GLOBAL BUSINESS: A VIEW FROM THE CHANNEL ISLANDS
BUSINESSLIFE
MARCH/APRIL 2021
The Wealth Edition • Brexit opportunities • Changing role of the wealth adviser • Bitcoin’s new wave • Alternative investments • High-end property
BUSINESSLIFE
ISSUE 72 MARCH/APRIL 2021
ESG
A new generation
BL
BUSINESS LIFE
PUBLISHING DATES City – June
Special Editions For editorial queries, contact: jon.watkins@blglobal.co.uk
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carl.methven@blglobal.co.uk
Welcome
Wealth of change THE WEALTH SECTOR is evolving. Fast. After easing along a steady trajectory for decades – with the majority of wealth holders following similarly trodden paths and strategies to those before them – all of a sudden change abounds, and from all angles. One of the biggest impacts will be the pending generational shift. According to the UBS Global Family Office Report 2020, one-third of the next generation admit they are either only slightly or not at all engaged with family wealth. This creates a huge challenge for the wealth managers and advisers who must somehow attract and engage this audience. Those who do so successfully will face an additional challenge, too – keeping them. As this special wealth edition of Businesslife explains, 70% of next-generation wealth holders would switch wealth manager given the opportunity (page 40). Meanwhile, those advisers who successfully engage and retain the next generation face yet further upheaval around the new wealth holders’ preferences. Top of the list at present, of course, are ESG and purpose – well documented as being of far greater importance to the next-gen investor. As one family office wealth manager tells us: “We have deployed more capital into ESG over the past 12 months than ever before. We are seeing more families deviate from their core intellectual property and go into unfamiliar areas.” Wealth is becoming more complex – and wealth holders’ requirements more bespoke.
NEW-WORLD ADVISERS To meet this challenge, a new breed of wealth adviser is emerging. As wealth holders crave a more holistic understanding of their needs, and as trust in governments and institutions falls, demand is growing for advisers who operate as genuine partners – partners who are better informed, more independent in their views and willing to call on additional experts where needed. We explore this trend and what wealth holders expect from this new type of adviser in our feature on page 32. A further change looming large over the wealth sector is the increasing influence of digital technologies. A sector traditionally built on personal relationships, physical meetings and trust established over time is finally – albeit reluctantly – embracing digital transformation. And the driver is the very attribute that many feared digital
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transformation would erode: a more personal experience. “Historically,” one wealth adviser tells us on page 58, “there was a misconception by service providers and consumers that ‘digital’ somehow meant ‘less personal’. But that’s simply not true. Some of the most personalised experiences we receive today are on digital platforms.” He cites the emergence of algorithms that know clients’ interests and instincts better than many of their closest friends, leading to a bespoke curation of information based on their behaviours, as an example of digital improving the client-adviser relationship. “The hyper-personalisation we can offer via a digital channel is far superior than we could ever expect a human to be able to deliver,” he says.
OUT WITH THE OLD While the wealth holder demographic is changing and as digital plays an increasing role in how decisions are made and wealth is distributed, so the type of investments being made is also evolving. Top of the pile for discussion is of course bitcoin (page 48). Tesla’s decision to plough £1.5bn of its reserves into bitcoin at the start of the year fuelled a further surge in the value of a cryptocurrency already flying high. And while questions remain over its longterm stability, it’s clear bitcoin is increasingly on the radar for investors looking to diversify their traditional portfolio approach. But it’s not just bitcoin that is grabbing investors’ attention. In this issue, we also explore challenges and opportunities put forward by other alternative investments – from art to other physical chattels (page 66). In addition, we look at the impact of Covid-19 on the luxury property markets around the world (page 62). What we find is that the pandemic has influenced the type of properties most in demand – particularly for investors who plan to reside in their purchase. But despite the disruption and volatility served up by the pandemic and its resulting lockdown restrictions, the luxury property market overall remains a mainstay of wealth holders’ investment strategies. In fact, property is providing a welcome note of stability and certainty in a sector that is currently experiencing a wealth of change. n
Wealth is becoming more complex – and wealth holders’ requirements more bespoke
Jon Watkins is Editor-in-Chief of Businesslife
march/april 2021 3
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Contents
INSIDE 48
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10 COMMENT
BUSINESSLIFE
Businesslife is published quarterly by Chameleon Group, with special editions covering the City, Middle East and Asia +44 1534 615886 www.blglobal.co.uk
CEO, CHAMELEON GROUP Carl Methven carl.methven@blglobal.co.uk EDITOR-IN-CHIEF Jon Watkins ART DIRECTOR Angela Lyons
52
VG Private Client Director Debbie Lumsden sets out the key facts for non-doms setting up an offshore trust
6 News
26 brexit
52 libor
12 regulation
Latest business news from the Channel Islands
The post-Brexit trade deal spells opportunity for the Channel Islands
The lending rates system is on the way out, but what will this mean for banks and borrowers?
