atkinson also acted for the borrower group. Mourant has acted as Jersey counsel on the launch of Invision VI, a fund sponsored by mid-market private equity firm Invision. The fund is a buyout fund, established as a Jersey expert fund, to invest in companies based in Germany, Austria and Switzerland. It achieved more than half of its target commitments of €375 million at its first close. Partner Daniel Birtwistle and Senior Associate Matt McManus led the Mourant team. The fund will be administered by Moore Management. n

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vistra survey reveals upbeat services sector A SURVEY OF 800 senior corporate services figures by financial services provider Vistra has revealed that the sector remains upbeat in the face of increasing political scrutiny and regulatory pressure. Vistra 2020 – The disruption advantage: opportunity in a changing world said the corporate services industry has never been so vital in underpinning globalisation, from the facilitation of capital flows, to providing local compliance, legal and regulatory support to individuals and firms wishing to do cross-border business. According to the survey, changes in regulation (62%) and developments in the global economy (53%) were the biggest challenges. Yet professionals were upbeat about their ability to generate growth (74%) and meet client demand (83%). Much of that demand was being driven by the amount of regulatory change faced by clients – 74% of respondents were ramping up investment in compliance to help clients demonstrate transparency, whether moving money across borders or setting up companies in new jurisdictions. Some 78% of respondents were confident of achieving compliance with new regulations, though a similar proportion (73%) admitted that the speed and frequency of change were a challenge. Some 85% expected the political pressure that’s forced greater scrutiny of tax and financial data to continue, though 76% believed governments have underestimated the challenge of automatic exchange of information. The survey highlighted pressure from technological change – but with just 20% of professionals expecting this to have a notable impact on their business, researchers pointed to complacency about the impact of areas such as robo-advice, biometrics, artificial intelligence and blockchain. The focus for many was firmly on issues such as automating ‘know your customer’ and antimoney laundering requirements. Only 22% of respondents were looking into blockchain. n

10 January/february 2019

MERGERS AND ACQUISITIONS Advantage Underwriting, part of the Vantage Group of companies based in Jersey, has agreed to sell its UK book of business to Bennett Gould & Partners, a Lloyd’s of London insurance broker and part of a multinational reinsurance and risk solutions group. Richard Packman, CEO of Vantage Group, commented: “The decision to sell is part of Vantage’s strategic plan to grow our Channel Island businesses.” The transaction is subject to regulatory approvals and to the agreement of customary documentation for such sale. Private equity firm Corsair Capital has made a majority investment in financial services group Zedra. Corsair will acquire the majority of equity holdings from Zedra’s owners, the Nielsen and Sarikhani families. At the close of the transaction, Bart Deconinck, Zedra’s Group Deputy Chairman, will become Group Executive Chairman. He said: “Since our acquisition of Barclays’ offshore and onshore trust businesses two years ago, Zedra has grown rapidly. With Corsair’s support, we will be able to build on these foundations.” The deal is provisional, pending full regulatory approval. Meanwhile, Zedra has acquired JP Integra Group, a Cayman-based provider of fund, corporate and trustee services. The transaction, subject to regulatory approval and expected to complete in the first half of this year, substantially increases Zedra’s structuring and administrative services. The firm already has an office in Cayman, and on completion of the transaction JP Integra will be rebranded and the team fully integrated into Zedra. Peter Cockhill, CEO of JP Integra, will be the Managing Director of the combined office and the Directors of Zedra and JP Integra will remain in their current roles. Accountancy and business advisory firms BDO and Moore Stephens are in advanced discussions to merge. On completion of the deal, expected this spring, the combined firm will have gross annual revenue of £590 million and 5,000 staff across the UK. About 1,000 people are expected to move from Moore Stephens to BDO. The proposed deal relates only to Moore Stephens’ London, Birmingham,

Reading, Bristol and Watford offices. Moore Stephens’ Channel Islands business will not be affected. Moore Stephens Channel Islands MD Angus Taylor said: “This upcoming merger will not affect the Channel Islands’ ownership structure as it involves only one business from the wider group. We will remain a key part of Moore Stephens International.” Bedell Cristin has completed its merger with Cayman-based law firm Solomon Harris. Announced in July, the merger enables Bedell Cristin to broaden its range of legal services to include Cayman legal advice and to extend its international presence. The firm says Solomon Harris’ Cayman lawyers will add a new level of expertise for Bedell Cristin’s international clients, particularly those based in the Middle East and Far East, where Cayman structures are popular. The Solomon Harris name is retained for the present, though the intention is for the firm to rebrand as Bedell Cristin at a later date. JTC has completed its acquisition of Minerva, the Jersey-based provider of corporate services. As well as bringing JTC’s total headcount to more than 650 in 18 locations and growing the firm’s total value of assets under administration to $100bn, the acquisition will add a Dubai office to the JTC network and increase its services in five locations – Jersey, London, Geneva, Singapore and Mauritius. In addition, it will extend JTC’s reach in sub-Saharan Africa, India and Asia. The Minerva business will fully rebrand to JTC and Minerva and JTC staff will be brought together in key locations. Jersey-based fiduciary services specialist FCM Trust has gained regulatory approval to acquire wealth management business Guardian Asset Management. The acquisition follows a period of growth and investment by FCM Trust over the past year, including a move to new offices and senior appointments to the board. The owner/Manager of the Guardian business, Philip Van Neste, will move to FCM as part of the transaction. A review of the newly combined group brands is under way and until this is completed, FCM and Guardian will continue under their brand names. n

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Appointments Intertrust in Guernsey has appointed Marie McNeela as its new Managing Director. Marie, who has more than 20 years’ experience in the global fiduciary and corporate industry, was previously Head of Corporate Client Services at Intertrust in Guernsey. She began her career with fiduciary provider Coutts in London, moving on to the Cayman Islands with MeesPierson Trust, before relocating to Guernsey in 2002. Marie is a former committee member of the Guernsey Association of Trustees and currently serves as a committee member for the Guernsey branch of the Institute of Directors.

Professional services provider Equiom has appointed Nick Evans to the newly created role of Global Chief Operating Officer. Nick will be responsible for the day-to-day operation of the company. He will also lead the team of jurisdictional Managing Directors across the group. Previously Head of Corporate Development, Europe, at Equiom, Nick had responsibility for leading the company’s M&A growth and forming strategic relationships across the continent. Prior to joining Equiom, Nick spent 20 years at Royal Bank of Scotland, most recently as Director of Structured Finance.

Jersey IT specialist TSG (formerly Total Solutions Group) has appointed Andy Delaney as its Chief Executive Officer. Andy has been Chief Operating Officer since January and his appointment coincides with the group’s restructure into three businesses – two export product-based businesses, supported by a third business (TSG) providing IT and business technology services. Andy has been in the local IT industry for 24 years, having previously worked for C5 Alliance and Logicalis. His focus is on transformational change and strategic client engagement across healthcare, retail and financial services.

HSBC has named Sue Fox as its new Chief Executive Officer in the Channel Islands and Isle of Man, effective from 1 February. Sue is currently CEO of M&S Bank, which is part of the HSBC Group, and has been with HSBC for more than 30 years. Prior to joining M&S Bank in 2014, she held a number of senior positions in HSBC, including Global Head of Physical Distribution. She has worked in the UK and overseas, including managing the HSBC branch network in Manhattan, New York. In addition to her role at M&S Bank, Sue is an independent Non-Executive Director with Scottish Power.

Solicitor Marianne Shaw has become the Managing Partner of Jersey law firm Le Gallais & Luce. Marianne is the first woman to be appointed to the role in the firm’s 90-year history and, at the age of 36, she is also the youngest Partner to take up this position. Marianne has served as a Partner at the firm since 2016 and is head of the wills and probate team. She joined Le Gallais & Luce in February 2010, having qualified as an English solicitor with Nigel Harris & Partners in 2007. She subsequently qualified as a Jersey solicitor in March 2014.

Praxis Fund Services (Jersey) has appointed Josh Farrow as Associate Director. He will manage the team on a day-to-day basis. Josh has more than 10 years’ experience, starting at Jersey-based State Street Alternative Investment Solutions providing administration and accounting services to hedge funds. He also worked in its London office, before returning to the island to join JTC Group in 2013 as a Senior Accountant. Most recently, he has worked for FTSE100 private equity manager Schroder Adveq, where he was responsible for the oversight of funds under management.

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The Jersey Financial Services Commission has appointed two Commissioners to its board – Mark Hoban and Monique O’Keefe. Mark will become Chairman in April 2020, subject to approvals. A former Conservative MP, Mark has been Financial Secretary to the UK Treasury. He is Chair of reinsurer Flood Re and serves on the Bank of England’s Enforcement Decision Making Committee. Monique co-founded and runs Kairos Wealth. Prior to moving to Jersey, she was a banker at Goldman Sachs in London and Merrill Lynch in New York and London. Before this, she was a finance lawyer with Clifford Chance and Minter Ellison.

Departing Jersey Finance CEO Geoff Cook is to join Mourant as a consultant early in 2019, after 12 years with the finance body. Geoff is a regular speaker at conferences and seminars around the world and writes on issues affecting Jersey and other finance centres. Prior to Jersey Finance, he was Head of Wealth Management for HSBC Bank in London, responsible for the delivery of financial planning services to HSBC customers in the UK. His earlier career was spent as a senior manager with HSBC Bank in the UK and as Head of Personal Financial Services and Deputy to the Chief Executive at HSBC Bank International in Jersey.

The Jersey Financial Services Commission has named Martin Moloney as its new Director General. Martin is currently a Special Adviser on Risk and Regulation to the Central Bank of Ireland (CBI), where he previously led the Markets Policy, Markets Supervision, and Legal and Finance Divisions. Prior to the CBI, Martin worked in the Department of Justice and the Irish Competition Authority, and spent 10 years in the Irish Department of Finance. During his early career, he worked for Barclays Bank and the Bank of Ireland in London. Martin will begin his five-year term as Director General from 28 February.

Bedell Cristin has appointed Catherine Cadman to the newly created position of Head of Knowledge. In her Jersey-based role, she will lead Bedell Cristin’s knowledge strategy in relation to the firm’s offices in six jurisdictions. With more than 20 years’ experience in onshore and offshore law firms, Catherine is tasked with maximising how knowledge is captured, shared and applied across Bedell Cristin. She joins the firm from Mourant, where she has been Global Head of Knowledge for the past three years. Her career also includes almost 20 years with UK firm Irwin Mitchell, and with Norton Rose Group in London.

Fionnuala Carvill has joined Investec Bank (Channel Islands) as a Non-Executive Director. Fionnuala has held several senior industry positions, including Commission Secretary and Head of Innovation at the Guernsey Financial Services Commission. Among her many professional roles, she is on the board of the Chartered Institute for Securities & Investment; a past President of the Chartered Institute for Securities & Investment, Guernsey; a fellow of the London Institute of Banking & Finance; a fellow of ICSA: The Governance Institute; and past President of Women in Professions.

Jersey-based fiduciary and administration services provider Ocorian has named Stuart Layzell as Group CEO. Stuart has held the dual role of Chief Financial Officer and Chief Operating Officer at the firm since January 2017. He has taken a lead role in all four of the acquisitions made by Ocorian and the development of a centralised Global Operations team. His career, which started at PwC in 1992, has included a wide range of financial and investment leadership roles in London and the UK. Prior to joining Ocorian, Stuart was Chief Financial Officer at financial planning firm Tilney Bestinvest.

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BL guernsey Fund report reveals stable growth for 2018

he latest edition of research company Monterey Insight’s Guernsey Fund Report sets out the market share of all service providers in Guernsey’s funds industry, revealing a year of stable growth in 2018. Fund assets serviced in Guernsey stood at $399.3bn at the end of June 2018, up 0.7% compared with 2017. The number of serviced schemes increased to 1,077 and the total number of sub-funds reached 1,323 from 1,018 and 1,363, respectively. For fund administration services across domiciled and non-domiciled funds, Northern Trust remained the largest by total net assets ($65.0bn) and by number of sub-funds (188). It was followed by Ipes, with $47bn, and Apax Partners in third with $39.3bn. Northern Trust also maintained its lead position for custody and transfer agency services respectively, with $25.7bn and $53.6bn. BNP Paribas Securities Services held onto its second position in the custody league table of serviced funds, with $10.6bn, ahead of Kleinwort Hambros with $6.6bn. Among the transfer agents, Ipes maintained its second position with $47bn, and Apax Partners rose to third position with a total of $39.3bn. Auditors ranking The ranking for auditors was unchanged this year, as has been the case for several years. PwC maintained its lead position, auditing 365 funds, ahead of KPMG with 295 funds and EY in third. The league table was reversed for auditor ranking by assets – KPMG leading with $140.3bn, followed by PwC with $116.3bn and Deloitte in third position. Among legal advisers, the ranking remained the same as last year. Carey Olsen held its lead, offering legal advice to 750 funds, followed by Mourant Ozannes with 173 funds and Ogier in third position.

14 January/february 2019

On the market share ranking of assets, Carey Olsen also took the top spot, ahead of Mourant Ozannes. Fund managers Among fund managers, the largest promoter/initiator of funds serviced in Guernsey was Apax Partners with $40.4bn. Partners Group climbed to second position with $21.1bn, followed by Permira at $15.3bn. A total of 95 funds and sub-funds domiciled in Guernsey was launched during the year, accounting for $15.5bn in assets, of which 58 sub-funds were private equities with a total net asset of $12.1bn, representing 78.1% in assets of the newly launched product. For serviced funds, private equities funds were the most popular product, accounting for $259.2bn compared with $250.3bn in 2017 – representing a 3.6% increase. Among newly launched serviced funds, private equities accounted for $15.1bn out of $19.3bn. Karine Pacary, Managing Director of Monterey Insight, commented: “We are pleased to reveal the continuing stability of the Guernsey fund industry in the 24th edition of our Guernsey Fund Report. “In fact, Guernsey has managed to attract 21 new promoters to establish funds in the island and, combined with the existing promoters, more than 140 new serviced funds and sub-funds were launched in the same period, accounting for $19.3bn. “In a landscape where private equity and venture capital funds hold a prime position, Guernsey continues to be recognised as a reliable and trusted market.” For news on Jersey’s funds sector, see page 18. n

Guernsey publishes financial services policy

he States of Guernsey’s Committee for Economic Development and Guernsey Finance have published a policy framework to support the growth of Guernsey’s finance sector. The framework will give clear positioning, principles and priorities for Guernsey Finance. It forms part of the Economic Development Strategy laid out by the Committee for Economic Development earlier this year and approved by the States in June. It sets out an approach to create leadership for Guernsey’s finance sector, built on a range of global specialisms. Dr Andy Sloan, Guernsey Finance’s Deputy Chief Executive, Strategy, who led development of the framework with industry, the government and the Guernsey Financial Services Commission, explained: “Growing global specialisms is all about positioning, principles and priorities. ‘Positioning’ is about clearly defining ourselves as a specialist finance centre that’s a force for global good, and a leading centre of sustainable finance. ‘Principles’ builds on the qualities, characteristics and strengths on which we’ve built our success – stability, security, transparency, flexibility, integrity, specialisms and innovation. “Finally, ‘Priorities’ is about having a clear concentration and focus on a pivot to private capital and wealth business. That could include servicing family offices or private funds, aligned to growing pools of capital in markets such as New York, the Middle East and the Far East.” n

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At Butterfield, we specialise in assembling the best people, products and services to create bespoke financial solutions for wealth management and the financial intermediary market. It is a skill Butterfield has honed over 160 years in banking. Although much has changed over that period of time, our core values, entrepreneurial spirit and unrelenting focus on our clients’ needs, remains at the heart of everything we do.

Butterfield Bank (Guernsey) Ltd PO Box 25, Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3AP www.gg.butterfieldgroup.com

To find out more about Butterfield’s personalised wealth management services, please contact one of our Business Development Advisers: GUERNSEY +44 (0)1481 711521 or e-mail Guernsey@butterfieldgroup.com JERSEY +44 (0)1534 843333 or e-mail Jersey@butterfieldgroup.com

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THE BAHAMAS • BERMUDA • C AYMAN ISL ANDS • GUERNSEY • JERSEY • SINGAPORE • SWITZERL AND • UNITED KINGDOM Butterfield Bank (Guernsey) Limited (“BBGL”) is licensed and regulated by the Guernsey Financial Services Commission (“GFSC”) under the Banking Supervision (Bailiwick of Guernsey) Law, 1994, The Protection of Investors (Bailiwick of Guernsey) Law, 1987 and the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000, each as amended from time to time. Company Registration No. 21061. BBGL is a participant in the Guernsey Banking Deposit Compensation Scheme. The Scheme offers protection for ‘qualifying deposits’ up to £50,000, subject to certain limitations. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details are available on the Scheme’s website www.dcs.gg or on request. Butterfield Trust (Guernsey) Limited (“BTGL”) is licensed and regulated by the GFSC under the Regulation of Fiduciaries, Administration Business and Company Directors, etc, (Bailiwick of Guernsey) Law, 2000, as amended. Company registration No 31645. BBGL and BTGL are both registered under the Data Protection (Bailiwick of Guernsey) Law 2017 and are registered for the purposes of The Companies (Guernsey) Law 2008. Their registered office is P.O. Box 25, Regency Court, Glategny Esplanade, St Peter Port, Guernsey GY1 3AP. Butterfield Bank (Jersey) Limited (“BBJL”) is regulated by the Jersey Financial Services Commission to conduct deposit taking business under the Banking Business (Jersey) Law 1991 (as amended), investment business, fund service business and money service business pursuant to the Financial Services (Jersey) Law 1998, (as amended). BBJL is registered under the Data Protection (Jersey) Law, 2018 and is registered with the Jersey Registrar of Companies for the purpose of the Companies (Jersey) Law 1991 (as amended). BBJL’s registered office address is St Paul’s Gate, New Street, St Helier, Jersey JE4 5PU. Company registration number 124784. BBJL is a participant in the Jersey Bank Depositors Compensation Scheme. The Scheme offers protection for eligible deposits of up to £50,000. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details of the Scheme and banking groups covered are available on the States of Jersey website www.gov.je/dcs, or on request. BBGL, BTGL and BBJL are wholly-owned subsidiaries of The Bank of N.T. Butterfield & Son Limited. Photo by Lachlan Dempsey on Unsplash.