BCR Law on the impact of the EU data transfer case Schrems II on Jersey
8 Appointments Senior job changes in Jersey and Guernsey
16 interview SRJ Technologies CEO Alex Wood on the newly listed business’s plans to diversify
32 wealth advisory Wealth holders’ changing expectations are having a big impact on advisers
36 client relationships Are the new approaches ushered in by the pandemic here to stay?
40 esg investing
SUB EDITOR Kate Wheal
The younger generation is setting the pace for socially responsible spending
ADVERTISING sales@blglobal.co.uk
48 bitcoin
NEWS AND EDITORIAL news@blglobal.co.uk
Will Tesla’s bitcoin plans lead to a new surge of interest in crypto?
GENERAL ENQUIRIES enquiries@blglobal.co.uk
58 cryptocurrency The Covid pandemic has reset the wealth agenda – so what does this mean for crypto investors?
62 property Brexit and Covid have had a massive impact on the world – so how has high-end property fared?
71
The knowledge
Tesla in numbers, management guru Lynda Gratton in profile, mental health at work and much more
66 alternative investments We look at the impact of increasingly diversified portfolios of investments that take in everything from artwork to jets
contributors The BL Global Discussion Forum
DAVID CRAIK
Follow us @blglobalnews Office: 7 Castle Street, St Helier, Jersey, JE2 3BT © 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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With Covid-19 bringing wealth advisers closer than ever to the next generation of wealth holders, David explores the impact of their increasing demand for ethical and socially responsible investing.
RICHARD WILLSHER Richard, meanwhile, asks whether that generation – as well as current investors – are finally taking bitcoin seriously as a long-term option for diversifying their investment portfolios.
SOPHIE McCARTHY
Sophie asks what all this means for wealth advisers, and finds that wealth holders are increasingly seeking out the services of a new breed of better-informed and more independent wealth managers.
ALEXANDER GARRETT
Alex explores the pandemic’s impact on a more traditional investment market, luxury property . While the type of properties being sought is changing, demand certainly is not.
March/april 2021 5
in the NEWS JFSC REPORTS 24% RISE IN FINTECH ENQUIRIES Fintech enquiries at the Jersey Financial Services Commission’s Innovation Hub grew by 24% in 2020. According to the JFSC’s latest FinTech and Innovation Report, the JFSC helped 74 businesses with queries about how to develop innovation in financial services and how regulation applies to them. Most related to regtech (29%), whereas in previous years the focus was on virtual asset activities. There was also an increase in the number of
the cost of purchasing a property across the world’s international finance centres. While the likes of Hungary (£61,368), Ireland (£163,220) and Cyprus (£192,977) offer relatively affordable options, the average house price across the 12 most attractive destinations is £617,523. Monaco is by far the most expensive, with average house prices exceeding £4m. But some of the highest values in the IFC housing market are in Jersey, where prices currently average £533,000. The research also shows Jersey’s world ranking as an IFC. Enness compiled data on the score attributed to each IFC based on the financial secrecy it offers and its strength as a corporate IFC. The Enness report said: “With a combined score of 164, Jersey trails the Isle of Man by just one point and ranks as the second most attractive IFC destination in the world based on the businesses looking to develop personal and professional solutions in Jersey. benefits it offers. JFSC Director General “However, with house Martin Moloney (pictured) prices averaging double that said: “2020 presented of the Isle of Man, a far challenges to the JFSC and stronger property market the financial services industry, arguably puts Jersey at but also opportunities. As the top of the global IFC businesses implemented hierarchy.” their continuity plans and began working from home, a GUERNSEY PROPERTY PRICE distinct theme arose regarding RISES: HIGHEST SINCE 2008 digitising or automating Guernsey’s Local Market has existing processes.” experienced the largest annual The Commission says rise in property prices since its focus this year is on 2008, according to the latest developing policy relating to Residential Property Prices virtual assets and money or Bulletin from the States of value transfer services. Guernsey. The average home in ENNESS RANKS JERSEY AS the bailiwick now costs IFC PROPERTY HOTSPOT £493,174. And a total of 345 Research by high-netLocal Market transactions worth mortgage broker took place in Q4 of 2020 Enness Global has revealed – 68 more than the prior