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Guernsey retains captives title

Strong upswing for property

uernsey was for the second year running named best nonEU domicile at the 2018 European & UK Captive Awards, held in Luxembourg on 13 November. The judging panel noted that Guernsey continued to lead the way for captive formations in Europe – more than half of the 17 new licensed structures in Europe in 2017 – and cited its non-Solvency II regime as a key differentiator. As Guernsey is not part of the UK or EU, it is outside the scope of the Solvency II regime. Following a public consultation in early 2017, Guernsey reaffirmed it would not be seeking equivalence with Solvency II. Its own regime distinguishes between different classes of insurer and places proportionate regulatory burdens on each. Guernsey observes the IAIS Insurance Core Principles – the global standard for insurance supervision – and the Guernsey Financial Services Commission maintains discretion to modify regulatory requirements on a case-by-case basis. There are over 800 captives in Europe, of nearly 6,500 worldwide, with Guernsey’s market share of European business at 38%. There were other Guernsey winners at the awards – BDO’s Guernsey office won the Accounting Specialist Category, and several firms with Guernsey offices, including Generali, Willis Towers Watson, Aon, EY and Marsh, were also winners. n

he latest House Price Index has reported the second highest number of quarterly property transactions in Guernsey this decade. A total of 251 transactions took place in the third quarter of 2018, 68 more than the previous quarter. According to Skipton International, while the average price of property sold rose by 2.2% to £419,763 on the previous quarter, this was still slightly lower than at the same time‘in 2017 suggesting buyers may be continuing to seek value. The time from property advertisement to sale continues to fall, indicating that the prior high levels of property on the market is starting to tighten, said Skipton. The last quarter saw peaks in the sale of homes priced between £300,000 and £399,000, with the largest increase with those between £600,000 and £699,000. Jim Coupe, Managing Director of Skipton International, said: “These figures support our experience of the market over the last few quarters. There appears to be a more balanced mix of mortgage lending by banks this year, which shows increased competition in the market.” Property purchase bonds were also up 5% on the same period in 2017, which was the best performing year for bonds since 2012. Coupe added: “Despite the last quarter of the year generally being a slower time for property, we anticipate the market will continue to enjoy steady growth.” n

Cruise passengers boost visitor numbers in Q3 2018

Image courtesy of VisitGuernsey

3 2018 saw an increase of 1,388 visitors (0.7%) on the same period in 2017, largely driven by a strong increase in visitors on cruise ships (up 14.9%). Excluding cruise ships and visiting yachts, there were 118,130 departing visitors during Q3, a decrease of 5% on the same period in 2017. Total staying visitors, the highest value segment of the visitor market, remained stable at 99,888. The fall in visitors was mainly driven by a drop in day visitors of 27% to 17,665 visitors, caused by a decline in sea travel of 14% on Q3 2017, with a number of ferries being cancelled during the quarter. French visitors travelling by sea were particularly affected. Overall, the number of French visitors fell by 41% in Q3 2018 compared with the same period in 2017. Despite a strong Q2 and a stable Q3, the year to date (January to September) saw a slight decline in the number of total departing

16 January/february 2019

visitors (including cruise passengers and visiting yachtsmen) of 0.5% on 2017 – 372,457 compared with 374,267 in 2017. This was due to a challenging first quarter and poor weather conditions. The number of day business visitors increased by 16% on 2017, but this was not large enough to counteract the sharp fall in leisure day visitors of 33%. There was a 4% decrease in visitors from the UK (down 3,341), but the number of visitors from Jersey increased by 18%. Visitors from other destinations increased by 5% – this included a strong uplift in visitors from Germany of 42%. Deputy Dawn Tindall, a member of the Committee for Economic Development, said: “We’re delighted to see such a healthy increase in cruise passenger numbers in the quarter and year to date, and the strong growth in visitors from Germany in Q3. This growth has been eroded somewhat by the challenges with sea travel during this quarter, particularly from France, but it’s encouraging that overall Q3 visitor numbers still show a modest increase.” n

Guernsey joins UNited nations’ European green finance network

he United Nations’ Financial Centres for Sustainability (UN FC4S) has launched its European arm in Dublin, Ireland, and Guernsey is one of nine financial centres involved. Dr Andy Sloan, Deputy Chief Executive, Strategy, at Guernsey Finance, commented: “We look forward to sharing our expertise in product development and learning from our partners in this initiative, to help us to achieve our objectives in developing green and sustainable finance.” Guernsey joins a number of other financial centres, including London, Frankfurt, Paris and Zurich, in the new European network, which has its base in Dublin. n

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BL jersey Fund sector breaks new records

Jersey approves international savings plan

ew findings from fund research company Monterey Insight reveal the market shares of all service providers in Jersey’s fund industry. According to the 24th annual Monterey Jersey Fund Report, fund assets serviced in Jersey rose to $411.1bn at the end of June 2018, up 18.7% from 2017. The number of serviced schemes increased to 1,279, up 6.5%, and the total number of sub-funds recorded was also up to 1,721 – a 3.5% increase. For fund administration services across domiciled and non-domiciled funds, Aztec Group maintained the largest market share for fund assets under administration for the third consecutive year, with $126bn in assets. It was followed by Saltgate with $40.2bn and Ocorian with $23.3bn. Of serviced funds, among transfer agents, Aztec Group accentuated its lead, with total net assets of $129.1bn, ahead of Computershare Investor Services with $21.9bn and Intertrust in third with $20.9bn. The custody ranking of serviced funds remained unchanged, with BNP Paribas securing top position as the largest custodian by assets, with $22.3bn. JP Morgan maintained its second position with $11.8bn and Link Asset Services came third with $9.7bn. Among legal firms, Mourant Ozannes kept its ranking as the number one legal adviser, advising on 791 funds, followed,

18 January/february 2019

like in 2017, by Carey Olsen with 670 funds and Ogier with 372 funds. Among auditors, and as in 2017, PwC held onto first position, with 452 funds, ahead of KPMG and EY respectively, with 320 and 199 funds respectively. Of assets, PwC also led with $105.5bn, followed by Deloitte and KPMG respectively, with $77.2bn and $69.2bn. Among fund management companies of domiciled and non-domiciled schemes, Ardian was in first position with assets totalling $39.5bn, followed in second position by CVC with $33.5bn. The most popular fund types for Jersey domiciled funds – private equity/ venture capital and infrastructure funds – rose to $143.6bn, an increase of 57.6%, thanks to some large funds launched during the year. In fact, just the top five funds in this category represent a massive $42.7bn. Overall, more than 110 groups/schemes have been launched since June 2017, adding a total of $54.2bn. Karine Pacary, Managing Director of Monterey Insight, commented: “This has been another strong and positive year for the Jersey fund industry, which managed to attract a great inflow of new business as promoters chose the island to set up their funds. “Specifically, 32 promoters/initiators chose Jersey to set up their funds, while 12 others decided to service their funds in the jurisdiction, bringing a total inflow of $39bn.” n

ersey’s government has approved the introduction of provisions that allow Jersey to launch International Savings Plans (ISPs). Effective from 1 January 2019, the proposals, which have been approved by the Jersey tax authorities, enable multinational and international companies to set up savings plans in Jersey for non-resident employees. It is anticipated the product will have a particular appeal in the Gulf region, which is already a key market for Jersey’s finance industry, and where there is a strong demand for such schemes. The ISPs are designed to be tailored to meet the needs of employers and employees, enabling a payout to employees when their employment ends or on the occurrence of a major trigger event such as redundancy, ill health or divorce. If multinational and international companies choose Jersey to set up their ISPs, they will be able to provide benefits to employees before the normal minimum pension age, which is currently restricted to 50 in Jersey. Geoff Cook (pictured), CEO of Jersey Finance, commented: "The ISP is the latest in a series of such products tailored to the needs of international business. Any major international firm or institution setting up ISPs will want to establish them in a reputable, well-regulated jurisdiction with a strong track record, and Jersey clearly meets that criteria.” n

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IFC 1 sold for £43.7 million

he first building to be constructed at the International Finance Centre in St Helier, IFC 1, has been sold by the Jersey Development Company (JDC) for £43.7 million. The 69,405 square foot, super-prime grade A office space was completed in March 2017, fully let in 2018 and sold to Klesch Family Office on 23 November. The sale has generated a net return (land and profit) of £10.9 million, exceeding JDC’s original projection of £7.5 million. IFC 1 provides centrally located, flexible working office space over six floors and has been rated Excellent by the BREEAM environmental standards body. The building is 100% let on long leases to blue-chip tenants. Klesch Group founder and Chairman Gary Klesch commented: “I've long held the view that Britain has been held back

by the static model of the European Union. Once Britain has left the EU, I believe it will be immensely more attractive for businesses and investors alike, as it becomes a more dynamic market able to adapt to evolving business needs. "This investment underpins my view that we will see explosive growth triggered by Brexit, which will increase the demand for high-quality office space in Great Britain and Jersey, as businesses hire to capitalise on the Brexit opportunity.” Lee Henry, JDC’s Managing Director, said: “JDC is delivering a flagship office district that provides the highest quality office buildings in Jersey. There was significant interest from potential purchasers as a result of the quality of covenants of occupiers, the level of unexpired lease term and the quality of the building in terms of design, flexibility and specification.” n

Consultation on lending and pensions launched

he States of Jersey has published two consultation papers proposing to regulate consumer lending and pensions business within a financial services regulatory framework. Despite the financial services industry in Jersey being recognised as well regulated, with high standards of consumer protection, lending and pension services are not regulated in their own right. The States of Jersey proposes to expand protection by bringing pensions business and

the provision of lending fully into the scope of regulation. The Assistant Minister for External Relations, Connétable Richard Buchanan, commented: “These consultation papers are an important step towards protecting islanders in two of the most important financial services that we rely on – borrowing and pensions. I encourage all islanders with a view on this to put their opinions forward so that we can build the best possible protection in Jersey.” n

EY appointed digital modernisation partner

rofessional services firm EY has been appointed as an expert partner to speed up the delivery of the government of Jersey’s digital modernisation and change agenda. The 15-month contract is worth £2.2 million, which includes the cost of the contract and other related costs. EY will develop an organisational structure for modernisation and digital, establish a corporate portfolio management office, create a digital strategy for the whole of the public service and identify the common technology needs and capabilities across the organisation to maximise efficiencies. As an integral part of the modernisation and digital transformation team, EY will also work with States of Jersey employees to develop skills that will ensure the improvements are sustainable over the long term. n

20 January/february 2019

Jersey signs UK customs arrangement

ersey’s Minister for External Relations, Senator Ian Gorst, has signed a Jersey/UK Customs Arrangement that establishes a customs union between Jersey and the UK. Similar arrangements have been agreed between the UK and Guernsey, and the UK and Isle of Man. Collectively, they will establish a UK-Crown Dependencies customs union, which the States said is essential for Jersey to trade after the UK leaves the EU. The two essential elements of establishing a customs union are that the parties agree not to impose import tariffs for goods passing between themselves, and to impose a common external tariff on goods from places outside the customs union. The arrangement means Jersey will be able to continue to trade with the UK free of tariffs, with no restrictions on quantities. Jersey and the UK are currently in a customs union with the EU and apply the EU’s common external tariff, but that will change on leaving the EU customs union. It's long been the case that the UK nor Jersey impose import tariffs on goods produced in the other’s territory. But after leaving the customs union, a practical mechanism must be put in place to impose the same common external tariffs as the UK on goods traded at the border. Other issues agreed include: l Tariff-free movement of all types of goods between Jersey and the UK, with no quantitative restrictions on imports l The ability to impose prohibitions or restrictions at border for specific reasons l Participation in a new joint UK-Crown Dependencies Customs Committee l Retention of Jersey’s autonomy in fiscal matters l Autonomy in maintaining local customs IT systems. n

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D I R E C T OR O F TH E Y E A R A W A R D S 2019 Friday 17 May 2019, Royal Yacht Hotel & Spa

ENTER THE 2019 AWARDS Entries and nominations are now open for the IoD Jersey Director of the Year Awards 2019. The Awards seek to honour the best performing business leaders in the private, public and third sectors across the island. Nominees and entrants can be of any age, from any sector and neither you nor they need to be an IoD Member. It's free and easy to nominate at www.iodawards.com/jersey Nominations close on 15 February 2019

Interview

In a consolidating market, Jersey-based fiduciary business Fairway Group has remained what it describes as ‘consciously independent’. Co-founder and CEO Louise Bracken-Smith tells Businesslife why the company isn’t up for sale and how she plans to take it forward Words: Eila Madden Pictures: Glen Perotte

In a nutshell, what does Fairway Group do? We do trusts, funds and pensions. We’re a fiduciary services business, so the trust is basically private and corporate clients. We look after high-net-worth individuals and corporate clients with global assets that use Jersey as a tax-neutral jurisdiction which is well regulated, has a great time zone, great legal infrastructure and real depth in expertise. The pensions side is obviously encouraging people to save for the future – we offer trustees the vehicles to do that, but what’s interesting is that the independent financial advisers are the sales force for

22 january/february 2019

those products. And then on the funds side we offer private funds for a real estate and private equity client base. So, it’s fiduciary service, but we’re all about trying to add value. When a client comes here, they get a director-led service, but with a whole team beneath them. So when the client phones up to ask a question, we’ve got somebody who can answer them. Does that service feed into your ‘consciously independent’ brand? That’s us making a statement that we are consciously remaining not for sale. When I started, there were 190 regulated businesses and I think there are probably about 15 independent businesses left now, so the market has really diminished. There are lots of reasons for that, including compliance, which is really driven by the regulatory regime because it’s a very well-regulated market and the barrier to entry now is just higher and higher. It makes sense for businesses to merge, to work together and to have a collaborative approach. We would always look at a joint venture or a merging opportunity – we have had talks with others before that haven’t come to fruition – but being part of a bigger group is just not on the agenda for us. Do you think independence gives you a competitive advantage? We just all believe passionately that it’s how to service the clients in the best way. The clients we attract are ones that want to be in more of an entrepreneurial environment. They want to be dealing with decision-makers; they want to know that when they ask for something, it’s going to get turned around quickly and we’re not going to have to trot off to head office in Canada or wherever for a decision, which might take weeks. It

enables us to be more nimble and that just suits the clients we look after. Had you always intended to run your own company? I’ve come from an entrepreneurial background. My dad always worked for himself – he was a dentist and my sister followed suit. In our house, the attitude was that you need to work for yourself. Being with a large firm like PwC [formerly Coopers & Lybrand], I knew that it would be 15 years before I’d be looking at any kind of promotion. I thought that if I joined somewhere smaller, I’d have an opportunity to get a partnership earlier – and that’s what happened. I and our Chairman, Alistair Rothwell, with whom I co-founded the business, became Partners of the accountancy practice in 2005 and we were shareholders of the whole business quite quickly after that. I never envisaged running my own company – there was no roadmap to where I’ve ended up – but I love it and enjoy every day and I want everybody in the business to feel the same. What do you enjoy most about the job? I enjoy the diversity of the role. I enjoy the people side the most – I enjoy meeting clients – but I also enjoy the strategic side of planning. We brought in a coach about three-and-a-half years ago, and what’s been really exciting about the journey with him is that we’ve spent a lot of time working on our vision, values and metrics that really matter. We’ve been trying to embed a leader culture where people aren’t reverting back to the owners to make a decision, but asking themselves: what would a leader decide? I also enjoy the fact that we’re a small business, so we can make decisions and see the results of those decisions quite quickly. I think what’s hard is really trying to be

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What’s your background and how did you get there? I trained with Coopers & Lybrand and, after a lot of soul searching, left and went travelling for a couple of years. I’d wanted to join a smaller accountancy firm so, when I came back, I joined HLB Jackson Fox, which at that time had eight or nine people in the business. They’d just sold their trust company to AIB Bank and we formed Fairway Trust in 2000 to cater for the clients AIB didn’t want. Fairway Group was formed later. Quite quickly, I fell in love with the private client trust world, having joined the business as an accountant and pursued an accountancy career. I decided to do my STEP [Society of Trust and Estate Practitioners] qualifications so I could learn about the trust industry. I actually had a world record in doing the STEP exams – they’re supposed to take three years and I did them in eight months at that time. But, obviously, some amazing lawyer came along quite quickly and decided to gazump me by a day and since that someone’s done it in three months. So I no longer hold the world record, but I did at one point – so very proud!

Interview

The

interview Louise Bracken-Smith www.blglobal.co.uk

january/february 2019 23

Interview

the inspiration and make everybody feel as if they are on the journey together. Today is a good example of us trying to do that. My brother has been doing quite a bit of work with us. He’s a motivational leadership speaker, having had a professional rugby career. My ambition is that everyone will walk away today and take something from it. Our ethos is: let’s just be the best we can be. You can have different businesses in different phases – one riding the crest of a wave, another having challenging times – but having a team mentality is the important thing. So, for me, that’s the exciting part of the business. It’s trying to get everybody inspired and motivated and driving towards the same vision. You have quite a big focus on employee wellbeing too. Wellbeing is really important to us. We do wellbeing surveys once a year and we have a Colleagues’ Council. I think we’ve got to be adjusting the business for what the people in the business want. So, we’ve now got a running club twice a week, we hold yoga classes, we offer gym benefits and yearly health checks, we’re looking at health screening, we offer stand-up desks – we just want people to be as active as they can. The results show that people who have an active private life can perform better in their work life and vice versa. We’re not interested in people being here at

24 january/february 2019

10 o’clock at night. We’ve got to get the job done, that’s for sure, but we do want people to go home at night and have a life – it’s just as important. The emotional wellbeing side is really important as well. Jersey Recovery College is going to come in and help train the business in dealing with mental health issues and how to spot the signs that could suggest that people are having mental health difficulties. We want to be partner of choice for trusts, funds and pensions, but we also want to be employer of choice, which is why we’re investing in our employees. You’ve grown from 10 to around 100 employees in the past 19 years. Tell us about that journey. We were bound by a seven-year noncompete clause until 2007, but after that, we started proactively marketing the business and it grew organically with Alistair and myself. There were other shareholders, but Alistair and myself have been together all that time. We then diversified and started a pension business, which went hand-in-hand with the accountancy practice. We started out doing pension solutions for local clients and then we realised our strategy for growth would be to bring in other likeminded people to head up that area. Quite quickly, we brought in Peter Culnane, who was a guru of the pensions industry in Jersey, to lead the pensions side. And then

You recently opened an office in Bahrain. What’s behind this move? We look after Emirates Bank. They have a trust company in Jersey and we took them over in 2012 and we’ve had a very fruitful relationship with them. We’ve been in the [Middle East] region for the past five or six years servicing their clients and, during that time, we’ve built up our own client base in that region. We’re currently rolling out a savings plan for the pensions side in the UAE, where we’ve partnered with FlexGlobal. It’s a Jersey product; we do the Jersey end of the product, they do the selling in Dubai. We’re really excited about how that’s going to progress. So we’re in the region and we’ve got teams in the region virtually three weeks out of four most months. Our Business Development Executive, Graeme Fairlie, is an Arabic speaker and he comes from Bahrain. We were increasingly wanting to visit Saudi and Kuwait, and a good, central place to do that from was Bahrain, so Graeme was spending more and more time there. We thought that, well, if we are actually going to dip our toe in the water in that area, then a great place to start would be Bahrain. At the moment, we’ve got a branch there and Graeme is there as often as he can be throughout the month. We’ll look to put somebody on the ground there full time, hopefully in the first half of this year. We’ll be increasing the marketing footprint and using Jersey as our head office. In time, the grand plan is to be fully regulated and have a full team on the ground out there. Do you see the group expanding into any other regions? We’re looking at Mauritius for outsourced accounting. We’re in negotiations there and are just exploring that market. Bahrain and Mauritius are our main focus at the moment, but it would be great to be in other places as well. Who knows whether it’ll be Luxembourg or the British Virgin

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for me, It’s trying to get everybody inspired and motivated and driving towards the same vision

we decided to grow the fund side, which is now headed by Alison Creed. We’ve ended up with three different businesses all operating under our Fairway Group umbrella, but they’re all in different stages of their evolution. The trust side’s probably the most mature, followed by the pensions side, followed by the fund side. We’re up to 100 people now and it’s all been organic growth – 30% year on year – very much with a strategy of bringing in the right people. I used to be the company secretary; I used to be the compliance officer; even a year and a half ago I was doing the marketing. Now we’ve got a full team to do all of these things. It’s quite nice, now, to actually be doing what I’m meant to be doing rather than things I know nothing about!

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Islands. When we have our strategy meetings, we’re literally looking through the countries going: ‘Right, let’s look at that one next’. All the offshore jurisdictions are on the list and it’s just a case of getting to them.

three in the ministerial cabinet are female. Unless there’s a drive at that level to change the dynamic, Jersey’s future for women is not looking good.