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Done Deals Bedell Cristin, working with Hogan Lovells, has advised the Norwegian Investment Fund for Developing Countries (Norfund) in expanding the receivable financing facility of Brighter Life Kenya 1 – a financing vehicle for solar energy developer d.light. In doing so, Norfund joins the US International Development Finance Corporation as a co-senior lender in the structure. The Bedell Cristin Jersey team was led by Partner Alasdair Hunter. Carey Olsen’s corporate team has advised PE investment group Earth Capital on the designation of its Nobel Sustainability Fund as a Guernsey Green Fund. The fund focuses on growth-stage investment opportunities in sustainable technology across food, water and energy to help meet demand for these resources from an increasing population. The Carey Olsen team included Partner Tom Carey and Senior Associate Matt Brehaut. Aztec Group has supported the closing of Basalt Infrastructure Partners’ third fund, Basalt III, which raised $2.75bn. Aztec supported the closing of Basalt III and will provide ongoing administration and accounting services. Carey Olsen’s corporate team in Guernsey, advising on all Guernsey legal and regulatory aspects of the fund’s launch, was led by Partner David Crosland. Ogier funds advisers in Guernsey have assisted Hipgnosis Songs Fund with its latest £75m fundraising, providing Guernsey law advice on the issue of new shares in Hipgnosis. The shares were admitted to trading on the Main Market of the London Stock Exchange on 10 February. Partner Craig Cordle led the Ogier team. Ocorian has supported the launch of Cordiant Digital Infrastructure Fund, a Guernsey LSE-listed fund focused on digital infrastructure. The fund, managed by Canadian firm Cordiant Capital, raised £379m from its IPO by issuing 379 million shares at 100p each. Ocorian supported Cordiant in the IPO and will provide administration, accounting, reporting and regulatory services. Appleby has acted as Jersey counsel to Advanz Pharma on its sale to Nordic Capital for $846m. The acquisition is to be effected by way of a members’ scheme of arrangement under Jersey company law and is expected to close in the second quarter of 2021. The global Appleby team, led by Partner Andrew Weaver, worked alongside White & Case and Fasken Martineau DuMoulin. JTC has supported Brazilian grain and fibre company Amaggi on its offering of a $750m aggregate principal amount of 5.250% notes due 2028. This debut cross-border bond issuance was structured as a sustainability bond. JTC’s team in Luxembourg, led by MD Joost Mees, provided administration and management support of the issuance vehicle. The net proceeds of the offering will be invested to finance a range of sustainability projects. n
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MERGERS AND ACQUISITIONS Calligo has acquired US-based data analytics, data science and visualisation specialist Decisive Data. Launched in 2008, Decisive helps global brands in technology, retail, telecoms, healthcare and other verticals to make decisions and meet efficiency, growth and profitability targets. Backed by Investcorp Technology Partners, this is Calligo’s 10th acquisition since 2012. Zedra has acquired Inside Pensions, a UK provider of occupational pension scheme governance support set up in 2008. The deal adds to Zedra’s Guernsey team, which offers global clients employee benefits, pensions and associated administrative services, and will increase Zedra’s presence in the UK market with a further 39 staff. JTC has acquired London-based funds management specialist Indos Financial. According to reports, the deal is for a maximum consideration of £12.5m, with an initial £10m in cash and £1m in JTC equity. A further £1.5m is said to be available to Indos’ management on the achievement of performance targets. The transaction is expected to complete by the end of Q1 2021. Founded in 2012, Indos provides depositary, ESG and anti-money laundering oversight services for alternative investment funds from offices in the UK and Ireland. All directors and staff will join JTC’s Institutional Client Services Division. Insurance management and consulting services provider Strategic Risk Solutions has announced it is setting up in Guernsey. The firm currently operates from the US, Europe, Barbados, Bermuda, Grand Cayman and South Africa. Peter Child, Head of European Operations and Managing Director, Guernsey, of Artex Risk Solutions, will become Managing Director, SRS Guernsey Management, in July. Vistra has acquired Brazilian firm Jotaerre, a specialist in services tax calculation and collection/payment, allowing it to offer international and local clients a broader range of company formation and management, secretarial, tax and accounting services. Founded in 1989, Jotaerre offers differentiated ISS tax services using a technology solution that interfaces with multiple Brazilian ISS submission systems. Marcelo Borgheti will lead Vistra’s expanded business as Country Managing Director, Vistra Brazil, and Jotaerre will be rebranded to Vistra in due course. n