Was global expansion always on the cards? Because Jersey has been in a period of consolidation for quite some time, we’ve really benefited from the clients that have not wanted to be private-equity supported. We’ve been really busy with that. But because we’ve now built up our leadership team in Jersey, we can start focusing on other jurisdictions. The ultimate goal is not to be so reliant on one jurisdiction. What do you see as the wider challenges and opportunities for the sector? As the emerging markets develop and mature, there are tons of opportunities there; they’re just difficult to get into. It’s all about contacts and relationships. The challenge that’s facing everybody is the regulatory regime. The amount of acronyms over the past two or three years – FATCA, CRS, national risk assessment, now substance – the industry’s had to do an endless amount of work. How is Fairway Group dealing with the compliance challenge? It’s resources really; it’s having the right people to continually adapt the policies and procedures, write them for the business, work with the business to make sure that they are workable and constantly update all of that to cater for the changing laws, codes and regulatory regime. There’s constantly something. It’s just part of life. Everything we do is compliance first and let’s do the business later. That’s the way it works, which is fine – we’re all used to that culture. But the challenge is keeping up. On the plus side, Jersey has put itself out there as the leading, most-regulated jurisdiction there is, which I think 10 years ago people thought was a crazy thing to do, but it’s really paid dividends. The clients now are much bigger and more sophisticated. Every time I speak to the lawyers in London, I ask them: ‘What’s your jurisdiction of choice?’. They all say Jersey. Whether they’re just saying it because they’re talking to me or not, I don’t know, but it’s more likely to be because of the strong regulation. It’s also the legal expertise that’s in Jersey – which is pretty phenomenal for the size of the island. And the level of expertise in the finance industry is pretty special compared with other jurisdictions that just don’t have the depth that we’ve got.

26 january/february 2019

FACT FILE Name: Louise Bracken-Smith Age: 45 Position: Co-founder and CEO, Fairway Group Member of: Institute of Chartered Accountants in England and Wales; Society of Trust and Estate Practitioners Married to: Pete Children: Max, Freddie, Harvey and Georgie Hobbies: Triathlon – Louise will be representing Ireland at the 2019 Triathlon World Championships this August Did you know: Louise is sister to former England rugby international Kyran Bracken

As a female CEO in a male-dominated sector, what do you think about Jersey’s record on diversity within business? It’s not doing well at all. The trust industry is female dominated, but not at the leadership level necessarily. At Fairway Group, we’re 66% female across the organisation and 40% female at leadership level, which we’re really proud of. But if you listen to someone like Charlotte Valeur, Head of the Institute of Directors, who’s introduced a fantastic initiative to get more women onto boards, her statistics for Jersey are frightening. To have proper female representation on company boards, we’d need about 300 or 400 females at a senior board level and we’ve probably got 20, if that. If business is going to keep coming to Jersey, we have to, as an island, deal with this. When you look at the States members,

So you think the lack of gender diversity can have a business impact? Yes, I think business will go elsewhere – you’ve got Scandinavian companies that won’t invest if the board is not 50/50. That’s the way the world’s going, so we need to educate the people coming through that board level is what they should be reaching for. It should be in people’s development programmes. But the statistics on the island show that’s just not the case. We’ve got to look at issues like maternity policy and give men equal time off to women – that’s not even on the agenda for discussion at the moment. If you look around the world, I think we’ve got eight female leaders dominating the world and yet at a microscopic level, like here, it’s just not the same. You train as a triathlete. How do you juggle that with a very busy work and home life? It’s quite a family friendly sport. My husband would totally disagree with that, but I try to do my training when the children are asleep or in the middle or end of the day. So I was up at 5.30 this morning on the turbo to get my hour in. I try to swim after work or early morning or do a long run or bike ride when the roast’s on – I try to fit it in when it suits the family, so I still make the rugby matches and football matches for the children, and obviously still come in and do a day in the office. I think it’s an amazing sport. It’s been an incredible journey for me to join triathlon. Even though it’s an individual sport, it’s really all about the team. You can be with the top girl on the island who’s dominated the sport for a long time and she’s training with the complete beginners. That says something special about the sport. It’s a really inclusive, really wonderful sport. I don’t really see that in other sports that I’ve been part of, which are all about beating somebody else. Looking ahead for the year, what do you see as the main focus for the sector and for the Fairway Group? For the sector, it’s keeping ahead of regulation and just embracing and looking after clients. And for us, in particular, it’s a bit of lifting our heads and looking at where we can move towards. All the metrics for the business are in place and we’re on track to meet our 2020 targets. So I think it’s exciting times. n For more on Fairway Group, see page 73. EILA MADDEN is Editor-in-Chief of Businesslife

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201 9: What can Predictions

we expect?

Experts from across the Channel Islands share their predictions on the challenges and opportunities that lie ahead for key sectors in the next 12 months

28 january/february 2019

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Predictions

FUNDS MIKE BYRNE, CHAIRMAN, JERSEY FUNDS ASSOCIATION

Over the coming 12 months, what do you see as the biggest challenge facing the funds sector in Jersey? The Jersey Funds Association (JFA) recently conducted a survey of our 100-plus members, asking for their views on the key challenges we face. We see these breaking down into two key areas: locally, our members report challenges around the availability of appropriate resources to respond to the growth we’ve seen. We see record levels of employment in the funds sector and, although we’re attracting new talent into the industry, our members have demand for even more. This need for talent exists despite unprecedented levels of technology investment and process improvement across the industry. Looking further afield, the key challenge reported by our members is to ensure that international fund managers and investors fully understand the role Jersey can play, and the quality of services and solutions we offer. Full credit goes to Jersey Finance and our government for all they do on the international stage, but in a world of increasing regulation and competition from other jurisdictions, maintaining our share of global growth remains a challenge. And where do you believe the greatest opportunities lie? This was a key area of focus in our recent JFA survey and three key markets dominate: ● The UK – our nearest and most significant source of business, many members see this as a key market going forward, especially given that it will sit outside the European Union (EU) ●N orth America – the US represents more than half of global fund assets and is a market in which we’ve been underweight

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for many years. Given the increasing need for substance – and Jersey’s ability to offer this – US-related funds, which have traditionally been located in the Caribbean, may need to look elsewhere in the future ● The Middle East – an important market for many Jersey businesses over the coming years. Again, credit goes to Jersey Finance for its new office in the Dubai International Finance Centre to support this growth. At an asset class level, private equity/ private debt, infrastructure and real estate dominate in terms of opportunities for our members over the coming year. Is there one thing that will dominate Jersey’s funds sector in 2019? I don’t think there is one specific factor – either markets or products – that will dominate in 2019. One hope for the year ahead is that the uncertainty that has prevailed around Brexit starts to decrease. Although Jersey isn’t directly affected by Brexit, the vast majority of our clients are, and what’s good for our clients is good for our island. I’m confident that we will continue to see the Channel Islands emerge as a global centre for digital innovation in asset management. We’ve seen this at both the fund level – for instance, in the area of crypto – and also at the service provider level, through advances in the use of blockchain technology for fund administration. Long may this continue. Public equity and bond markets will also be a key focus. And having seen a 10-year bull market since the global financial crisis through to record levels throughout most of 2018, later months have seen a certain level of correction and investor uncertainty. Market direction throughout 2019 and what this means – for instance, for the trillions of dollars in index tracking funds – will certainly be interesting, with many

investors looking at whether now is the time to switch into largely uncorrelated, private market Alts. What other funds sector issues should be on our radars over the coming year? In recent years we’ve seen a number of London-listed funds being established in Jersey, and investing in alternative assets. This form of long-term capital vehicle (as opposed to the fixed, typically 10-year life of many Alts funds) is a source of interest to many investors, offering a combination of continuity of ownership of assets whilst providing potentially greater liquidity than traditionally seen in Alts. As at asset class level, the search for yield continues and the evolution of Alts assets to provide this return through private debt, yield-producing property and infrastructure will be an ongoing theme for many institutional investors.

ANDREW WEAVER, PARTNER AND JESSICA JIANG, SENIOR ASSOCIATE, CORPORATE, APPLEBY, JERSEY As we enter 2019, how would you assess the general health of the funds sector in Jersey? We expect the Jersey funds sector will be generally more active and healthy in 2019 than in 2018. No matter what the result of Brexit, after March 2019 there will be more investment opportunities in the market for private equity funds, hedge funds, debt funds and funds focusing on distressed assets and then eventually boosting fundraising activities. We’ve observed a ‘wait and see’ approach taken by some fund managers (especially first-time fund managers) in 2018 due to the uncertainties caused by

january/february 2019 29

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As we enter 2019, how would you assess the general health of the funds sector in Jersey? We find our funds industry in excellent health, with a record level of fund assets in Jersey and fantastic momentum behind new fund launches. The most recent figures available show total fund assets of more than £315bn, the first time we’ve exceeded the £300bn mark as a jurisdiction. This is the aggregate of our regulated funds of £296bn and our recently established Jersey Private Funds (JPF) assets of close to £20bn. The global outlook for Alternative Assets Funds (Alts) – Jersey’s sweet spot – looks incredibly strong, so overall there’s lots to be confident about.

Predictions

both the buyer side and seller side will tend to be more willing to move forward and reach deals, no matter if prices of assets are increasing or decreasing

30 january/february 2019

substance requirements and thus would be an ideal jurisdiction for fund businesses willing to comply with the EU regulation.

Over the coming 12 months, what do you see as the biggest challenge facing the funds sector in Jersey? The biggest challenge comes from the ‘traditional onshore’ jurisdictions – including Luxembourg and Malta in the EU, Singapore in Asia and even the US. They’ve become the competitors to offshore jurisdictions. In 2019, in a fast-changing economic landscape, all jurisdictions will face pressures domestically and internationally, economically and politically. In the next 12 months, if those onshore jurisdictions continue to lower tax rates, provide more favourable tax and regulatory treatments (particularly for ‘valuable’ sectors, such as high-tech, fintech and biotech), it will be no surprise to us if certain funds businesses relocate from offshore jurisdictions to those onshore jurisdictions. And where do you believe the greatest opportunities lie? In 2017, the EU challenged offshore jurisdictions on the basis that they attract profits that do not reflect real economic activity in such jurisdictions. Most of the offshore jurisdictions have committed to the EU to impose substance requirements and implement those requirements into domestic laws at the beginning of 2019. Jersey, an island that has more than 13,000 highly skilled and experienced finance professionals, 4,240 banking industry employees and 182 regulated trust and company service providers, is capable of offering all the facilities and professionals needed to satisfy the new

Is there one thing that will dominate the sector in 2019? ‘Diversification’ is the key word for the Jersey funds sector in 2019. We expect more restructuring of existing fund structures and more establishment of ‘new-new’ fund structures from ‘traditional’ fund types (such as hedge, debt and private equity funds) to hybrid funds such as limited liability companies (LLCs), managed accounts and JV structures. One thing worth mentioning is the new Jersey LLC regime. LLC, as a hybrid structure between a company and a partnership, is familiar to US managers and investors and commonly used in the US market. The new legislation may attract more US-based fund managers to set up structures in Jersey. LLCs can also be easily understood and accepted by US investors. We also expect more attention and investments from Asia following the Jersey Chief Minister’s visit to China in November 2018. We anticipate the Jersey protected cell company (PCC) structure, which is equivalent to the Cayman SPC (segregated portfolio company) structure will become more commonly used by Asian fund managers and Asian investors in 2019. The more that US and Asia-based managers, investors and professionals participate in Jersey, the more diversified the Jersey funds sector will become. What other funds sector issues should be on our radars over the coming year? Fintech, high-tech and biotech funds are worth attention. We do see more and more activity in the tech funds sector. The challenge to the island is that most tech funds require their directors, administrators and other relevant service providers to have a good understanding of new technologies and be willing to work in an innovative environment (but at the same time comply with existing laws and regulations and eliminate legal risks). It’s critical for Jersey to attract more funds professionals who have relevant background and experience working in the island and we also urge funds professionals to keep learning new technologies and thinking creatively. We would also like to emphasise the importance of 2019. It will not be a normal year. Opportunities and challenges will be both boosted in the next 12 months. Any jurisdiction that loses its market share in 2019 may have to pay a high price to get it back. We thus urge Jersey funds professionals to work proactively, and the States of Jersey and the Jersey Financial Services Commission to consult with the private practice sector more frequently, to ensure the Jersey fund sector maintains its forefront position in the world.

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Brexit. Certain types of funds, such as real estate funds, have been more affected. In 2019, both the buyer side and seller side will tend to be more willing to move forward and reach deals, no matter if prices of assets are increasing (good for sellers) or decreasing (good for buyers). Even if a no-deal Brexit happens, it is feasible that buyers would take advantage of fluctuating valuations. The opportunities of underlying investments will, we expect, encourage fund managers to actively make investments and simultaneously raise new funds. Investors may feel vulnerable in 2019 due to the changing political and economic environment and allocating their assets more broadly for wealth protection purposes will be a response to this. Pensions and sovereignty funds have to further diversify their investments to satisfy their strict investment risk controls. All this will make investors more willing to invest in different types of funds. The challenges in other parts of the world, including the US and China trade war, may also push funds participants to react quickly. On the horizon, aggressive fundraising, secondary sales of fund interests and even spin-off funds and restructuring of fund management entities may become common in 2019. Jersey is a traditional domicile for panEuropean funds and fund management entities and is well positioned in the European Union (EU) and the UK. We see a huge opportunity for the Jersey funds sector in 2019 if the island’s non-UK and non-EU position, and its economic and political stability, can be well utilised.

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Predictions

As we enter 2019, how would you assess the general health of the funds sector in Guernsey? We should feel very confident about the health of the Guernsey funds sector. The most recently available figures from the Guernsey Financial Services Commission show that the total value of funds business in Guernsey stood at £272.6bn at the end of Q2 2018 – a five-year high. Not only that, new findings from independent fund research company Monterey Insight found that Guernsey had attracted 21 new promoters to establish their funds in the island in the past year. This shows that the funds sector remains buoyant and that the island continues to be attractive to high-calibre investment business. Over the coming 12 months, what do you see as the biggest challenge facing the funds sector in Guernsey? It almost goes without saying that dealing with Brexit as well as other global uncertainty will be key issues. Having said that, our third country status remains unchanged throughout the Brexit process and that should provide reassurance to those managers looking for a stable, continuing platform to access the EU. Similarly, the EU substance issues are certainly on our radar, but it’s likely that most of the investment funds business in Guernsey already meets the substance requirements as currently proposed. And where do you believe the greatest opportunities lie? Guernsey’s greatest opportunity centres on continuing to make the most of the island’s hard-earned reputation as a stable, well-run and innovative jurisdiction that maintains a proportionate, flexible and competitive funds regulatory regime. The introduction of regimes such as the Guernsey Private Investment Fund (PIF) – particularly well received since its launch two years ago – and the Guernsey Green Fund, introduced earlier this year as the world’s first regulated green fund product, show that Guernsey has the tools and vision required to innovate and stay ahead of other jurisdictions. All that, and the lower costs of establishing and operating a fund in Guernsey, means it will continue to remain attractive to a wide-range of investment managers going forward.

suitable for everything from private funds to public funds, and for more specialist impact and green funds. What other funds sector issues should be on our radars over the coming year? There’s likely to be an ongoing focus by investors on fees, but also on seeking ethical returns on their investments. We’ve seen a real shift in recent years in increased capital being directed towards investments focused on environmental, social and governance (ESG) principles, and that’s only likely to increase in 2019. It’s why the introduction of the Guernsey Green Fund as the world’s first regulated green fund product is such an exciting development for the island. It builds Guernsey’s position as the leading small international finance centre for green finance and demonstrates that we are in tune with the evolving investor and ESG mindset. From a Carey Olsen perspective, we were delighted to have recently advised ADM Capital Europe LLP on the successful designation of its global agribusiness investment fund, the Cibus Fund, as a Guernsey Green Fund and, in doing so, make it the first regulated green fund of its kind in the world.

bigger opportunities. These bigger opportunities tend to be more complex, take longer to onboard and involve a raft of structures. However, they tend to be more holistic in terms of serving a number of different objectives for the family and their wealth. In the next 12 months, what’s the biggest challenge the private client sector will face? The sector will continue to see increasingly complex structures, and practitioners will need to have experience beyond just the basics. In fact, experience and the ability to manage complex relationships with clients will count for everything. And where will the greatest opportunity lie? Working with clients to assist them to transfer wealth from one generation to the next will bring opportunities in 2019 and beyond. Organisations that can cater to multi-generational needs will stand to benefit as the importance of succession planning dominates the motivation for new structures. Families will also look for service excellence and expertise, and the ability for service providers to be flexible and commercial in how they manage structures.

RICHARD PROSSER, GROUP DIRECTOR AND GLOBAL HEAD OF PRIVATE CLIENT SERVICES, ESTERA

Is there one thing that will dominate the sector in 2019? Clients and their advisers will be in for a bumpy ride over the next 12 months, as share prices react to testing market conditions. Private client advisers will be challenged to produce above-average returns in what is likely to be a highly volatile market.

As we enter 2019, how would you assess the general health of the private client sector in the Channel Islands? The sector is in very good health, although we continue to see a move to fewer, but

What other private client sector issues should be on our radars this year? Clearly, Brexit is never far from our minds and the possibility of a political change is something that’s already being considered

PRIVATE CLIENT

In the private client sector, experience and the ability to manage complex relationships with clients will count for everything

Is there one thing that will dominate the sector in 2019? Registered funds will continue to dominate the sector in the coming year. Their simplicity and ease of use make them

32 january/february 2019

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ANNETTE ALEXANDER, PARTNER, CORPORATE AND FINANCE, CAREY OLSEN, GUERNSEY

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Predictions

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Predictions

by clients and advisers. The continuing global emphasis on transparency and substance means that our regulatory responsibilities will continue to increase, which will in turn mean that the asset value of new structures is only likely to increase. Balancing the relationship between transparency and privacy is also of utmost concern for private clients. Jersey and Guernsey as jurisdictions are well placed in balancing these two considerations and advisers must continue to work with clients and educate them on this matter. The way in which we communicate and work with the next generation can be very different to communicating with the original settlor. Those in the next generation have different expectations and needs, and as trustees it’s our job to maintain the integrity of the settlor’s wishes whilst also meeting the expectations of the next generation.

PETER MARSH, CLIENT SERVICES DIRECTOR, EQUIOM JERSEY, AND DUSTYN MOLVER, CLIENT SERVICES DIRECTOR, EQUIOM GUERNSEY

With the entrepreneurial nature of clients today, and with many of the private bank-owned trust companies de-risking, an opportunity will present itself for independent trust companies to tailor structures and provide a more bespoke solution for their clients

As we enter 2019, how would you assess the general health of the private client sector in the Channel Islands? DM (pictured below right): Overall, the private client sector is in a healthy position, with around 21,000 employees in the finance industry in the Channel Islands – some of the highest numbers since before 2008. With the entrepreneurial nature of clients today, and with many of the private bank-owned trust companies de-risking, an opportunity will present itself for independent trust companies to tailor structures and provide a more bespoke solution for their clients. In the next 12 months, what is the biggest challenge the private client sector will face? PM: The sector is faced with additional compliance obligations in respect of transparency and reporting requirements for tax and non-tax purposes. I expect that these obligations will continue to increase in the future, putting greater pressure on the administrative element of private client business. The key to success will be to continue to provide the high-quality service to clients. DM: What’s also important is efficiently adhering to our regulatory and compliance obligations at the same time. Brexit will

34 january/february 2019

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Predictions

And where do you believe the greatest opportunities lie? PM: The Channel Islands have positioned themselves as compliant jurisdictions on the international playing field and have evolved in the past to take opportunities available to them. With some jurisdictions not as well placed to deal with substance requirements from the European Union and the threat of blacklisting, the Channel Islands has an advantage. Those clients who want to be in a more robust jurisdiction may look to relocate their business and may consider the Channel Islands when doing so. Is there one thing that will dominate the sector in 2019? DM: Consolidation. We have already seen it happening and anticipate that we will continue to do so. The cost of compliance has become too great for smaller businesses to deal with effectively. Consequently, there will continue to be economies of scale through mergers and acquisitions. What other issues in the private client sector should be on our radars over the coming year? PM: UK tax changes will always have a significant impact on Channel Islands businesses. With the upcoming changes to the taxation of UK property and assets that derive their value from such, there will be changes to the administration of structures or possibly restructuring in some circumstances. In addition, with the consultation on the simplification of inheritance tax by HMRC, it is likely that trustees will need to consider any impacts of that in the future. Other considerations may include the tensions between General Data Protection Regulation (GDPR)/privacy rights versus transparency and automatic/spontaneous sharing of information. DM: Ethical investing has increasingly come onto the private client radar and I suspect that during 2019, we will see an increase in this type of investment among trustees and their clients. Clients still look for returns on their capital, but they are becoming more mindful of doing right by our community and environment.

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BANKING WARWICK LONG, HEAD OF COMMERCIAL BANKING, HSBC CHANNEL ISLANDS AND ISLE OF MAN As we enter 2019, how would you assess the general health of the banking sector in the Channel Islands? 2018 was significant because it marked the 10th anniversary of the start of the global financial crisis, which clearly had a substantial impact on the banking industry around the world and had implications for the industry here in the Channel Islands. That provided an opportunity to take stock and reflect on where we are now, and the consensus is that we are in good shape. The industry here has been pretty resilient in the face of some significant regulatory changes and a sustained low-interest-rate environment. Looking at the figures, the indications are that we’re on a steady growth trajectory in the islands, with core customer deposits holding up well and with much

greater confidence in the sector’s future. We continue to see increases in lending, as well as companies investing across the islands, building a strong foundation for the years to come. In the next 12 months, what’s the biggest challenge the banking sector will face? Brexit continues to dominate business thought processes and decision-making, but the islands are well placed and the banking sector is in a good position to support ongoing business opportunities between the UK and the EU. Beyond Brexit, there’s a focus on growth strategies, with an increased emphasis on digital technologies and compliance to ensure that the banking sector is growing in a sustainable way. In order to facilitate this, banks will continue to focus on recruitment. However, sourcing people within the islands, especially local graduates, in what is a competitive environment, is likely to be a challenge as the sector continues to position itself as one that can offer exciting, dynamic, flexible and fulfilling career opportunities.

The banking industry has been pretty resilient in the face of significant regulatory changes and a sustained low-interest-rate environment

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still have a big part to play, and with negotiations still ongoing and the UK government in the final throws of signing off on the UK’s exit plan, there’s definitely a ‘wait and see’ attitude. This is especially true when considering the impact on offshore financial centres such as the three Crown Dependencies of Jersey, Guernsey and the Isle of Man.

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Predictions

And where do you believe the greatest opportunities lie? Last year, managing the ring-fencing requirement was a significant priority for the banking sector and this gave banks in the islands a real opportunity to develop products and services that were much more aligned with the needs of islanders. The islands are well positioned to capitalise on international opportunities within the banking sector, leveraging cross-border trade flows and facilitating investment into Europe and globally into countries such as China. The international reach of companies across the Channel Islands is vast and the banking sector is well placed to help these companies continue to grow and diversify globally.

What other banking sector issues should be on our radars over the coming year? There has been considerable change in the banking industry in recent years, but there is a sense that as we look into 2019, there is a renewed positivity about the sector that forms the backbone of the islands’ finance industries. The islands are

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emerging from the global financial crisis well, the finance industries are performing impressively, the UK base rate is on the up and helping to support the sustained growth of the sector locally, and banks are emerging from their ring-fencing projects. All this means that the sector is actually in a very good position to look forward to the future with confidence, implement growth strategies and really focus on the needs of local customers and communities.

ALEX WICKENS, SENIOR ASSOCIATE, COLLAS CRILL As we enter 2019, how would you assess the general health of Guernsey’s banking sector? Based on our own practice, the banking sector remains strong in Guernsey. In particular, we find that the breadth of our practice is an encouraging indicator of the sector’s general health. In 2018, our matters have ranged from real estate transactions, commercial acquisitions, utilities and infrastructure financing, fund financing, group restructuring and refinance and Islamic financing. This diversification shows that Guernsey is no one-trick pony in respect of any particular financial sector or sub-sector, and is well placed to handle the challenges coming its way in 2019. Of course, the island is not immune to

we’re seeing a shift into a mobile-first ecosystem, as people look for the kind of personalised, intuitive and simplified journeys they get with everyday apps

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Is there one thing that will dominate the sector in 2019? Digital. Everyone is living and working in an increasingly digitally-led environment and when it comes to personal banking globally, 80% of banking transactions are already made on a digital platform. In addition to that, we’re seeing a shift into a mobile-first ecosystem, as people look for the kind of personalised, intuitive and simplified journeys they get with everyday apps. There’s no doubt that digital innovation will continue to dominate thinking across the banking sector, as it looks for ways to support customers better. As the islands look to boost their own international connectivity and brand awareness in key overseas markets, digital capability will be key. Just as Jersey and Guernsey are reaching out to do business around the world, there will be opportunities for banks in the islands to help connect clients and provide services internationally through supportive digital platforms and tools. The flip side to this is cybersecurity. Cybercrime is very much on the rise, with the sophistication, time and effort invested by perpetrators continuing to increase. Reports of online fraud received by the States of Jersey Police alone rose by 100% year-on-year in 2018. There’s no doubt that in 2019, banks and other financial institutions will have to focus considerably on this area to boost education around cybercrime and ensure that both customers and the wider community are adequately protected.

january/february 2019 37

Predictions

The island has launched a Green Fund, there’s a green segment on TISE, and the Guernsey Financial Services Commission has proposals to introduce green insurance

global and European trends, which show a decrease in the amount of activity in the loan market, or to outside competition from Jersey, Luxembourg, the Caribbean and even the UK. It’s the outside competition that has the greatest effect on the sector, even if indirectly. For example, if Luxembourg continues to increase its market share of the funds space to Guernsey’s detriment, this is likely to have an impact on our funds financing practice. That’s why, as a law firm in general, and specifically as a banking practice, we can’t afford to be myopic in our interests; we need to support all of the island’s finance sectors and sub-sectors. In the next 12 months, what’s the biggest challenge the banking sector will face? It may be clichéd, but I have to say Brexit. Just as we saw in the aftermath of the Brexit vote, as we get closer to 29 March, we may see a number of transactions and projects simply grind to a halt as all sides stop and wait for the dust to settle. The uncertainty is the real barrier for now. We’d expect to see this to some extent even if a Brexit deal were in place, but it will only be exacerbated by a hard Brexit. And where will the greatest opportunity lie? Brexit also. First, whilst alternative forms of financing may dry up in volatile times, traditional bank financing will be where businesses turn for their long-term financing over this unstable period. Second, Brexit itself, especially a hard Brexit, will generate a lot of opportunities. We would expect to see increases in logistics projects and investment into border and port infrastructure, to cope with the changes in how trade is conducted between the UK and Europe. We also expect to see continued crossborder mergers and acquisitions activity as businesses look to protect themselves from the impact of political issues such as Brexit and the Trump presidency by becoming more international. Is there one thing that will dominate the sector in 2019? Excluding Brexit, I don’t see any one thing dominating the banking sector in Guernsey. However, there’s an emerging area that we may see more of in 2019: green financing. The island has launched a Green Fund, there’s a green segment on TISE, and the Guernsey Financial Services Commission has proposals to introduce green insurance. An increase in a green financing sub-sector seems like a logical next step. What other banking sector issues should be on our radars over the coming year? I think we can expect to see a working replacement for LIBOR benchmarking by

38 january/february 2019

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Predictions

TECHNOLOGY JASON CONNOLLY, DIRECTOR, NEXT GENERATION IT As we enter 2019, how would you assess the general health of the technology sector across the Channel Islands? The health of our technology sector closely follows the fortunes of the local finance industry it supports. The islands are experiencing an extended period of strong growth, despite political uncertainty around Brexit and global protectionism. If anything, challenges stem from a lack of resources, which constrains growth. Consequently, many organisations are seeking mergers and acquisitions to gain capabilities, increase efficiencies, exploit synergies and reduce costs. Happily, this results in more work for us in IT to integrate systems, applications and offices. Innovation in technology has always been a strength of the Channel Islands and this has spawned a thriving fintech industry. Our experience and contacts within the established finance industry is being coupled with technical expertise to lead the way in fintech – a great example is the application of blockchain to drive investment in private equity funds. In the next 12 months, what’s the biggest challenge the technology sector will face? Technology is changing our lives beyond recognition, enabling people to connect to their systems from any device anywhere in

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the world, allowing people to fill their spare time with work, improve productivity and in many cases spend more time at home with the family. Keeping up with an accelerating pace of change is becoming more and more challenging. Adaptable businesses that invest in technology can bring their ideas to fruition fastest, disrupt markets and gain market share. However, technology change is expensive and traditional fixed capacity onsite IT systems cannot adapt rapidly or cost effectively. An accelerated uptake of cloud computing will give local businesses access to flexible IT infrastructure that grows and adapts with a business, driving digital transformation. And where will the greatest opportunity lie? Experts predict we are entering the fourth industrial revolution, where unrelenting technological progress is blurring the traditional boundaries between physical, digital and biological realms. This means there are great opportunities for increases in efficiency and standards of living. Previous industrial revolutions have automated repetitive manual tasks, but artificial intelligence (AI) is targeting knowledge workers, such as accountants, bookkeepers, administrators and legal advisers. With a constrained labour market, AI presents a great opportunity to augment our local resources to generate more value for the islands.

local business and the regulator view cyber security as a competitive advantage. Financial and data protection regulations are driving businesses to focus on security, procedures, auditing and monitoring

Is there one thing that will dominate the sector in 2019? Information security challenges are increasing, with many local organisations succumbing to ransomware attacks in 2018. The frequency and complexity of attacks continue to increase exponentially, and cyber security is now firmly on the boardroom agenda. Businesses are rolling out stronger cyber controls and awareness training to combat the risks – for instance, security companies are employing AI in their products to fight back. Interestingly, local business and the regulator are being proactive and view cyber security as a competitive advantage. Financial and data protection regulations are driving businesses to focus on security, procedures, auditing and monitoring. Audits are now assessing businesses against stringent ISO, ISAE and PCI DSS standards. This will lead more businesses to consider hosted services in 2019, through which best practices in security and IT are baked into the service. What other technology sector issues should be on our radars over the coming year? Earlier this year, the General Data Protection Regulation occupied the attention of many local businesses, but

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the end of 2019. LIBOR is due to be phased out by the end of 2021 and its replacement has already been identified by the Bank of England as SONIA (Sterling Overnight Interbank Average Rate). The SONIA rate is a benchmark based on historic performance (backwardslooking) as opposed to LIBOR, which is a benchmark based on predicted costs of borrowing (forward-looking). Mainly for operational reasons, banks and borrowers have not been keen to move to a backwards-looking rate, so SONIA hasn’t started replacing LIBOR in loan documents yet. To address this, the Bank of England established a working group to create a forward-looking reference rate using SONIA. A consultation period with industry concluded in October and we can expect to see the results of that consultation in 2019. I expect that by the end of 2019, we’ll have a working replacement.

january/february 2019 39

Predictions then businesses were given an extended 12 months to prepare. The reprieve was welcome as most businesses have taken advantage of the extra time to get their house in order. Nevertheless, we expect that the pressure will build again in 2019 as the new May deadline looms.

CAPITAL MARKETS FIONA LE POIDEVIN, CEO, THE INTERNATIONAL STOCK EXCHANGE GROUP

we continue to see potential opportunities in Brexit, including the listing of UK small and mediumsized enterprises

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2018 was another year when we built on the successes of previous years to deliver further growth in the number of new listings on The International Stock Exchange (TISE). The largest proportion of new listings have been debt issuances, such as high-yield bonds, from issuers based all around the world, including Europe as well as increasingly the US and the Far East. As such, we’ll be continuing to monitor the global capital markets to understand how this might have an impact on our business. We’ve already seen interest rate rises and geopolitical events starting a slowdown of issuances in the debt capital markets, so the effect on the number of listings on TISE will have to be monitored closely. Either way, we’ll aim to continue to increase our share of the market. Of course, Brexit is also on the minds of many with UK-related business. Our business is global but there remains a significant proportion of debt issuances

that are financing acquisitions in the UK, and we are home to more than a quarter of all UK Real Estate Investment Trusts (REITs). This is an area where, following a hiatus around the Brexit referendum in 2016, there’s been strong growth in the past few years, not least due to the currency fluctuations precipitating considerable inflows of international capital into the UK real estate sector via the REIT product. In the post-Brexit referendum environment, we’ve benefited from being able to facilitate investment into UK property. As we approach the UK’s withdrawal from the EU, there’s been no discernible negative impact on TISE listings and, at the time of writing, it remains to be seen whether any of the fears about the markets materialise and therefore the effect for us in terms of new listings. In fact, we continue to see potential opportunities in Brexit, including the listing of UK small and medium-sized enterprises (SMEs). The UK government views SMEs as the engine of the UK economy through Brexit, but those companies are finding financing more of a challenge than ever. TISE offers the advantages of a stock exchange listing, including access to a new pool of capital, but with costs that are proportionate to SMEs. In addition, being based in the British Crown Dependencies means that we offer the certainty and stability of already being outside the EU while still being part of the British family. We’ve also had growth in the number of enquiries from Channel Islands trading groups, which have seen how TISE’s proposition has benefited companies with the scale and ambition of businesses such as PraxisIFM. The door is very much open to local business owners who want to find out more about the process of listing and the potential benefits it can offer. I expect we will be having plenty more of these conversations during 2019. I also expect that in 2019, both globally and locally, we will see increased prioritisation of environmental, ethical and impact investing. The focus on environmental sustainability in recent years has led to an established and growing sector of green finance. As a result, in November last year, we launched a new market segment of the Exchange, TISE GREEN. This has been established to enable those seeking funding for environmentally beneficial initiatives to highlight their green credentials, while also providing easier access for investors looking to allocate to investments verified as meeting globally recognised standards in green finance. During 2019, we will be monitoring this marketplace to ensure that, as it develops further, we will continue to be able to offer a product that’s suitably comprehensive and robust. n

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praxisifm.com Praxis Fund Services (Jersey) Limited and Praxis Fund Services Limited are regulated by the Jersey Financial Services Commission and Guernsey Financial Services Commission respectively.

To find out how you can benefit from our expertise contact: Pippa Davidson E pippa.davidson@praxisifm.com T +44 1534 835808

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Advertising feature

Clear vision points the way forward for

Julius Baer Julius Baer is celebrating 30 years of private banking in Guernsey this year and continues to go from strength to strength in the island. Branch manager Stephen Burt examines how the bank’s clear vision has enabled it to thrive over three decades THE BUSINESS WORLD is full of

success stories that begin with a lucky break, a chance encounter or a stroke of genius. But far more often than not, business success is down to clear planning, hard work and strong principles. All three of those factors have played a part in Julius Baer’s 30-year tenure in Guernsey. They have also, more significantly, contributed to a vision for the business that comes from group level but is honed and refined right here in Guernsey to meet the needs of our clients. Julius Baer’s vision shapes who we are and is underpinned by three qualities: pioneering, personal and pure private

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banking. These are shared across the whole group, so everyone is clear on who we’re trying to be and what we’re striving hard to achieve. A clear, strategic vision is such a key component of business success and, as the bank begins its 30th year in Guernsey, we’ve been thinking about what the qualities within our vision mean to the more than 100 employees who work for us in the island.

PIONEERING Our employees are absolutely central to the business and it’s one of our aims to empower our people to take initiative and responsibility. Again, clarity is important

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Increasingly, a pioneering spirit is about embracing technology and how it can benefit us. In our case, this means using robotics more to create efficiencies for our clients – without losing the human touch

to achieving this. Everyone here knows what our objectives are, how they relate to those objectives and the role they play in achieving them. This clarity has enabled us to foster a positive working environment where people are confident and competent enough to try new things and be decisive, knowing they have the backing of our local management team and the group as a whole. Increasingly, a pioneering spirit is about embracing technology and how it can benefit us. In our case, this means using robotics more to create efficiencies for our clients – without losing the human touch – and to enable our people to make decisions that are better informed. It’s important to us that Julius Baer plays a part in shaping the private banking industry around the world and that’s no different in Guernsey, where we work closely with the States of Guernsey, the Guernsey Financial Services Commission, the Association of Guernsey Banks and the Guernsey International Business Association. Throughout our three decades on the island, there are examples of us working closely with each of these groups to do what’s best for the industry and ensure that our clients continue to benefit from our expertise.

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PERSONAL Many of our pioneering qualities intersect with our personal approach. As mentioned, it’s important to combine technology with the human dimension. We want to retain our entrepreneurial spirit despite our growth and we strive to build longlasting relationships. We regularly survey our clients so we know they appreciate the one-to-one relationships they have with our relationship managers. Some of our client relationships are more than 20 years old and their loyalty reflects our servicefocused ethos. A personal approach wouldn’t be in any way possible without great people. Recruitment is just as thorough and rewarding a process today as it was when we first arrived in the island. Guernsey benefits from a deep pool of talent but we know that building relationships is often the result of aptitude and attitude – qualities that can’t be taught. We always want to hire the right people and then give them a chance to develop. We put great stock in training and we try to promote from within wherever possible.

PURE PRIVATE BANKING While we’re ambitious, we know what we’re good at. Our strategic focus sees us sticking to our speciality of private banking

and investment management. We know our employees and clients alike appreciate our clarity of vision. That doesn’t mean that we’re rigid, however. The holistic offering we’ve developed over the past 30 years is focused towards the markets we serve and the type of business in which our Guernsey team specialises. Thirty years is a long time and it has allowed Julius Baer to build a stable foundation in the island that has been recognised through the loyalty of our clients, an Aa2 credit rating and positive relationships with clients, local government and many long-serving employees. Our success so far is testament to many factors and it’s good to look back and reflect. However, it’s even better to look forward. We’re continuing to grow in Guernsey, thanks to our clear vision that places pioneering, personal and pure private banking right at the heart of who we are. n

FIND OUT MORE

If you’d like to know how Julius Baer’s vision can benefit you, then please get in touch on +44 1481 726618

january/february 2019 43

China

Channel Island businesses have long seen China as a growth opportunity, but as the country seeks to take a bigger role on the global stage, is it time for a renewed focus on the Middle Kingdom?

Words: Chris Menon

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Union in the 1990s, the global stage has witnessed growing tension between a dominant US superpower and a resurgent China, with many in the US coming to view it as a strategic threat, from both a military and an economic perspective. Sustained economic growth has made China the second largest economy in the world in terms of gross domestic product. Moreover, through its Made in China 2025 and One Belt, One Road initiatives (see box overleaf), observers such as Justin Oliver, Canaccord Genuity’s Deputy Chief Investment Officer, believe it plans to “challenge the US position as the global pre-eminent geopolitical force”. Paul Christopher, Managing Partner of the Hong Kong office of offshore law firm Mourant, says China has evolved quickly over the past few years. “When I moved to Hong Kong seven years ago, there was no such phrase as ‘China outbound’. Chinese businesses didn’t really invest outside of China. Now, some of them have bought the most high-profile real estate and businesses going, although that’s curtailed a bit in more recent years. They’re still learning to operate on the international stage in terms of governance.” For a decade, the Channel Islands has sought to capitalise on a China that was originally touted as the ‘next big

opportunity’. Guernsey Finance established a representative office in Shanghai in 2007, led by Guernsey Finance’s China Representative, Wendy Weng. And Jersey Finance has been promoting opportunities for the island’s finance industry in China since November 2005, opening a Hong Kong office in 2009.