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quarter and 154 more than this time the previous year. During 2020, the highest number of Open Market transactions took place since 2006 – 92 in total, with 39 in the last quarter. Skipton International Business Development Manager Roger Hughes said: “Even with reduced activity during lockdown, the 2020 total of property purchase bonds increased by 8% in comparison with 2019. “Lockdown caused many people to reassess their requirements for a home, a trend that will continue for some time. This activity not only demonstrates the stability of the local property market but more generally the local economy.” JERSEY COMPETITION AUTHORITY CONFIRMS CEO The board of the Jersey Competition Regulatory Authority has appointed Tim Ringsdore (pictured) as its permanent CEO. Tim has been fulfilling the role on an interim basis since May 2020, following the organisation’s demerger from the Channel Islands Competition and Regulatory Authorities (CICRA). He has significant regulatory experience across the Channel Islands and internationally, having served as a Director of CICRA
between 2018 and 2020. Prior to this, he led Cable & Wireless Communications in the British Virgin Islands and held a variety of senior roles in JT over 10 years. FCA APPROACHES JFSC OVER WOODFORD LAUNCH The Financial Conduct Authority (FCA) has been in touch with the Jersey Financial Services Commission following reports that investor Neil Woodford’s new business will operate out of Jersey. The UK watchdog is still investigating the collapse of the LF Woodford Equity Income Fund and investment company in 2019, but in a recent interview with The Telegraph, Woodford said he was planning to launch an investment firm, Woodford Capital Management (WCM) Partners, in Jersey. FCA Director of Enforcement and Market Oversight Mark Steward said: “We are in contact with the JFSC and agreed with them that we will share information on any application made in our respective jurisdictions – for both a fund or entity.” The JFSC said: “We are disappointed to see this announcement in advance of either receiving or processing any application from this company for authorisation to conduct licensed business as an investment management firm in Jersey. Although the trading name WCM Partners has been reserved in the Jersey Registry, no application has been received or processed to authorise WCM Partners to operate as a Jersey company or an authorised investment management firm.” n
march/april 2021 7
News
Appointments C5 Alliance has promoted Mark McLachlan to Director of Managed Services. Mark has more than 20 years’ experience in the legal, fiduciary and banking sectors. He has been with C5 since 2017, the past two years as Head of Managed Services. Prior to this, he spent nine years at BNP Paribas, and before that five years at Ogier. In his new role, Mark will work within C5’s senior leadership team to implement the delivery strategy across Managed Services, developing and growing services in line with the firm’s technology and business strategy. In addition, he will ensure best practice is followed for Managed Services clients.
Maples and Calder, the Maples Group’s law firm, has recruited Tim Morgan to its Jersey office as a Partner. Bringing to the role more than 17 years’ experience within the Jersey investment funds market, Tim has acted on funds transactions across a range of asset classes – private equity, venture, growth, real estate and credit – with an institutional client base of US, UK and European clients. Following an early career with Taylor Wessing, PwC and Dresdner Kleinwort Wasserstein, Tim went on to spend 12 years with Ogier and five with Mourant in Jersey. He also currently serves as Chair of the Jersey Funds Association.
The International Stock Exchange has appointed Anthony Byrne to the new role of Head of Bond Markets. Based in Ireland and operating across Dublin and London, Anthony joins The International Stock Exchange Group having held senior roles at the Irish Stock Exchange and Euronext. His experience has spanned stock exchange business development and client relationships, particularly in international primary bond markets. He said: “Having spent 15 years developing the bond market offerings of two European exchanges, I see significant scope to expand TISE’s bond proposition into a truly global product.”