HARD MARKET TO CRACK During this period, they appear to have made some, if not outstanding, progress in what is universally acknowledged to be a hard market to crack. For example, around 50 firms in Jersey have a branch in Hong Kong and 34 have an operation in mainland China. Marcus Leese, a Partner at law firm Ogier in Guernsey, was recently in Hong Kong to attend the STEP Asia conference, which focuses on the family inheritance and succession planning sector. He says: “Ever since Guernsey Finance opened its office in Shanghai over 10 years ago, and members of industry began establishing physical bases in the region and posting staff there or having them visit regularly, Guernsey has shown real commitment to the China market.” Indeed, Guernsey had the largest presence of any of the offshore centres at the STEP Asia conference, he adds. Building that relationship has required

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SINCE THE COLLAPSE of the Soviet

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China

In search of

Growth

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China

China is still a work in progress, but in the past few years we’ve seen business coming through to Guernsey directly from the country

46 january/february 2019

hard work. Kate Clouston, Deputy Chief Executive at Guernsey Finance, explains some of the obstacles that had to be overcome. “There was a lot of education required in the early days, about Guernsey and the services we could offer – Chinese corporates’ need for offshore didn’t really extend beyond the British Virgin Islands. “China is still a work in progress for us, but in the past few years we’ve seen business coming through to Guernsey directly from the country. It’s been primarily captive insurance structures, where Guernsey has been seen as attractive, particularly as China’s domestic requirements for captives are a real barrier.” However, the island remains interested in funds and private wealth opportunities. The first Guernsey private investment fund was registered from Hong Kong last summer. As part of its focus on diversifying its overseas market strategy, Jersey Finance has expanded its programme to include new growth markets in Asia, the Middle East and Africa. However, Amy Bryant, Jersey Finance’s Deputy Chief Executive Officer, says Jersey has remained committed to the Chinese market throughout. As proof, she stresses Jersey’s role as a gateway into the UK and European markets, which in recent years has seen demand for its services accelerate, driven by a more liberalised approach in China to international investment. Bryant cites figures from economic research consultancy Capital Economics revealing that Jersey mediates around

£13bn of capital flows from China each year across its private wealth, corporate and funds sectors. Andrew Weaver, Partner at law firm Appleby, believes the Channel Islands must remain focused on China for a number of reasons. Given Brexit uncertainties, he sees value in the Channel Islands exploring more opportunities outside the UK and the European Union (EU).

NEW OPPORTUNITIES He also believes the China-US trade war, coupled with a slowing economy, means China is willing to explore new co-operation opportunities with other countries and jurisdictions. “In a recent visit to China, feedback provided by PRC [People’s Republic of China] lawyers and professionals in respect of exploring more opportunities in the Channel Islands was very positive,” he says. Weaver contends that for investment from China to the EU and the UK, or vice versa, the Channel Islands are ideal domiciles in which to set up holding companies. In addition, the islands’ financial sector “can provide valuable opportunities for Chinese companies to access international investments (in the form of debt or equity) at different stages”. Warwick Long, Head of Commercial Banking for HSBC Channel Islands and Isle of Man, agrees that given the One Belt, One Road initiative, it’s an opportune time for the islands to harness these outward investment trends from China. He stresses: “While historically, China has mostly been focused on the blue-collar [manufacturing] industry, its sights have moved to the open-collar [services] area. “Notably, we’re seeing more consumption, urbanisation and ‘greening’ of the Chinese economy, in addition to the move towards higher-tech manufacturing. “These certainly play to the Channel Islands’ strengths, particularly in terms of international financial services and digital expertise, and we’re looking to further strengthen ties between China and the islands in the coming years.” The attractions of China for offshore financial service providers remains undiminished too. Ogier’s Leese explains: “China generates more new high-net-worth individuals (HNWIs) than most, if not all, western countries, and those HNWIs increasingly understand the need for offshore structuring for their personal and business assets around the world. “The newly announced change in the

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China

People’s Republic of China’s personal tax regime, a rise in the divorce rate and migration overseas have all increased this,” he says.

BEYOND FINANCIAL SERVICES Aside from private wealth management, Appleby’s Weaver believes sectors well placed to take advantage of the opportunities in China include shipping, logistics, warehousing and transportation, particularly if the Channel Islands is included in the One Belt, One Road initiative. The islands offer a tax-neutral environment and have harbours that can provide marine services. They could also “become ‘free trade zone’ for goods imported from China that enjoy the tax-neutral position until further delivery to the UK or, subject to Brexit, the EU”, says Weaver. The islands’ location and size also mean they can be used to develop, test and launch new tech products from China, he adds. “Testing the core technologies in the Channel Islands (instead of in the UK or an EU country) will generate equivalently useful data, but significantly reduce the cost for such tests and avoid the complex legal, government and regulatory barriers at the testing stage,” he says. Nevertheless, he does acknowledge that, particularly compared with neighbours such as the UK, France and Germany, the Channel Islands “still lack experience and resources”. “To balance the future benefits and current costs, cooperation between Jersey and Guernsey, cooperation between public and private sector, cooperation between different organisations (for-profit or non-profits) are critical. We believe such cooperation will make the journey shorter and more sustainable.” n CHRIS MENON is a freelance business writer

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CHINA’S INITIATIVES FOR GROWTH MADE IN CHINA 2025 Launched by Beijing in 2015, Made in China 2025 is a strategic plan to transform China into an innovative, hi-tech powerhouse by 2025. It aims for increased self-sufficiency in hi-tech across 10 key sectors: information technology; numerical control tools and robotics; aerospace equipment; ocean engineering equipment and high-tech ships; railway equipment; energy saving and new energy vehicles; power equipment; new materials; medicine and medical devices; and agricultural machinery.

ONE BELT, ONE ROAD (OBOR)

Launched in 2013 by President Xi Jinping, this is a Chinabacked initiative to improve infrastructure development and support long-term economic growth. The intention is to build roads, ports and railway tracks along ancient trading routes to Asia, Europe, the Middle East and Africa. Justin Oliver, Canaccord Genuity Deputy Chief Investment Officer, explains the initiative’s true purpose. “Its role in supporting China’s Asian and global ambitions are manifold. At a base level, China is keen to find new sources of growth abroad, partly to utilise resources from industries suffering from excess capacity, and the OBOR will help achieve this objective. “Its intention is also to increase prosperity for the underdeveloped parts of China, as well as secure China’s energy supply and, by default, minimise social tension and keep the ruling Communist party in power.”

january/february 2019 47

Project management

A proper profession Project management is frequently seen as a bolt-on to the day job â&#x20AC;&#x201C; but as these projects often drive business strategy, it makes little sense to manage them part-time

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Project management

ALL TOO OFTEN a project manager is

seen as a costly expense – an option rather than a necessity. Some companies fail to understand that project management work is a distinct role requiring specialist skills. Scott Crittell, Projects Director at Guernsey-based accountancy firm Offshore, says: “A manager who’s overseeing a team of staff and has day-today responsibilities is often unable to add to their daily activities and properly engage with a project. The result is that both daily activities and the project’s needs suffer.” Kate Gosson, a consultant at business change specialist BDO Greenlight in Jersey, agrees. She argues that foisting a project management role onto someone is not only a false economy, but potentially damaging to the business. “It’s important to engage qualified and experienced project managers that have the expertise in the area of change required,” she says. “You wouldn’t recruit a dentist to change your car tyres, so the same principle

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WITNESSING THE BENEFITS Some sectors are more receptive than others when it comes to recognising the merits of the project manager. As Crittell points out, it would be unthinkable for a large-scale construction or infrastructure project not to have a team of project managers from the outset. He cites the Crossrail project in London. From the start, in 2007, Crossrail had a large team of project managers. The initial report they put together noted that the project would employ 14,000 workers, create 1,000 jobs to maintain the new network, and enable 1.5 million people to be within a 45-minute commute of the economic centre of the UK. There was clarity on project goals, the vision behind Crossrail and how it could add to the overall GDP of the country. Seen in this light, the professionalisation of project management can contribute to wider economic success. In other sectors and on smaller scale projects, the benefits, whether short or longer term, are not always as easy to

identify, as Leonie McCrann, CEO, at international change consultancy Marbral Advisory, explains. “With construction and engineering, you can see tangible changes in a project and how all the different elements interact. But with financial services, an area like regulation is far less tangible in terms of recognising change.” McCrann also believes that the financial limitations of smaller and fledgling companies, as well as a lack of experience, mean that staff end up wearing multiple hats rather than focusing solely on project management. “If a business isn’t mature, perhaps they haven’t been burnt,” she says. “They don’t know what it feels like to get something wrong. They don’t identify a need for a dedicated project manager and learn the hard way when things don’t work out.” BDO Greenlight’s Gosson agrees that with the benefit of hindsight, smaller companies frequently realise that saving a salary expense by not hiring an experienced project manager is a false economy. Without a project manager, budgets can overrun and deadlines can be missed.

WHAT GOOD LOOKS LIKE According to Crittell, good project management comes from establishing what the project goals are at the start and what success will look like. These questions need to be asked by the project manager

january/february 2019 49

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Words: David Burrows

applies when it comes to implementing a new project. Adding it as a bolt-on to someone’s daily routine could lead to lack of project focus, critical risks being missed and costly delays – all of which could have a direct impact on the business.”

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Project management

COMMUNICATION SKILLS Effective project management also relies on good communication and teamwork. Not all the responsibility should rest on an isolated project manager. McCrann points out that, too often, project managers are expected to design, develop, implement and even test a product. “Project managers need the feedback of other people – for instance, with product development the project manager will often be a couple of steps removed from the customer. They need the input from those with a direct relationship with the client.” Listening and understanding the needs of the business from the outset and engaging all stakeholders at this point is a must. As Gosson emphasises, clear lines of communication and continual risk management help project managers deliver an outcome aligned with business goals. While clearly defined objectives are important, there’s also need for flexibility in good project management. Crittell insists that any project plan is a living document that will continually change and evolve during the project’s lifecycle. It requires a dedicated project manager to make sure that this development of the project continues during its life. In some instances, using third-party specialists to project manage might prove to be the preferred option. As Peter Stoten, Head of Strategy and Change at consultancy Prosperity 24/7, explains, a project manager should be politically neutral and be able to communicate openly to the project organisation without fear of negative consequences. This can be challenging for an internal member of staff left to deliver project management off the side of their desk. It can also threaten their position within the organisation long after the project has closed, and more so if the project is deemed to have failed. Paul Marshall, Director of Strategy and Change at Prosperity 24/7, adds: “Change consultants are external to political inferences and so are able to ensure focus, openness and honesty. More often than not, a project will at some point in its lifecycle encounter difficulties that may

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require sensitive interventions. Change consultants are capable of having the difficult conversation.” Accountants and solicitors have long been viewed as ‘professionals’ with chartered certificates and a string of letters after their name to stress the point. This has not traditionally been the case with project management – arguably one of the reasons companies might see it as a bolt-on rather than a skill set in its own right. But this is beginning to change. The Association for Project Management (APM) now has 27,000 members – mainly in the UK and Europe – from a range of sectors. Significantly, chartered status was introduced back in 2016 and the number of APM members taking qualifications has nearly tripled since then, from 1,300 in 2016 to 3,700 in 2017. A combination of APM chartered exams and universities increasingly offering project management courses should help to change perceptions among employers and among students who are looking for challenging and respected career paths. APM has worked hard to build the profile of project management as a profession in recent years, as its CEO Debbie Dore explains: “Five years ago, it wasn’t possible to study degrees in project management and you couldn’t take chartered exams. School-leavers are now looking at project management as a career path. “Parents, too, are aware of the high level of investment that degree courses require. Consequently, apprenticeship degrees in project management, which allow students to earn and learn, have much appeal.” Dore is also keen to point to the breadth of opportunities open to those who identify project management as a career choice. “The core skills (aligning key players, assessing risk, identifying opportunity) are transferable across sectors,” she says. Job satisfaction is another factor for those building a career. Dore suggests that what millennials typically want from a job is a feeling that they are getting something back, that there’s a benefit attached to what they do. From this perspective, she says, project management fits the bill.

The idea that delivery is the conclusion of a project is bad project management. Any project will require training that often intensifies once live operation starts

SUPPORT FROM THE TOP Over the long term, will professionalising project management contribute to wider economic success? “Yes,” is Gosson’s considered response. “Having a professional benchmark in place will improve the standard and quality of project managers and the output that they provide. In turn, this should have a positive impact on the wider economy.” McCrann is equally positive: “I think the APM is very significant – a body such

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and answered by all the stakeholders. “Understanding the timeline is another important factor,” he says. “Is the project in phases or in one transition at the project end? The idea that delivery is the conclusion of a project’s life is bad project management. Any project will require training that often intensifies once live operation starts. And refinements that are sometimes termed a ‘sweep up’ may continue for some while after a project is considered as delivered.”

january/february 2019 51

Project management

The project management role is not always clearly presented at board level. it’s often hidden within ‘operations’

as this can make a big impact, especially when it comes to gauging the professionalism of those you’re bringing in.” In terms of more companies treating project management as a profession in its own right, much depends on those at boardroom level being more enlightened, according to Crittell. “As more senior managers start to realise that a project manager is a cost that enables you to succeed in your strategy – or to stay on the right side of legislation or helps your business to function smoothly – then more businesses will consider having project managers in the same manner as having any other qualified role in their organisation.” Dore agrees that awareness among senior management is often a sticking point. “The project management role is not always clearly presented at board level. It’s often hidden within ‘operations’.”

SUPPLY AND DEMAND But is there a strong enough demand for project managers? Gosson believes there is. She cites Jersey’s stringent rules for non-locals qualifying to work on the island. As an experienced project manager from Australia, Gosson was told that demand for her skills would be high, so getting a green light to work on the island would not be a problem. That proved to be the case. But it’s not just Jersey that’s crying out for high-calibre project managers; the same can be said for the whole of the UK. “Demand at this level certainly plays into our favour when it comes to recruitment to the profession,” Dore enthuses. She points out that many large firms are willing to invest sizeable sums in existing staff to develop their skills and ultimately reach chartered status. In some instances, companies are planning to put 200 people through training each year. For APM, on a mission to professionalise project management, that’s reassuring progress. n DAVID BURROWS is a freelance finance writer

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Women in project management Does project management attract a higher proportion of women and are they particularly suited to the profession? Despite the common perception that women are better at multi-tasking, Debbie Dore, CEO at the Association for Project Management (APM), believes gender has little influence on whether someone makes a good project manager or not. The real issue currently is encouraging more women to enter the profession. “The first batch of candidates to sit the chartered exam were 75% men to 25% women,” says Dore. While a significant proportion of candidates were in sectors such as construction, which traditionally attracts more men, the imbalance is still a concern. Events such as APM’s annual Women in Project Management conference play an important part in promoting the profession to women, but female recruitment is still a challenge. Kate Gosson, a consultant at BDO Greenlight, is hopeful that the imbalance of men to women in the profession will start to change as project management is embraced more enthusiastically by different sectors. “In time, I think there will be a lot more opportunity across a broader range of industries, such as, banking, IT, development and event management, which women may find themselves more suited to than the traditional construction project management roles,” she says. As for what women have to offer, Leonie McCrann, CEO at Marbral Advisory, believes the skill sets are largely the same between the sexes, but that women tend to be more empathetic, which has its advantages. “With something like change management, when you could be dealing with someone who’s been at a company for more than 30 years, women are typically more attuned to the situation and able to handle things sensitively,” she believes.

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Project management

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Automation

Sharing the spoils The benefits of technological advancement have traditionally gone straight to the business bottom line, but some companies are starting to share the payoffs – with impressive results Words: Jessica Furseth HAD JOHN MAYNARD Keynes been

right, we would have been working 15 hours a week by now. In 1930, the economist anticipated that technological advancements in ‘progressive countries’ would mean we’d be enjoying more leisure. But it hasn’t happened – even though data is now automatically inputted, documents effortlessly shared across devices, reports instantly assembled and hardware spontaneously alerts us when it needs attention. In spite of warnings that automation will put people out of work, Britons put in some of the longest hours in Europe, racking up £32bn worth of unpaid overtime, according to a Trades Union Congress (TUC) survey from September 2018. People resent spending so much of their time working – 81% want to work less, the TUC found, and of those, about half would love to have a four-day working week. The TUC has thrown its weight behind this idea, hailing it as a way to ensure productivity gains are distributed fairly. “Bosses and shareholders must not be allowed to hoover up all the gains from new tech for themselves. Working people deserve their fair share,” TUC General Secretary Frances O’Grady said in a statement. “If productivity gains from new technology are even half as good as

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Automation

promised, then the country can afford to make working lives better.” But would working four days a week while being paid the same salary as before actually work? Initial reports suggest a four-day week may lead to improved productivity, even with fewer hours in the office. Researchers at Auckland University of Technology tracked a four-day week initiative at the 240-staff-strong trustee company Perpetual Guardian, based in New Zealand. They found that staff were less stressed and reported being more motivated and committed to their work, which in turn resulted in better performance. The findings of the study, which took place in March and April 2018, make sense. Some 12.5 million UK work days were lost in 2017 because of work-related stress, depression or anxiety, according to the UK Health and Safety Executive, and the single biggest cause was workload.

If productivity gains from new technology are even half as good as promised, then the country can afford to make working lives better

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The fact that a four-day working week has been floated at this point in time is no coincidence – we are finally at a stage of technological advancement where it might actually be possible. Several businesses in the UK have already implemented such an initiative. And while their altruistic goal is to share the spoils of technological advancement, they also believe it serves their businesses well financially. For Nautoguide, a digital mapping company in Swindon with five employees, the decision to move to a four-day week in September 2018 was motivated by a desire to have more time to work on strategic goals. “We had a project we really wanted to deliver long term as an investment, but we never got around to it because we were always firefighting,” says Dave Barter, CEO and Founder of Nautoguide. The company realised the answer wasn’t to have more resources or to be more efficient, but to have more time to think. “When you’re all in the office, you never [take that thinking time] because the phone rings, emails come in and people want things. The only way we could see to achieve that was by taking ourselves out of the office.” The staff at Nautoguide now work regular hours Monday to Thursday and Barter thinks it’s fostered an appreciation that this is a place where you get rewarded for your good work right now, rather than maybe someday. “I think there’s also a benefit to being seen as having an open and

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EARLY EXPERIMENTERS

Automation

forward-thinking culture, as [clients] see that and understand it will translate to our work too,” says Barter. Rich Leigh is the Director and Founder of Radioactive PR, a public relations firm with 12 staff in Gloucester. “I’ve got incredibly happy staff,” says Leigh, who started the four-day week initiative six months ago. The company is making more money than ever, although the initiative has made a difference to margins as Leigh has had to hire sooner than he might otherwise have done, as he doesn’t want to “squeeze five days into four”. The initiative has made the company an attractive place to work, Leigh says. “We get so many CVs. Inevitably we’ll be finding the very best people.” Becky Simms, CEO and Founder of Reflect Digital, a marketing agency in Kent with a staff of 55, has also found that business has been good since moving to a four-day working week in October. “We’ve closed the most business and had the most revenue,” she says. The firm wanted staff to be at their best in the office, says Simms, who adds that agency work is high pressure. “You’re really worn out by the time you reach the weekend. [The four-day week] was inspired by that buzz you get after the three-day weekend. Now we can have that time to relax, but still really work hard while we’re in the office.” Experiments with four-day weeks are less common in the Channel Islands because they’re “not as advanced as the UK in terms of digital transformation”, says Pierre Jehan, Client Services Director of Guernsey IT outsourcing specialist Resolution IT. Pointing to the 2,000 vacancies in the Guernsey finance sector alone, Jehan says it’s clear that automation has a role to play in closing this gap. But businesses haven’t embraced it yet, and with talent shortages being as they are, employers may be reluctant to offer staff a day off each week.

OTHER BENEFITS However, Channel Islands staff are reaping other rewards from automation and digital transformation, with opportunities for remote working and flexible hours. As Jehan explains: “Automation can also make workers’ lives more enjoyable by taking away the mundane tasks, making them more efficient, and letting them concentrate on the nicer aspects of their job.” Jehan strongly believes in rewarding the people who create savings through the

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The four-day week was inspired by that buzz you get after the three-day weekend. Now we have time to relax, but still work hard in the office

use of technology. “Companies, in whatever sector, should empower staff to use these technologies in order to become more efficient and innovative through digital transformation. And in the same breath, they should also reward their staff for doing so,” he says.

FUNDAMENTAL ISSUES While agreeing that Channel Island companies should be looking to robotic process automation or artificial intelligence to overcome worker shortages, Justin Bellinger, Chief Digital Officer of telecommunications supplier Sure, thinks fundamental issues need to be addressed before the four-day working week will make it onto the agenda. This will include tutoring and retraining. “We need to work out what machines can do that will benefit our businesses. What do I want my people doing instead of manual input? The answer will be more interpersonal skills and emotional intelligence – things that will add value beyond the basic grind.” This has already started happening in the Channel Islands, says Bellinger, pointing to the fund insurance and trust sectors. “As we come under ever-increasing regulatory scrutiny in the financial services sector, I firmly believe that regulators will start to automate compliance. We’ve already started to see that in the gaming industry.”

Proponents of the four-day working week have an uphill battle ahead to convince business leaders that more time away from the desk could actually mean better overall job performance. But as Bellinger points out: “How long that person has spent at their desk is a false way of looking at productivity. We’re not working at cotton mills anymore.” Research backs this up. When a Swedish retirement home ran a six-hour working day experiment in 2016, it found that its nurses were less stressed, got sick less often and had more energy to spend on their patients. Most people can only focus for five or six hours a day before fatigue sets in, so it’s a fallacy to think that keeping them in the office longer will get more out of them. For Radioactive PR’s Leigh, the change to a four-day working week has positioned his company as forward-looking and innovative. “We’ve had clients come to us as a direct result of this, saying they like the fact that we don’t just talk the talk, but walk the walk too,” he says. Ultimately, Leigh wants to ensure that his staff are happy. “These are people you spend the majority of your life with. Why wouldn’t you want to give them the best time that you can?” n JESSICA FURSETH is a freelance business writer

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Advertising feature

In profile: Simon Torode founder and CEO of Livingroom in Guernsey Simon Torode felt it was time to take both the business and himself to Jersey. Close enough to run a pan-island business, yet unique enough to feel like a fresh start, Simon’s now happy to call Jersey his home What does your business do? Livingroom is an estate agent with a creative ethos and a belief that everyone deserves the best possible customer service. I set the business up in Guernsey in 2006 with just a mobile phone and a computer on the kitchen table and am proud to say Livingroom is now revered as the leading estate agency in Guernsey. Globally, the firm won the International Real Estate Marketing award, after solely representing the UK against 48 other countries, and the Best Estate Agency Website in the UK award in the UK edition of the International Property Awards in 2017 – the Oscars of the property world. In October 2018, Livingroom was awarded a further five-star award – the highest industry accolade. Since expanding to Jersey in October, Livingroom is the only Channel Islandwide residential estate agent and we aim to bring a fresh and considered perspective to the island in terms of our approach. No matter whether you’re looking for or selling a £100k or £10m property, everyone

should benefit from the importance we place on customer service. From first-time to last-time buyers and everyone between, our clients are as unique as the homes they occupy and each has very different objectives and search criteria. Livingroom staff are true property people, boasting an incredible 150-plus years of industry experience to help where it’s really needed.

What made you consider Jersey? I’d been monitoring the Jersey market for some time. Given the ongoing success of Livingroom in Guernsey, it felt like the perfect time to expand the brand to a new jurisdiction. Jersey has a varied, thriving property market, with fabulous homes that attract a lot of interest, not just locally but internationally too – allowing us to utilise our marketing skill set to best effect.

Was relocating straightforward? Locate Jersey have been brilliant in helping move both myself and the business over to the island. They understood my ambitions for the business and the need to prove our worth and land with confidence in the marketplace. In fact, making sure we were up to scratch and running audits on the business has been a cathartic process in itself. It’s helped me think about the future and to plan for Livingroom’s continued success. Quite simply, the team at Locate Jersey made the whole process as straightforward as possible.

How are you finding life in Jersey? I really love Guernsey and Jersey for different reasons, but Jersey is now my home – I’m delighted to be living on such a unique, inspiring island. My dog Mabel and I really enjoy the beaches – so much so that we’re now living on the beach at Green Island and appreciate the changing

panorama every day, from glorious, still sunsets to wild seas. I love eating out in the array of restaurants in Jersey, and meeting new people. After all, it’s the people who give the island a certain edge. The Jersey community has a fundamental ‘can-do’ attitude, largely helped by the fact that it’s a population made up of a variety of creatives, industry areas and mentalities. Even when eating out, or going into independent, local shops, it’s clear that there’s a great level of aspiration. The Jersey government is progressive; there’s a real desire to attract interesting and varied new businesses and individuals to move here. I’ve been impressed by the balance shown by government and how accessible the politicians are – to ask questions and seek advice.

How do you see your business evolving? Expanding the business to Jersey has enabled a complete brand evolution, two class-leading dedicated websites (shortly to be followed by a third) and a 24-strong expert team of staff, with seven in Jersey. We’ve established great traction already, which, as a ‘humble newbie’, has shown the willingness of the local community to embrace change. The Jersey team listed in excess of 50 new instructions within the first month of opening the Jersey office – we’re hugely proud of that. Looking ahead, Livingroom will promote Channel Island properties to new markets, in the UK and further afield. There’s great scope to project each island and their qualities to the world, and with a different take on estate agency. We have homegrown technology, such as our Transparent Vendor Management system, as well as other technical innovations and plans. It’s all about quality. When dealing with your largest asset, you should expect high-quality representation and a compassionate, friendly team that has your best interests at heart. n This advertising feature was produced in partnership with Locate Jersey.

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Corporate governance

patisserie valerie is just one of several recent high-profile corporate governance failures – and that’s putting board directors under increasing pressure to go beyond their statutory duties towards the companies they oversee Words: Alexander Garrett

malfunctioning. The parent company of upmarket cake emporium Patisserie Valerie announced that it had found a ‘material shortfall’ – otherwise known as a black hole in the accounts – and needed an immediate injection of cash to stay afloat. In the days that followed, Patisserie Holdings’ finance director was arrested, its auditors came under investigation and it also emerged that part of the business had been served a winding-up order by Her Majesty’s Revenue and Customs – about which most of the directors knew nothing. How could such a disastrous set of events have occurred in a listed company, supposedly open to public scrutiny? The finger was immediately pointed at corporate governance, the mechanism by which companies are directed and controlled, and which is the culprit for so many high-profile failures. Think of high street department store BHS, which collapsed after its owner, Sir Philip Green, sold it for £1 in 2005, thereby conveniently alleviating his responsibility for the company’s pension fund. Then there was Carillion, the construction giant that went into liquidation with £1.5bn of debts, leaving many public contracts in the lurch. In these and many other cases, it’s the failure of boards to follow best practice, and of individual directors to live up to their responsibilities, that causes corporate collapse, with widespread reverberations. In the specific example of Patisserie Valerie, the finance director was also the company secretary. Simon Osborne, Chief Executive of ICSA: The Governance Institute, says: “If you confer that much power in a single individual, they can control everything from the front desk to the post room to the board room and then there’s huge opportunity to abuse that influence.” Recent company failures, coming in

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the wake of the financial crisis, have highlighted to the public why it’s important that listed company boards have the right structures in place and that the directors are fully accountable for their actions. The two are related but distinct, says David O’Hanlon, a Partner at Guernsey law firm Collas Crill. “Directors’ duties are the legal obligations and standards by which the directors will be individually judged,” says O’Hanlon, “whereas corporate governance is the mechanism and processes by which a company is controlled.” Since December 2018, the Wates Principles have provided a similar framework for larger private companies. In the UK, the Financial Reporting Council (FRC) publishes a Corporate Governance Code, which was significantly

Jersey’s companies have one of the highest degrees of regulation. Directors all have to be vetted and non-executive directors all have to be certified

revised in 2018. It’s not compulsory, but all listed companies have to report how they have applied the code – or explain why they have not. Directors’ duties, by contrast, are legally imposed on directors of all limited companies via the Companies Act 2006 in England and Wales. They range from promoting the success of the company to exercising ‘reasonable care, skill and diligence’ to declaring interests and avoiding conflicts of interest.

LOCAL LAWS In the Channel Islands, Jersey and Guernsey each have their own company law, which follows English law to differing degrees. In Jersey, the Companies Law (1991) states that directors shall ‘act honestly and in good faith with a view to the best interests of the company; and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances’. Many director duties are drawn from customary law. Jeremy Garrood, a Partner in the litigation department at Carey Olsen in Jersey, who has been involved in the liquidations of BHS and Carillion, says: “Jersey’s companies have one of the highest degrees of regulation. Directors all have to be vetted and non-executive directors all have to be certified, for example.” There’s also a high level of transparency, he points out. “For £4 you can see the ownership of any Jersey company.” In Guernsey, O’Hanlon says: “In terms of corporate governance and directors’ duties, for historic reasons Guernsey follows closely best practice in England, and Guernsey courts will look at cases that arise there.” Because of the dominance of highly regulated investment companies and other financial vehicles, directors need to be particularly aware of what’s expected of them, he adds.

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IT WAS THE latest case of a boardroom

Corporate governance

the corporate icing

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Corporate governance creating a new code to beef up boardroom effectiveness evaluations, too often seen as a box-ticking exercise that lacks transparency. Nilsson agrees that there need to be stronger incentives for directors to avoid failure, pointing out that levying fines on a company only hurts the shareholders. With this in mind, since October 2018 the Jersey Financial Services Commission has been able to fine ‘principal persons’ up to £400,000 for breaches of its code of practice. Nilsson adds: “I think millennials will drive a lot of change [by putting public pressure on boards to do the right thing]. They have a different set of values.”

WIDER INTERESTS

So, what are the ingredients for best practice in corporate governance? Malin Nilsson, Managing Director of global advisory firm Duff & Phelps in the Channel Islands, says: “There needs to be real independence, which means the directors are strong enough to challenge each other. You need to change the board periodically, you need diversity – both gender and generational, you need a good range of qualifications represented such as legal and accounting and you need to evaluate effectiveness at regular intervals.” Above all, she says, “everything comes back to the board. It’s the tone from the top that really matters”.

HUMAN FAILURE But while corporate governance is designed as a framework to ensure a company runs well, it is still prey to human failings. “The biggest danger is having a dominant leader,” says Garrood. “You can have all the structures you need, but if you have one powerful individual who sweeps everything before him or her, it doesn’t work.” Conflict of interest is another reason why corporate governance often goes awry, says Nilsson. “That may be the conflict between different priorities, such as risk versus performance, or it may be having board members who go back 30 years or have become too close to your auditors.” The ICSA’s Osborne says board members are too often out of touch with their company’s culture – a factor that the FRC has sought to address in the latest edition of the Corporate Governance Code. “Are

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You can have all the structures you need, but if you have one powerful individual who sweeps everything before him or her, it doesn’t work

they aware of practices for paying the supply chain? Does the company conduct exit interviews? How do they handle complaints from customers?” Any of these could be an early warning sign to the board of problems that are brewing. You cannot generally depend on external bodies to detect when things are going wrong, says Sara Johns, a Partner in Ogier Jersey’s corporate and commercial team. “Regulators and auditors, of course, play their part in providing external checks on companies, but in reality they can only ever be a last line of defence. No company should be relying on its regulator or auditor to realise and remedy the failings of its board – to ‘catch out’ any wrongdoing.” And while few believe that improving the governance code or tightening sanctions will stop companies failing altogether, steps could be taken to make corporate governance more effective. According to Osborne, the FRC has repeatedly asked government for greater powers, but has been denied. “If a board director is a qualified accountant, the FRC has the power to discipline them, but many directors are not,” he says. “We also need to have more robust disqualification proceedings.” At the behest of government, the ICSA is

There are signs that corporate governance is evolving in another way: towards increasing recognition of wider stakeholder interests, and not just those of shareholders. Johns believes well-run companies will be considering this anyway. “It would be strange to imagine an effective board, doing its job properly, would not be considering the perspectives of its customers,” she says. “That said, for corporate governance to be truly effective, there arguably needs to be a cultural shift by companies towards a greater collective social responsibility. Perhaps this means reforming rules around corporate governance, but what we’re really talking about is the need for an appreciation of the company’s footprint and the impact of that in a wider sense.” Jonathan Bates, who recently set up a financial protection and advice service in conjunction with the Guernsey Investment Fund Association through his company Thorndon, says: “I was involved with industrial resource-based companies, which have to be long term in their thinking. The ethical aspect is driven by the long-term nature of business. Every board has to think about the ethical constraints they should adopt to be successful in the long run. “In my experience, they should set and adopt ethical principles – for example, treating everyone internally and externally with ordinary decency and distributive justice, which is about whether the distribution of assets and rewards is fair and equitable.” In the case of Sir Philip Green and his treatment of BHS pensioners, Bates says, that was clearly not deemed to be the case. According to this line of thinking, directors increasingly will have to think not just about accountability to their shareholders, to regulators, and to company watchdogs, but also about their impact on society at a time when people’s faith in capitalism has been shaken. As the rewards for business success scale new heights, the scrutiny is only going to get more intense. n ALEXANDER GARRETT is a freelance journalist

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Advertising feature

Take nothing for granted Rebecca McNulty, Advocate at Ogier in Jersey, considers legal privilege and internal investigations EVERY REGULATED BUSINESS should

take the time to consider its policies and procedures around internal investigations, and think carefully before embarking on any internal investigation when faced with a regulatory issue that needs investigating. Doing so is all the more important if the business wishes to assert and maintain any claim to withhold privileged material from disclosure to a third party or to the Court. Legal advice privilege protects confidential communications between a lawyer and client for the purpose of giving or receiving legal advice (identifying who the ‘client’ is in that regard is key). Litigation privilege applies to documentation that’s produced when litigation is reasonably anticipated and where the dominant purpose, at the time of creating the document, is for use in relation to litigation. The underlying purpose of legal professional privilege is to protect legal communications from disclosure to the world. It enables clients and lawyers to converse freely without fear that their communications will be seized upon. It most commonly arises in the context of giving legal advice or litigation. Recent decisions in England and Wales have highlighted the difficulties that companies may face when trying to maintain privilege over documents produced in investigations. The reality is that legal professional privilege is often easier to state in theory than it is to apply in practice – and that the issue of privilege needs to be considered from the outset, not once an investigation is in train. Legal professional privilege has received a lot of attention by the Courts over the years, both in England and Wales and here in Jersey, with some controversial decisions along the way. It is well established that the Jersey Courts apply English principles in relation to questions of privilege. The Courts here have made it clear that such an approach is entirely appropriate – not least since the general principles underlying civil litigation, and the position of lawyers in that process, are similar in both jurisdictions. The latest English Court of Appeal

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“Legal professional privilege is often easier to state in theory than it is to apply in practice” decision in the case of the Serious Fraud Office [SFO] v Eurasian Natural Resources Corporation [ENRC] is of key importance, not least because it overturned a controversial decision of the English High Court in the same case last year. This case had otherwise significantly narrowed the scope of litigation privilege where the High Court rejected ENRC’s claims to litigation privilege over documents including interview notes and material associated with the forensic accountant’s review from ENRC’s internal investigation into allegations of bribery, fraud and corruption. Thankfully, the English Court of Appeal has restored some orthodoxy as to when litigation privilege arises. It held that documents produced to investigate allegations were created for the dominant purpose of preventing or defending litigation and hence were covered by litigation privilege. And the rule as to legal advice privilege otherwise remains the same, in that it protects confidential communications between a lawyer and client for the purpose of giving or receiving legal advice. The English Court of Appeal gave the view that the rule puts large corporations

at a disadvantage where those tasked with seeking legal advice are likely to have to rely on information gathered by employees, which will not necessarily be covered by privilege (unless litigation privilege applies). The English Court of Appeal decision in the SFO v ENRC is welcome. There is clearly a public interest that companies should be prepared to investigate allegations against them before deciding whether or not to self-report to the regulator. The decision supports a culture of investigating issues when they arise, and that in turn encourages a system of good corporate governance. So what practical steps can a business take to try and maximise any claim to privilege that it might be able to make? ● Take nothing for granted. Consider instructing external lawyers at an early stage. ● Set up a protocol for undertaking the investigation. Establish a designated team with clearly defined responsibilities to undertake the investigation. ● Consider and clearly define who the ‘client’ is – who is specifically tasked with seeking and obtaining legal advice? ● Limit the dissemination of legal advice – circulate on a ‘need to know’ basis only. ● Mark any privileged documents ‘confidential and privileged’. Be aware that simply marking a document in this way does not necessarily guarantee the document will be privileged. ● Be aware that attaching non-privileged documents to privileged documents does not make them privileged. ● If reports need to be drafted, ensure that they are drafted by external counsel and only shared with the core investigations team – once confidentiality is lost, so is privilege. n Advocate Rebecca McNulty is a Managing Associate in Ogier’s Jersey Dispute Resolution team. She has more than 10 years’ experience in offshore litigation, with particular experience in multi-jurisdiction disputes, leading large-scale document review and discovery exercises and advising on risk management and litigation strategy.

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Tax

The long arm of the IRS

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Tax

A year on from the introduction of major tax changes in the United States, it is becoming clear how significant they may be for individuals and businesses in the Channel Islands Words: Richard Willsher

of dense legalese and tax-speak, experts in the field are calling the Tax Cuts and Jobs Act (TCJA) the most important piece of taxation legislation to be passed in the United States for 30 years. However, there is still a lack of full guidance from both the US Treasury Department and the Inland Revenue Service (IRS) on many of the areas covered by the Act. And the courts have yet to judge relevant tax cases. All of which is adding uncertainty to the full implications of the legislation.

THE GOOD NEWS There is, however, some good news for individuals and corporations. There are higher personal tax allowances and lower deduction rates across the board, and the threshold for inheritance tax has doubled to a whopping $11.2 million. For corporates, the headline tax rate has fallen from 35% – among the highest in the world – to 21%. This brings the US more or less in line with the average among countries that are members of the Organisation for Economic Co-operation and Development (OECD) club of wealthy countries. The bad news is that wherever a US citizen may be in the world, there’s still no escaping the watching eyes of the IRS. As Anderson Page, Tax Manager at KPMG in Guernsey, points out: “Because the US has a unique, global view of taxation, wherever a US person puts their money,

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US tax has an impact on wherever that money goes and who that money is with. Also, wherever money goes into the US from a foreign source, US tax law has an impact on that foreign source within the borders of the US.” Page’s colleague, Guernsey Head of Tax at KPMG Tony Mancini, adds: “There are a surprising number of US citizens invested into Channel Island investment funds. The reason why our firm has US tax practices here is primarily to deal with their tax reporting requirements. “There’s also a surprising number of US investors in other Channel Island structures of various shapes and sizes.”