ICSA: The Chartered Governance Institute has elected Teresa Le Couteur – currently Group Company Secretary for Northern Trust Guernsey – as Chair of the Institute’s Guernsey Branch. Teresa succeeds Paul Smith, who chaired the branch from May 2019 to December 2020. She is a Chartered Secretary with more than 20 years’ experience working in Guernsey and Jersey, with firms including Ipes, Standard Bank, Mourant and Crestbridge. She also has experience managing client entities across various other jurisdictions – British Virgin Islands, Cayman Islands, Cyprus, Delaware, France, Luxembourg, Netherlands and UK.
IQ-EQ has appointed Mirek Gruna to the newly created position of Chief Commercial Officer for Jersey. Mirek brings to the firm more than 15 years’ experience in financial services on the island. He joins IQ-EQ from Dominion Fiduciary, where he has served as Managing Director since 2017. Prior to that, he spent four and a half years with TMF Group, latterly as Managing Director. Earlier in his career, he worked for trust company Herald Group and consultancy Capita, again in Jersey. Mirek has also acted as a Director of entities owned by listed companies and sovereign wealth funds.
Apex Group has made two appointments to its Corporate Solutions business in Jersey – Stephen Reilly (pictured) as Head of Corporate Solutions and Alice Read as Commercial Director. Stephen joins from facilities management provider AFM, where he was Chief Operating Officer. Prior to this, he spent more than two decades with RBS International, latterly as Managing Director, Head of Corporate Banking and Financial Markets. Alice moves from Intertrust, where she was most recently Director of Corporate Services in Jersey. Prior to this, she was Intertrust’s Managing Director in Dubai.
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News
PraxisIFM Group has appointed Stephanie Coxon to the board as a Non-Executive Director and Chair of the Audit Committee. Stephanie already serves as a Non-Executive Director of three London listed companies – Apax Global Alpha, JLEN Environmental Assets Group and PPHE Hotel Group. Prior to these appointments, she spent almost 15 years with PwC, latterly as Capital Markets Director across the UK and the Channel Islands. In this role, she led teams advising the boards of investment funds on a wide range of asset classes, relating to corporate governance, accounting policies and reporting processes.
Crestbridge has announced two senior promotions – Brian Jemwa (pictured) to the role of Director within its Fund Services business and Christopher Corfield to Director within the Real Estate Services team. Both are located in Jersey. Brian has been with Crestbridge since November 2015, most recently as Associate Director, Real Estate. Earlier in his career, he worked in audit roles with Deloitte & Touche in Zimbabwe, moving to Deloitte’s Jersey office in 2012. Meanwhile, Christopher started working for Crestbridge in February 2016 after seven years with Société Générale Private Banking in Jersey.
JTC has promoted Paul Weir to Managing Director of its Jersey office. Paul has been with JTC since 2013, when he joined as Director, Private Clients. He has worked in the trust and fiduciary services sector since 1994. After starting his career with NatWest Bank, Paul joined Barclays Private Bank and Trust in 1994, and went on to join Bank of Nova Scotia Trust Company, Ansbacher and Standard Bank Offshore Trust Company, where he became a Director in 2001. From 2003 to 2007, Paul served as a Director for EFG Trust Company, combining operational responsibilities with looking after a portfolio of complex and high-value clients.
RBC Wealth Management has appointed Gail McCourt to the position of Head of Private Client Fiduciary Services for its British Isles business. Based in Jersey, Gail will lead the fiduciary management and technical trust teams in the Channel Islands, and will report to Dave Thomas, CEO of RBC Europe. She joined RBC in 2003, and her roles have included Head of Marketing, Head of Regional Market Strategy and Head of Client Experience. Most recently, she has spent four years as Head of Fiduciary Management. Gail has also gained recognition as a keen advocate of diversity and inclusion in the workplace.
Baker & Partners has promoted Senior Associate Lynne Gregory to the firm’s partnership. Lynne is a senior litigator with more than 25 years’ experience. An Englishqualified Solicitor and Jersey Advocate, her work focuses on complex, multijurisdictional cases, often involving assettracing and fraud claims. Before joining the firm in 2017, Lynne spent several years as General Counsel to Centamin, a FTSE 250 mining company based in Jersey. Prior to this, she worked for law firms in London, including Charles Russell Speechlys, Baker McKenzie and Allen & Overy.