WHO’S AFFECTED The key to getting to grips with the impact of the TCJA is how much wider the US tax net has now become. There’s a new filing requirement, for example, that covers US limited liability companies (LLCs) that are 100% owned by single foreign ‘persons’. This legal term covers companies, partnerships and trusts, as well as individuals, none of which were formerly required to file returns. This will catch a range of investors into the US. The term ‘US shareholder’ has been redefined. It now includes any US person who owns 10% or more of the value or voting power of a non-US company. Moreover, if such a US shareholder owns more than 50% of the value or vote of a foreign company, then the company will be

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RUNNING TO MORE than 1,000 pages

Tax

deemed to be a controlled foreign corporation (CFC). At the very least, US shareholders or CFCs will face increased IRS reporting requirements and possibly an increased tax burden. “Additionally,” Page explains, “a new concept of a ‘specified foreign corporation’ (SFC) has been introduced. This means that where a US corporation owns more than 10% of the vote or value of a foreign corporation, that US corporation may have additional filing obligations. The IRS may require more detailed information about their investment into foreign corporations, including reporting their share of foreign earnings of the underlying entity.” Another change, which is particularly relevant to Channel Islands funds such as

the changes in the rules require that structures will have to be reviewed regularly to monitor the occurrence of CFC s in structures

private equity structures, affects income from so-called ‘carried interest’, where, for example, a manager of a fund may share in the fund’s profit. This was previously taxed as capital gain and therefore at an advantageous rate compared with income tax where a fundholding period exceeded one year. Such treatment will now only apply to holdings lasting three or more years. In a further move, which may wrongfoot businesses that use debt and claim interest expense against their profits, the amount of interest they can offset will be limited to 30% of earnings before interest, taxes, depreciation and amortisation (EBITDA). An important principle of US tax law is that citizenship, rather than domicile (as in the UK, for example), determines where US citizens and businesses pay their taxes. So, wherever they live or earn money through work or investment, or wherever US corporations make profit, tax is still payable at home. The TCJA was aimed principally at US corporations with operations across many jurisdictions. In line with OECD and EU thinking on profit shifting, lack of operational substance and tax avoidance, the US is out to bring back tax revenue to where it thinks it should rightly be taxed. The Channel Islands may lack the presence of businesses such as Amazon, Starbucks, Apple and Google. However, corporate entities that the IRS defines as a US LLC, CFC or SFC – and which could be funds, holding companies or others – now fall within the scope of the TCJA. One significant approach that the IRS has taken is over profits earned on US intellectual property (IP) or other intangible assets. As Linus Ostberg, a Senior Manager within the US tax services practice of Moore Stephens, explains: “They say: ‘We don’t want you to simply

set up a foreign company and put your investment in that company and roll up the profits. We’re going to impose rules on the company so that you, as the owner of the company, still have to pay US tax’.” The IRS has devised the suggestive acronym GILTI – global intangible low-tax income – to corral such feral income into its fiscal fold. Ostberg continues: “It means that, say, an operating business in the UK with US owners in the Channel Islands has to be aware of these rules and see whether or not there should be some restructuring. The same rule would apply to private equity and any fund-related business. They really need to make sure they understand these rules, and when they could apply.”

IMPLICATIONS OF THE ACT The full ramifications of the Act have yet to be explored, tried and tested, even though it was signed into law in December 2017. Nonetheless, its effects are far reaching and, with the exception of some of the personal taxation provisions, which have time limitations, may stay on the statute books for a very long time to come. The implications for some Channel Islands residents and business operations are significant, as Thomas Groenen, PwC’s Partner, International Tax Financial Services, warns. “These tax reforms influence all aspects of businesses with ties to the US. In the context of the financial services sector, this would include asset managers with investments in the US and/ or with US investors. For instance, it affects the legal form used for business in the US (given the reduction in corporate tax rate) and investment and deal structuring income earned by CFCs, which are subject to tax in the US. Moreover, the changes in the rules require that structures will have to be reviewed regularly to monitor the occurrence of CFCs in structures.” As we have seen many times in recent years, US laws enacted by one administration can be overturned by its successor. But, as Groenen points out: “It is now a fact that the introduction of the new taxes, anti-deferral mechanisms, territorial system of taxation and so on will require more in-depth tax planning. “The main challenge is to ensure US tax considerations of current structures are still optimal. It is also important to plan ahead and use systems that, as much as possible, will stand the test of time and pre-empt any expected changes in US tax law.” Such sage advice calls for businesses in the Channel Islands to invest a good deal of time into detailed scrutiny of that voluminous TCJA documentation. n RICHARD WILLSHER is a freelance finance writer

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Private equity

Putting the moneY

to work

Record fundraising levels are forcing private equity firms to change tack on origination and exit strategies as competition for investment targets hots up Words: Jon Watkins

▼

SOME OF THE numbers surrounding today’s global private equity market are nothing short of eye watering. In 2017, the global industry raised a record $453bn from investors – leaving it with more than $1tn to pour into existing companies and new business ventures, according to industry tracker Prequin. What’s more, private equity groups are spending the least amount of time ever on the road raising money, as yield-starved investors desperately seek places to park their cash. Prequin’s figures show that buyout funds spent an average of just 11 months raising a fund in 2017, compared with 19 months back in 2010. Josh Farrow, Associate Director of the Jersey Funds Team at PraxislFM, says these record amounts of money being raised are fuelling competition in the market – which is in turn driving innovation and change. “At no point in the history of private equity has competition been so great,” he says. “The number of firms has tripled globally and we’ve seen a rise in assets under management from around $600bn in the year 2000 to circa $2,500bn in 2017. The knock-on

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january/february 2019 65

Private equity

If private business owners looked at their business through the eyes of someone who was buying the company, almost through private equity eyes, they would look at it much more objectively

effect is competition. Fund managers are fighting to find a good deal – the right deal, at the right price.” Traditionally, says Farrow, as long as a deal offered an opportunity for return or complemented an existing asset within the portfolio, and was aligned to the specific strategy of that fund, it was what that fund manager would focus on. They would drill down into particular sectors and not really deviate from that. “But it’s fair to say that competition in the market is leading to diversification – a willingness to explore the opportunities in different sectors. There’s a big drive in the tech and healthcare sectors, for example, and in fact on tech businesses within the healthcare space.” That view certainly seems to be supported by industry statistics, with the Economist reporting earlier this year that 2017 “saw a frenzy of deal activity [in the healthcare sector] – the highest by value since the go-go year of 2007”. Of course, once a private equity fund has struck

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a deal for a business, it must turn its attention to how it maximises profit while ensuring that the business is ripe for an exit further down the line. One of the criticisms often aimed at private equity firms is that they laden firms with too much debt – prioritising profit over all else. Alex Di Santo, a Director within Intertrust Fund Services with 12 years’ experience in the offshore financial services industry, suggests this is a somewhat unfair criticism. He adds that private equity firms are focused on providing benefits for their investors while protecting the value of the asset. “The leverage is used to produce attractive returns for investors,” he says. “There are risks to putting leverage into those structures but, done right, it is to the benefit of all stakeholders – it’s good for the portfolio company and the investors. “The PE funds know what they’re doing and, if they laden those firms with too much debt, then that will hamper their ability to exit that business when they want to move it on. It’s a key component of private equity and PE wouldn’t be around if it didn’t have the ability to use it.”

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Private equity

LESSONS FOR OTHERS While private equity approaches and strategies are not without criticism, does the industry’s ability to maximise profit for portfolio businesses, while also striving to sell on its asset for a profit for investors, offer lessons for everyday private businesses? “Essentially, every business should be focusing on value and profit – and the benefit that private equity houses have is that, while they are closely focused on the business, they are not running it day to day,” says BDO’s Hallett. “Many private and owner-managed business leaders are so focused on the day job that they don’t have a focus on change, urgency and immediate targets. Private equity must reach a target return, and that allows it to make considered and calculated decisions,” he adds. “If private business owners looked at their business through the eyes of someone who was buying the company, almost through private equity eyes, they would look at it much more objectively. Private equity has the ability to up-skill, to change people and to bring in new processes without a strong emotional connection. “It’s de-personalised. That’s to the benefit of the business and it’s just another of the reasons that private equity is continuing to grow at a record rate and continuing to create returns for all involved.” n

A view from the Channel Islands Tony Lane, Partner in the Corporate team at Carey Olsen in Guernsey, has worked on some of the most notable Channel Islands and offshore deals of the past year, including the deal that led to Stars Group becoming the world’s largest publicly listed online gaming company, and TMF Group’s purchase of Guernsey-based Gentoo. Here, he offers some insight into private equity trends in the Channel Islands: “While strategies and trends in the Channel Islands are not dramatically different from elsewhere, I think we are seeing a number of buy-and-build strategies – people coming in and trying to consolidate in the market, picking up other businesses. “We’ve seen a couple of IPO exits recently – Sanne Group and JTC both had some private equity stakes in there – but generally the trend is towards sales rather than IPOs, which is reflective of the trends outside of the islands. “And we haven’t really seen much in the way of joint holdings, where two main private equity houses hold a majority of the shares between them. “We do, however, see a lot of businesses where there’s a private equity holder who has about 30% of the holding, with the rest sitting with the owner-managers who started the business. “That’s quite a popular management structure here. And, in terms of actual transactions, I’m not aware of a high propensity of overly leveraging debt on businesses within the Islands.”

Image courtesy of VisitGuernsey

That said, Tony Lane, Partner in the Corporate team at law firm Carey Olsen in Guernsey, says there is a broad trend around the propensity for private equity funds to lend to other portfolio firms – driven partly by the lack of available credit from traditional lenders. “Certainly, in the key markets, it’s becoming more and more common at the point of the deal for private equity firms to directly lend to portfolio companies rather than rely on traditional lenders,” he says. “That’s partly because of credit drying up, but also because it provides continuity for the private equity house by giving it a means of paying off some of its fundraising and, at the end of the day, increasing its return.” Private equity’s end game is to successfully exit the business and move it on, preferably having reaped the profits of a successful ownership. But are the shifts in an increasingly competitive market also leading to changes in the exit strategies of private equity-backed businesses? Justin Hallett, Executive Director and Head of the Funds and Asset Management sector team at BDO in Guernsey, certainly thinks so. “I would normally have said that the maximum length of time for holding an investment would be five years – because three to five years is the normal cycle of a PE fund,” he says. “But I think they are getting longer now. I think that’s tied in to the amount of money out there that’s still not invested. “If a private equity house sells an investment now, they convert that investment – which is continuing to make a return – into cash. As the market is so competitive, and because it’s not easy to invest that cash, by selling, they risk turning something that was making a return into cash that isn’t,” he continues. “As a result, I think we are seeing houses hold for longer – for anything up to 10 years while they enjoy the good returns on that investment.”

JON WATKINS is a freelance finance writer

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january/february 2019 67

MORE PEOPLE H AV E B E E N I N TO S PAC E THAN H AV E PA S S E D THE MASTER OF WINE EXAM

Meet Pierpaolo, he’s one of three Masters of Wine here at Waitrose & Partners. He and his team spend their lives searching the planet to find the best wines for our customers. Think of them as your very own sommeliers. Because every single wine we sell has been hand-picked by them.

Pierpaolo, Partner & Head of Wine Buying

FOR US, IT’S PERSONAL

68 january/february 2019

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The

Knowledge Brain food for the busy business professional

The Knowledge is compiled by Alexander Garrett Wheels of misfortune

Talking

points

The arrival of ride-hailing apps Uber and Lyft has led to an increase in fatal car crashes in a series of US cities, according to research by the University of Chicago and Rice University in Texas. Before Uber launched in San Francisco in 2010, US traffic deaths were at their lowest point for half a century, says the study. But since then, fatal accidents have started to rise. In a draft of their paper, researchers John Barrios of the University of Chicago, along with Yael Hochberg and Livia Hanyi Yi of Rice University, wrote: “The arrival of ridesharing is associated with an increase of 2%-3% in the number of motor vehicle fatalities and fatal accidents.” They tracked the rollout of Uber and Lyft across the US and correlated it with accident statistics to reach their damning conclusion.

A quantum of solace

A new report from US space agency Nasa and Standard Chartered bank says that quantum computing promises to make dramatic improvements in investment decision-making, according to the Financial Times. Quantum computers, in case you didn’t know, are “computers which make use of the quantum states of subatomic particles to store information”, and they are powerful. Very powerful. According to the new research paper, asset managers will be able to use these super-duper computers to create optimised portfolios, for instance, by finding the perfect balance between risk and return. But it’s early days yet. Alexei Kondratyev, Managing Director, Financial Markets, at Standard Chartered, one of the report’s authors, told the FT there has been little uptake so far among asset managers of quantum computers because of their cost, which starts at $15 million. He expects that to change in the next couple of years “as fund managers are able to rent computer firepower through the cloud”.

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Economic powerhouse

More than two-thirds of middle-market companies in the UK expect to achieve growth of between 6% and 10% in 2018, according to the 2018 EY UK Growth Barometer survey. These figures compare with the International Monetary Fund’s forecast of 1.6% for the UK economy, and demonstrate the extent to which middlesized companies are the key to prosperity, says EY. However, UK companies are less optimistic than their EU neighbours, with just 24% of UK businesses expecting to grow by more than 10%, compared with the Netherlands (38%) and France and Germany (both 31%). Many cited slow or flat growth in the local market, plus the threat of supply chain disruption caused by Brexit, as the biggest external risks to their business.

Unequal retirement

The gap between the pension income of men and women in the UK is nearly 40%, according to analysis by the trade union Prospect – more than twice the corresponding gender pay gap. The union carried out a study in which it took data on all sources of retirement income from the Department for Work and Pensions’ Family Resources Survey in 2016-17, including state, personal and workplace pensions. Its stark conclusion? The retirement income of women was 39.5% lower than that of men – around £7,000 less. Prospect puts this disparity down to lower pay, gaps in employment due to caring responsibilities, and the greater proportion of women doing part-time work. “These figures reveal the shocking scale of the gender pension gap and clearly demonstrate the need for urgent action to address this issue,” says Sue Ferns, Prospect’s Deputy General Secretary.

A perk too far

Four in 10 business travellers admit to using corporate cards for personal purchases, according to research commissioned by global travel management company Carlson Wagonlit Travel (CWT). Some 46% of American and European travellers and 38% of Asian travellers ‘fessed up to making illicit use of the company plastic. “Travel managers need to address the misuse of company cards – and also work out why travellers don’t follow the rules,” says Christophe Renard, Vice President of CWT’s consultancy arm. Quite what these ‘personal purchases’ are is left to the imagination.

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THE KNOWLEDGE

Best of… BOOKS

Brief moments of discomfort

Testing personalities

The Discomfort Zone: How to Get What You Want by Living Fearlessly by Farrah Storr (Little Brown, £13.99, paperback) revolves around a simple enough idea: only by stepping outside your comfort zone can you reach your full potential. That could mean putting yourself forward for a new challenge, asking for difficult feedback, nailing a presentation or getting a dream job. Whatever the scenario, Storr says you have to push through these “brief moments of discomfort” to make real progress in your career. Storr is editor of Cosmopolitan magazine in the UK, and was one of just seven BAME women to be named on a 2017 list of the UK’s 1,000 most powerful people. By transforming your fears into bite-size, manageable pieces, she claims, you can overcome them – and even learn to enjoy the experience.

Mention personality tests, and the name Myers-Briggs quickly crops up. But few know the story behind this staple weapon of the HR department. The test was conceived by Katherine Briggs, an American academic heavily influenced by psychologist Carl Jung, and her daughter, Isabel Myers, a best-selling crime writer. Their first version was sold in 1943 to a US government department, training spies to go to war. What’s Your Type: The Strange History of Myers-Briggs and the Birth of Personality Testing (HarperCollins, £20, hardcover), by Merve Emre, is a biography of the pair and their somewhat eccentric lives, as well as a fascinating history of personality testing.

Opportunities to listen For 35 years, Ambi Parameswaran was a leading luminary in India’s advertising industry. He got to meet and develop relationships with many of the country’s leading marketers and top business honchos, and he came to the realisation that if you turn those interactions into opportunities to listen, you’ll learn a great deal along the way. In Sponge: Leadership Lessons I Learnt From My Clients (Westland, £9.95, paperback), Parameswaran relates many of those conversations in anecdotal form. He recalls the attention to detail with which Ratan Tata, eponymous chairman of Tata Group, scrutinised a ‘shiny new car’ – the Indigo Marina – before it went on display. He tells how he won his first account in the city of Chennai simply by spending a couple of hours in the Connemara hotel bar chatting to the owner of Spencer’s department store. And one of the key lessons the author learned about Indian advertising along the way: “There are only three things that sell in advertising … celebrities, kids and dogs.”

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Speak up in safety Fear of speaking up is common in many organisations, as individuals anticipate the criticism and the commitment that comes from putting your head above the parapet. It has negative consequences for the organisation, though, as good ideas and valuable feedback often fail to come to the surface. The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation and Growth (Wiley, £22.99, hardback) describes how a culture of candour can be built, in which people feel safe to speak up. Its author, Amy C Edmondson, is a professor at Harvard Business School and has studied why teams at companies such as Google perform better than others. She comes to the conclusion that creating ‘psychological safety’ – a place where you can take risks without feeling insecure or embarrassed – is a key component. And that’s good for individuals, too. All prices are publishers’ official prices except Sponge, price by Amazon.co.uk

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The Knowledge

In numbers: Billionaires PODCASTS

$8.9tn The wealth held by billionaires across the world increased by $1.4tn in 2017 to reach a total of $8.9tn – the greatest growth witnessed among this exclusive group.

The Disrupters This is the name of the BBC’s new business podcast on its recently launched Sounds platform. It’s hosted by Kamal Ahmed, former BBC Economics Editor and recently appointed Editorial Director of BBC News, and entrepreneur Rohan Silva, and promises in-depth interviews with other leading entrepreneurs to find out the secrets of their success. Among those to be featured in the first season are Demis Hassabis, co-founder of AI researcher DeepMind; Justine Roberts, founder of Mumsnet; and Reid Hoffman, founder of LinkedIn. bbc.co.uk/sounds

The dream Multi-level marketing programmes, aka pyramid schemes, are one of the rogue elements of the business world, seducing members of the public into parting with their savings by offering the illusory promise of easy money. There are few winners and, for many, the consequences can be financially devastating. In this new podcast by internet radio service Stitcher, presenter Jane Marie tries to find out why people get sucked in again and again. www.thedream.fm

Household name Business Insider’s new podcast tells the lesser-known stories behind giant brands of the past few decades. Reporter Dan Bobkoff discovers that TGI Friday’s was the Tinder of the 1960s; reveals how Donald and Ivana Trump helped to sell Pizza Hut’s stuffed crust pizza; visits the last Blockbuster video store in Alaska; and recounts how Coca-Cola helped Vicente Fox become Mexico’s President. And then there’s the curse suffered by the family who own Jell-O. uk.businessinsider.com/household-name

199 In 2017, 199 new billionaires emerged. A third (30%) of these newly minted billionaires were Fourth Industrial Revolution pioneers who accumulated their wealth through innovation and business model disruption. The majority of the world’s billionaires – 80% – come from the US. The rest can be traced to the Asia-Pacific region. Although the US was home to the largest population of billionaires in 2017, the growth rate of AsiaPacific billionaires was three times that of the US.

80%

$1.12tn

China has seen the greatest growth in billionaires of any country. From just 16 in 2006, the country is now home to 373 billionaires, whose accumulated wealth totals $1.12tn.

A major global wealth transition is also under way. A total of 701 billionaires are over the age of 70, which suggests that 40% of the current wealth of billionaires will either be inherited by the next generation or handed over to charity in the next 20 years.

70+

Source: Billionaire Insights 2018, UBS and PwC

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january/february 2019 71

THE KNOWLEDGE

How to…

… manage underperformance Someone on your team just isn’t pulling their weight. Their colleagues are grumbling and it’s bringing down team performance and morale. Even your customers have noticed this person doesn’t deliver the service they expect. How are you going to turn the situation around?

Spell out expectations. You can’t blame somebody for underperforming if you didn’t make it clear what you were expecting in the first place. Advice service ACAS says: “There are three aspects to planning an individual’s performance: the objectives the employee is expected to achieve; the competencies or behaviours (the way in which employees work towards those objectives); and personal development (the development employees need to achieve objectives and realise their potential).” Under best practice, each employee should be given an individual performance plan, which is tailored to their own specific circumstances.

Act promptly. Don’t allow the situation

“Focus on aspects of performance that can be measured, rather than those that are a matter of opinion”

to fester. Once you become aware a team member is letting the side down, the quicker you act, the sooner you can stop the issue becoming a drag on the business and damaging morale among other team members. Software specialist Bright HR advises: “An informal chat with your underperforming employee might be all it takes to get them back on track.” Let them know their lack of performance has been noted and try to find out if there’s anything wrong. Give notice that they need to step up their effort.

Be specific. Making vague comments about performance won’t help them understand what’s wrong or put it right. As management guru Peter Drucker said: “If you can’t measure it, you can’t improve it.” Focus on aspects of performance that

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can be measured, rather than those that are a matter of opinion – feedback scores from customers, for instance, or the revenues they bring in if they’re in a sales role.

Be prepared to listen. Your underperformer may not be the one to blame. They could have been covering up for a colleague who’s not doing their job properly. Or there could be other reasons, such as IT problems or being provided with the wrong instructions. Give them a chance to explain.

Is there something else? Poor performance at work may be a symptom of something happening outside the office – relationship, money or mental health issues. “Consider how long this team member has been working with your organisation; you may discover they’ve been in the same role for years without any recognition, or they’re victim to isolated bullying or other workplace disagreements,” says Miles Burke, CEO of employee survey firm 6Q. Offer training. “People underperform because they’ve not been trained to do the job,” says business psychologist Adrian Furnham. “The training has been absent, poor, too quick, too long ago and/or not supported in the workplace. It’s a common problem, particularly where there’s a change in structure, equipment or customer needs.” Underperformance can often be easily cured through putting the person on the right courses, says Furnham. And reinforce that by ensuring you reward the new skills. Coaching is also an option.

Turn it round. “A great technique is to ask the underperforming employee how you, as a manager, can help them perform better,” says Burke. “This may allow them to open up about what they think they need while framing it in general terms.” Talk to them about where they fit into the organisation to give them a sense that they are valued.

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The Knowledge

Business leaders on making it to the top

Getting ahead Set new targets. Sit down with the person and agree a new set of objectives. If they understand why these are necessary, they’re more likely to meet them.

Follow it up. “If your underperformer doesn’t improve after you’ve given them a fair chance, or you think they might have an attitude problem, you should formally address their behaviour,” says Anthony Hughes, co-founder of recruitment consultancy Coburg Banks. Always follow the correct disciplinary procedure – that may mean issuing them with a formal warning.

Reward improvement. If the person’s performance does improve, you must make sure you acknowledge that and find a way to offer a reward – even if it’s a small recognition, such as a ‘wall of fame’.

Be prepared to fire. If the individual’s performance still doesn’t improve, despite being given the chance to make changes, extra training and other opportunities to up their game – and you don’t believe they ever will – you must be prepared to let them go. But ensure you follow a fair procedure. That means you must: believe the reason is fair; follow the relevant procedures; tell the employee why they are being considered for dismissal; allow them to be accompanied at disciplinary/dismissal hearings; and give them the chance to appeal. Fail on any of these points and you could find your organisation on the losing side in an industrial tribunal.

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Alistair Rothwell, chairman, Fairway Group What’s the best piece of career advice you’ve ever been given? Well, there are three pieces, actually. First, be yourself; you will be a poor version of somebody else. Second, be the best you can be, be enthusiastic and take a genuine interest in your clients’ affairs. And finally, there are no spectators on the extra mile, but you’ll get your reward – great service is never forgotten.

“My advice is to work hard, study hard, get qualifications and look out for the right opportunity to come along. The art then is not to miss it!”

What’s the best piece of career advice you’d pass on? Steve Jobs told a generation to “follow your heart”. But how many failed musicians and artists are there out there working as shelf stackers? In truth, most people don’t know what their heart is telling them. My advice is to work hard, study hard, get qualifications and look out for the right opportunity to come along. The art then is not to miss it! Try and find humour in what you do and never take yourself too seriously – if you can laugh at yourself, and with your colleagues, it really makes your work life that much more enjoyable.

What’s your biggest mistake, and what did you learn from it? Not being honest enough with both colleagues and clients at an early enough point – if you think they are not performing as expected. Inevitably, things deteriorate, possibly to an unrecoverable position, and either the colleague leaves or you lose the client when an honest chat could have brought things back on track. So the lesson is: be frank, but do it with compassion where necessary.

What do you look for when you’re hiring people? Hire for attitude. They can always learn. Hire people who have the potential to be better than yourself. Imagine who you’d want running your company when you’ve gone. If you hire people and have that ‘niggly’ feeling that something isn’t quite right during the probation period, you’re going to be correct at least 95% of the time. Grasp the issue early, discuss it and try to sort out the problem. If you have to part company, then it really is better to do so before you know the names of their kids and the state of their mortgage!

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THE KNOWLEDGE

GURU

WATCH

Richard Thaler

economics to policymakers and the wider public. It showed that consumers can be prompted to make good decisions – getting a pension or eating more fruit, say – without heavy-handed lecturing, or compulsion. Another classic though unorthodox nudge case study is the image of a housefly printed in the bowl of urinals, which shows men where to aim when they pee.

f you’ve been auto-enrolled in a pension scheme, or Other claims to fame been panicked into buying an air ticket by the message Thaler has a second string to his bow. He is co-founder of “Only three seats left at this price!”, you can probably investment management firm Fuller & Thaler Asset Management, thank Richard Thaler. Winner of the 2017 Nobel Prize for where key tenets of behavioural economics – such as loss aversion Economics and co-author of the best-selling book Nudge, and the endowment effect – are put into practice. He even made Thaler is the guy who popularised the theory that you can a cameo appearance in the 2015 film The Big Short, trying change people’s behaviour by little non-coercive prods to explain the fallacy whereby people expect the future that help them make the right choices. It persuaded “Nudge is a book to carry on as things are today. In his latest book, David Cameron, when Prime Minister, to form a Misbehaving: The Making of Behavioral Economics, no publisher ‘nudge unit’ at the Cabinet Office. he set out to show the effect of human irrationality initially wanted – So far-reaching has been the impact of Nudge on financial markets. that it probably received more coverage on its Thaler has nevertheless described himself as “lazy” there are now 200 10th anniversary than on its publication in 2008. and says he works on “things which amuse me”, nudge units we The BBC devoted an entire radio programme to the describing the success of Nudge as a genuine surprise. know about” tome, describing it as “probably the most influential “It’s a book no publisher initially wanted. There are now popular science book ever written”. 200 nudge units we know about. And what are they doing? Thaler’s day job is Professor of Behavioral Science and They’re just exploring what works and trying to make government Economics at the University of Chicago Booth School of Business, programmes more efficient. Some people worry I’m advocating where he’s taught since 1995. Nudge, written with Cass Sunstein, a nanny state, but it’s actually the opposite – it’s preventing the wasn’t his first book, but it brought key ideas of behavioural nanny state, because our programmes always allow opt-out.”

real time 360

360

We’re all used to giving our colleagues, underlings and managers 360-degree feedback, right? Well, say hello to what Netflix calls a ‘real time 360’. According to the Wall Street Journal, the video streaming company has given the concept a starring role in the ‘take no prisoners’ culture it’s nurtured among its US executives. At team dinners and lunches, it seems, attendees take it in turns to go round the table giving feedback and criticism about everyone else present. “It can be intense and awkward,” Brandon Welch, a former talent executive, told the Wall Street Journal. Netflix takes the blunt feedback a stage further. Managers are told to apply a ‘keeper’ test to each member of their teams – would you fight to keep hold of this person? And the commitment to tell it like it is doesn’t end when someone gets fired, says the newspaper. “The emails about firings can reach hundreds of employees across multiple divisions and can be painfully specific, calling out an employee’s failings while inviting more questions and gossip, many employees say.” Sounds like good fodder for a TV drama on life inside a cut-throat tech leviathan…

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Idea shower Brainstorming is so passé, and the sun has set on blue sky thinking. Now if you want to get everyone’s thoughts up and running, the only way is to convene an idea shower.

Boil the ocean This is all about taking on an impossible task – as in “you’re really boiling the ocean on this one!” The origin is somewhat obscure, beyond the fact that it’s impossible to boil the ocean.

BUZZWORDS…

JARGON BUSTER:

ALSO NEW IN THE WORLD OF

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The Knowledge

Top tech Flight deck

WHAT’S

HOT

HOW DO YOU KEEP YOUR BUSINESS RUNNING WHILE YOU’RE ON THE MOVE? SHIVVY JERVIS REVIEWS THE BEST OF MOBILE TECH As a futurist, keynote speaker and founder of an innovation advisory firm, I know first-hand how vital it is to maximise your time both on the ground and in the air. This is where powerful, versatile mobile tech can power those efforts. So here are some of the lesser known nifty services, apps and platforms that will help you on the go.

SECURITY If you think your phone’s passcode is enough to protect your information, think again. Fewer than 15% of us have installed an antivirus app and just 8% of us have installed software that can remotely erase data on the phone. First, set a passcode with more than four digits. For mobile antivirus, my top choices are Avast, Bitdefender and Lookout. And for encrypted messaging, there’s a multitude of choices: Signal, Telegram, Line, WhatsApp, and many more. If you’d like to take this a step further and encrypt everything on your device, investigate open source tools such as VeraCrypt or AES Crypt, which use standards widely vetted by an informed security community.

SCHEDULING When determining upcoming schedules, it’s likely that you’re used to threading this planning into short, staccato moments in transit. How about automating the tedious aspects? Virtual assistant x.ai will actively respond on your behalf to contacts trying to reach you by engaging in live email dialogue with them. I’ve used the service for a while now and I love the fact that important meetings are neatly confirmed and slotted into my diary while I’ve been blissfully soaring at atmospheric height. Evie is another AI assistant that optimises resources to make meetings more productive, with integrations for Chrome and Slack. TripIt will collate all the information from airline and hotel apps and all you need to do is forward all the info to a designated email address and it does the rest. Clever.

CONNECTIVITY Access to internet and secure networks is a top priority for most travellers. If I’m using a public wifi network that’s spotty or too slow for me to work, NetSpot and WiFi Manager can help find uncluttered networks and the right location to access them.

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If you’re transmitting sensitive information, you’ll need a secure network. Whenever I must use an unprotected network, I use a VPN to mask my traffic and protect the flow of any sensitive data. A good VPN for desktop is Astrill, while TunnelBear is a really affordable and reliable option for mobile. When there’s no reliable wifi, use a data roaming USB dongle from WorldSIM, which works in 188 countries and runs on a prepaid basis – much cheaper than most carriers’ roaming charges.

MONEY Ensuring all business spending needs are in one place, and making it easy to keep control of employee finances on the move, is critical. And if, like me, you also need to keep decision-makers informed of cash flow, Soldo is a brilliant tool. It even integrates directly with accounting software (no more irksome population of spreadsheets). Since the start of November, Soldo has integrated with Xero to help streamline everything from spending and reconciliation to accounting.

DATA Cloud-based apps can help you handle large volumes of data on the go. Domo brings together data, systems and people for a digitally connected business, delivering real-time insight on financial and regulatory changes, and communicating value to investors, analysts and employees. Google Data Studio is a free product that can collect data streams from virtually any source you desire, enabling you to create custom dashboards, reports, and data visualisations to stay informed and pass information to your team. And when you want to get under the hood of your business, have a play with crystal.ai. The tool examines data from your marketing, sales, CRM, operations, and even internet of things platforms – and delivers insights in natural language you can understand. Shivvy Jervis is an award-winning futurist and speaker on innovation

NO MORE CONNECTION WOES Fed up with turning up in a client’s office and struggling to get your laptop or phone connected to their presentation screen? That’s just one of the scenarios tackled by Airtame, a tiny wireless device that plugs into the HDMI port of any screen or projector and instantly streams your content. It’s also perfect for digital signage – using otherwise blank screens to showcase your content. Airtame2, €399, airtame.com

GO PAPERLESS The paperless society may not be here yet, but the Rocketbook Everlast is helping us on the way. It looks like a classic notebook, but it’s connected to the cloud. You upload your notes – written with a Pilot Frixion pen – wipe it clean and start again. As the name suggests, it should last forever. £34.99, getrocketbook.co.uk

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Directory To advertise in the directory in print or online contact Carl Methven on + 44 (0)1534 615886 or carl.methven@blglobal.co.uk

Great learning boosts performance It’s a simple fact of business that people who know how to use their IT systems properly are more productive and happier at work. At ALX Training, it is our mission to ensure that every person we work with can use their essential applications properly, saving time, smoothing processes and creating a more productive workplace.

Appleby is one of the world’s largest providers of offshore legal advice and services. Uniquely positioned in the key offshore jurisdictions of Bermuda, BVI, the Cayman Islands, Guernsey, Isle of Man, Jersey, Mauritius and the Seychelles, as well as the international financial centres of Hong Kong and Shanghai. We are also the only firm to have offices in all three British Crown Dependencies. Our services include:

Ashburton Investments is an investment manager offering discretionary portfolio, multi-asset and specialist fund solutions to international private and corporate clients including family offices, trustees and wealth managers. While the rest of the industry may have had to come to terms with how the global financial crisis changed the world for their clients, we have simply carried on doing what we have always done – delivering risk adjusted returns through all market conditions.

Our trainers are renowned for their product knowledge, and their friendly and energetic attitudes to training help them get the best from every person they teach.

l Corporate l Dispute Resolution l Private Client & Trusts l Property

Learning starts at induction We are well-known for our range of Microsoft Office courses which includes Office 365, Excel, Outlook, PowerPoint, Word, Project, SharePoint and Visio but our clients know we can do much more.

Members of the Jersey and Guernsey offices regularly advise London City and international law firms on all legal aspects of offshore corporate, finance and investment fund transactions and arrangements in the Channel Islands.

Not only do we train on well-known accounting packages such a Xero and QuickBooks but we create courses on bespoke in-house systems. We design unique courses specifically for your organisation, so that your staff learn precisely the information they need to work efficiently and effectively.

For more information visit our website www.applebyglobal.com

Multi Asset is not the latest investment trend to us. It has been the cornerstone of our business since inception, supported by our experienced and longstanding equity specialists. For more than 35 years, we have invested in what makes sense. Our product set and approach to investments has evolved over time to suit ever changing market conditions but the underlying constant is that we understand our clients need to effectively manage risk and we put them at the centre of our thinking.

Wendy Benjamin Managing Partner, Jersey Group Partner, Guernsey wbenjamin@applebyglobal.com

Globally, Ashburton Investments has over £9.1bn under management as at April 2018 with offices in the Channel Islands, United Kingdom and South Africa.

We know there’s no better place for your new colleagues to start learning than during their induction programme, so we develop bespoke induction courses that give your new starters all the information they need to hit the ground running. We can even deliver content online, so training can be ongoing and continuous.

Contact Laythamm Malorey E: laythamm.malorey@ashburton.com T: +44 (0)1534 512010 www.ashburtoninvestments.com

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Independent and Professional We offer a full range of management and fiduciary services to our domestic and international private clients and corporate structure: Family office - bespoke assurance l Wealth management - your strategy l Trustee - impartiality with vision l Corporate services - attention to detail l Good governance - a helpful eye l Strategic guidance - controlled ideas l

We aim to assist in the provision of personal service to meet your requirements. Ask us. Being vigilant and proactive in the face of a fast changing legal, economic and fiscal landscape. We can provide the focus to your solution. Try us. Our team has many years of experience dealing with a wide range of clients in different countries. We look to provide good corporate governance to achieve your aim. Contact us: Wendy Warder – Senior Trust Manager wwarder@baccata.co.je Lisette Le Creurer – Senior Trust Manager llecreurer@baccata.co.je Justin Clapham – Client Director jclapham@baccata.co.je Áine O’Reilly – Client Director aoreilly@baccata.co.je Tim Cartwright – Consultant tcartwright@baccata.co.je www.baccata.co.je Tel: 00 44 1534 870670 Regulated by the Jersey Financial Services Commission

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Be Secure is a consultancy business providing services in the following areas; GDPR data protection ISO 27001 Information Security l Cyber Security l EU Representative services l l

(via Irish office)

Be Secure, in association with partners who are experienced professionals in data protection, technology, cyber security and legal services are working to deliver high standard assurance and advisory services to Channel Islands organisations. We work as a business partner to your organisation in support of the board of directors, trustees, partners, senior management and staff in managing the governance obligations of data protection in this new GDPR data protection world! Be Secure is lead by a highly experienced finance professional, who has worked in senior roles in private equity owned businesses, in both commercial and financial services business sectors. As a member of the International Association of Privacy Professionals (“iapp”) and an accredited Certified Information Privacy Professional Europe (CIPP/E), Certified Information Privacy Manager (CIPM), Certified Information Privacy Technologist (CIPT), GDPR Practitioner, ISO 27001 Lead Implementer and Lead Auditor, Be Secure’s founder and director can help you, and your colleagues, manage this area in a professional and practical way for your organisation and clients. For further information please contact:

Carey Olsen is a leading offshore law firm. We advise on Bermuda, British Virgin Islands, Cayman Islands, Guernsey and Jersey law across a global network of nine international offices. We are a full service law firm working across banking and finance, corporate and M&A, investment funds and private equity, trusts and private wealth, dispute resolution, insolvency and property law. Our clients include global financial institutions, investment funds, private equity houses, multinational corporations, public organisations, sovereign wealth funds, high net worth individuals, family offices, directors, trustees and private clients. We work alongside all of the major onshore law firms, accountancy firms and insolvency practitioners on corporate transactions and matters involving our jurisdictions. Our advice is delivered by an approachable and experienced team of globally-minded lawyers who work in partnership with our clients to help them achieve their objectives. We have the expertise and resources to handle the most complex international transactions combined with a personal approach to business. Contact: guernsey@careyolsen.com T +44 (0)1481 727272 jerseyco@careyolsen.com T +44 (0)1534 888900 www.careyolsen.com

Brian Siney, Founder and Director, CIPP/E, CIPM, CIPT, ISO 27K Lead Implementer, Lead Auditor, FCA brian@besecure-consultants.com +44 7797 738743 or www.besecure-consultants.com

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