Appleby has named Christophe Kalinauckas as Group Partner in Jersey. Christophe joins after eight years at Walkers. A Jersey Advocate, he specialises in corporate and private equity work, debt finance and real estate finance. He has also listed securities on The International Stock Exchange. Christophe has been admitted as a Cayman Islands Attorney and English Solicitor. His offshore experience includes corporate, banking and finance work, private equity work, restructurings, joint ventures, advising on M&A deals and general non-contentious offshore law.
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Three considerations of deemed domicile planning
CO M M E N T
DEBBIE LUMSDEN
Protected settlements provide income tax and CGT deferral advantages, such that beneficiaries are only taxed to the extent they receive a benefit. Therefore, provision for the intended beneficiaries’ immediate needs outside of the trust should be considered to mitigate future tax exposure. If the settlor and their family decide to leave the UK in the future and become non-UK resident and resident in a low- or no-tax jurisdiction, there may be an opportunity to receive tax-free distributions from the trust.
TIMING – WHEN TO SETTLE In the current political climate, there are several reasons why non-doms may want to consider settling a protected settlement sooner rather than later. Asset values have, in the main, been affected negatively as a result of Covid-19 and Brexit, and now may be the right time to ask if the ‘right’ assets are held. If so, should they be settled into trust while assets are at depressed prices, in order to minimise tax leakage? Covid-19 continues to be a big political risk for 2021, and has already prompted unprecedented UK government policy responses, including recently commissioned reports from the Office of Tax Simplification looking into both inheritance tax and capital gains tax (CGT) changes. The latter received notable interest amid concerns that it may provide pointers as to future CGT changes and hikes to match income tax. While there is certainty under the current CGT regime, now may be the time to trigger a disposal and settle assets into trust. Longer term, the next UK general election is only three years away. A change in government could alter, or remove altogether, the attractive benefits that the ‘protected settlement’ regime offers.
CONTROLLING THE SETTLEMENT While most clients like to, as far as possible, legitimately retain an element of control over the management of the trust, particularly in relation to investments, clients and their trustees should be mindful of the level of control a settlor exerts to protect the tax residence of the trust offshore. Another important consideration is ‘tainting’, whereby the trust effectively becomes transparent and the income and gains taxed on the settlor. In such instances, a trust will lose its protected status and become tainted if the settlor enters any arrangement with the trustees that is not on arm’s-length terms and results in extra value passing to the trust. This is critical to bear in mind when settlors have a desire to be involved in the trust’s investments, especially if they are financially sophisticated and are qualified to do so. If the settlor is to be involved in a management or advisory capacity, it is critical to ensure the settlor is remunerated at a market rate for their services, that the formal tax advice is obtained and a formal agreement is entered into. Additionally, the settlor should consider that payment for their services will be from trust monies, which are essentially outside the scope of UK tax. As a result, they will be taxed in the UK at their marginal rate, which may not be desirable. To mitigate restrictions over control, we are seeing an increased demand for private trust companies (PTC). While usually more costly, a PTC provides optimum control. It is effectively the settlor’s own trust company, where assets vest in the PTC rather than in a third-party trustee. Control over investments can be exerted via the composition of the board, voting rights and/or through an investment advisory committee. Establishing a trust before becoming ‘deemed domiciled’ should be seriously considered and supported by a team of trusted advisers who are able to consider and implement bespoke solutions to suit clients’ preferences in relation to the management of a trust’s investments.
HOW MUCH TO SETTLE The question of how much to settle is critical. A detailed understanding of the client or family’s lifestyle and their foreseeable expenditure is needed to calculate the portion that should be retained outside the trust to fund this.
VG does not provide tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax or legal advice. You should consult your own tax and legal advisers before engaging in any transaction. For more information about VG or details of the legal and regulatory status of VG, please visit www.vg.je
Private Client Director, VG
Timing, cost and control are key factors for non-doms to bear in mind when setting up an offshore trust
D
eemed domicile planning presents a golden opportunity for ultra- and high-net-worth individuals to settle protected settlements and enjoy the well-documented tax protections. But there are a number of considerations for non-domiciled clients – or non-doms – and their advisers when contemplating settling an offshore trust as part of deemed domicile planning.
10 march/april 2021
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R E GU L AT I O N WATCH
Schrems II and reducing the risk to your business
NOUR BELAL BCR Law
ASHLEY QUENAULT BCR Law
What impact will this landmark EU data transfer case have on Jersey law?
T
he landmark Court of Justice of the European Union (CJEU) case colloquially known as Schrems II has had a significant impact on the transfer of personal data to countries outside the European Economic Area (EEA). Given that Jersey’s data protection legislation is similar to the EU’s General Data Protection Regulation (GDPR), decisions from the CJEU on its applicability and effectiveness are likely to be persuasive to the Jersey authorities when interpreting Jersey’s own legislation. So, what are the known key facts relating to Schrems II, and what are its likely implications on data transfers to and from Jersey? Schrems II considered the validity of transfers of personal data from Ireland to the US. At that time, data transfers to the US were permitted under the Privacy Shield – an EU-approved mechanism that allowed for the transfer of personal data from the EEA to companies in the US that were certified with this programme. In fact, the CJEU found that certain US surveillance laws were disproportionate and violated the fundamental rights of EU citizens. As such, the CJEU declared that the Privacy Shield mechanism was invalid. The CJEU also expressed caution about the use of EU standard contractual clauses (SCCs) to transfer personal data to non-EU countries. In particular, it stated that data exporters needed to do more than just rely on the terms of the SCCs in order to demonstrate compliance with their data protection obligations.
IMPACT OF SCHREMS II ON JERSEY BUSINESSES
The outcome of Schrems II is that businesses need to understand where the data they export goes and what the rules are governing personal data in that jurisdiction. Some practical steps for Jersey businesses to undertake now include: • Completing a data audit in order to identify the
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jurisdictions where personal data is actually transferred to • Identifying the contractual arrangements that govern that transfer of data • A ssessing whether that jurisdiction grants the same or equivalent protection to personal data as Jersey’s legislation • If shortcomings are identified, considering what, if any, supplementary measures are necessary to address those shortcomings • If those shortcomings cannot be resolved, considering suspending the transfer of the data to that jurisdiction. The European Data Protection Board has recently published guidance on data transfers in light of this judgment, which businesses should consider reading and digesting. In addition, new SCCs have been published (albeit not yet approved) and it is likely that there will be a 12-month transition period for businesses to adapt to the measures contained in the new SCCs. Therefore, now would be a good time for businesses to start making preparations.
TRANSFERS OF DATA TO THE UK
The Trade and Cooperation Agreement between the UK and the EU permits the free flow of personal data to the UK for a period of six months. During this time, the EU will determine whether to issue an adequacy decision, meaning that data can continue to freely flow between the EU and the UK, notwithstanding the UK’s departure. Jersey has amended its data protection legislation to permit the free flow of data to the UK for the whole of 2021. This is in anticipation that the UK will receive an adequacy decision within that time period. If an adequacy decision is not obtained, the UK will be regarded under Jersey’s data protection legislation as a third country, meaning the transfer of personal data can only take place using approved data transfer mechanisms (such as SCCs). Jersey businesses should not be complacent when it comes to transferring personal data outside Jersey. They should be assessing a country’s equivalence and consider whether the personal data being transferred will have the same protections as granted in Jersey. If it does not, businesses should identify any potential supplementary measures to address this issue. A failure to appreciate this or to have adequate provisions in place could have serious implications. n This article only provides a summary of the subject matter and does not constitute legal advice. BCR Law can provide assistance surrounding the measures that should be in place to permit businesses to comply with their obligations under Jersey’s data protection legislation.
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“One undoubted benefit of the UK-EU trade agreement for the islands is their new membership of the WTO” What the Brexit deal means for Guernsey and Jersey
PAGE 26 “We don’t have to look too far into other industries to see just how quickly market leaders can be disrupted – look at Blockbusters, Nokia and Kodak” The rise of digital wealth management
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“Libor is fatally flawed – and the rate will cease to exist from the end of 2021” PAGE 52 www.blglobal.co.uk
1,264
60%
Share price jump experienced by SRJ Technologies when it listed
THE LENGTH, IN PAGES, OF THE EU-UK TRADE AND COOPERATION AGREEMENT. WE PULL OUT THE KEY IMPLICATIONS FOR CHANNEL ISLANDS BUSINESSES
CEO Alex Wood tells the story of the Jersey-founded business
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“I had a conversation with a client recently, who explained that what she really needed was an educated best friend”
OF THE NEXT GENERATION ADMIT THEY ARE EITHER ONLY SLIGHTLY OR NOT AT ALL ENGAGED WITH FAMILY WEALTH
The birth of the modern-day wealth adviser
Greening the family tree
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$32,000
$45,834
PAGE 32 The value of bitcoin in January, which means its total market capitalisation is now greater than the monetary base of Canada The value of bitcoin by February
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LUXURY PROPERTY ON THE CHANNEL ISLANDS CAN CHANGE HANDS FOR HUGE SUMS TODAY
£30M
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march/april 2021 13
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Investing with HSBC, a step in the right direction. With the start of a New Year holding the promise of a better future, it’s time for life to move forwards. An opportunity to make fresh plans, explore different ways of growing your money and make positive things happen. We talked to some of our Premier Wealth Managers (PWM) based in Jersey, Guernsey and the Isle of Man for an insight into why now, more people are choosing long-term investment for their money.
Sid Ludbe
Investment goals
Flexibility and convenience
Sid Ludbe, Premier Wealth Manager on the Isle of Man, has been a wealth advisor for seven years and with HSBC since August of last year. The majority of Sid’s clients invest for retirement and come to him for specialised advice.
But what’s really important to our clients is the flexibility that may come with investing for the long term. This is particularly the case given current concerns about economic and employment stability. That’s why it’s Cara McPhee reassuring to know that at HSBC, you could start investing with £250 per month, or with a lump sum of £25,000 or more. Monthly investment payments can also be paused at any time, leaving the investment already built to continue to work for you, and you can resume payments at your convenience. There’s often the option for funds to be withdrawn at short notice in case of emergency. “Of course,” said Cara, “there’s the risk that this could be at a time when the markets aren’t favourable, so it’s always better to ensure that the funds set aside for investing are separate from short-term or day-to-day needs such as monthly expenses. That’s why we always undertake a full profile and risk assessment.”
“We need to consider people’s reasons for investing in the first place; often, it’s to achieve a personal goal. We must assess their priorities, their concerns and their main ambitions. Whether it’s planning for retirement, funding their child’s education, or pursuing a career dream, for many, last year saw a change of perspective which naturally affected their immediate financial decisions.”
Time, not timing
Olivia Miller
Olivia Miller has been a PWM in Jersey for almost two years. She attributes the rise in investors that she’s seen to the combination of increased downtime during lockdown and dramatic market fluctuations during the height of the pandemic.
“Suddenly people had more time on their hands to contemplate their ‘To Do’ lists and start or diversify their investment journeys. Many savvy clients consider this time as an ideal opportunity.” As Cara McPhee, PWM in Guernsey points out, investing with HSBC is less about timing than time. “Our portfolios are designed to give global diversification in a wide range of assets, which manages the overall risk. If any individual were to manage the portfolio alone, it would require considerable time and knowledge. But that’s what our investment team across the world are trained and employed to do. What this means is that money has a better chance to grow with stability over the long term.” © HSBC Bank plc 2021. All Rights Reserved. 201230/GI/535
Sid, Cara and Olivia all agree that the most important ingredient in investing is that their clients are completely comfortable with the investment they will undertake. “If there is any cause for concern, or a client expresses any worry at all over an investment, it’s not the right course of action,” said Olivia. “We only ever proceed when we are absolutely certain our customer is comfortable with the chosen investment.” The start of the year can be a great time to talk to us about investing – and with HSBC Island Offers, you can take advantage of reduced investment fees of just 2%1 until 31 March 2021. We’re right with you. Ask in-branch 03456 006161 ciiom.hsbc.com/islandoffers
Moving forwards Get going with reduced fees from 2.75% to 2% on investments1.
Turn today’s promise into tomorrow’s reality when you invest in your future. Start your investment journey before our reduced fee offer ends on 31 March 2021.
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Please remember that the value of investments, and any income received from them, can fall as well as rise, is not guaranteed and you may not get back the amount you invested. | 1Offer only available to eligible HSBC Premier current account customers who have not invested in the last 12 months. In order to make investments with HSBC, you will need to hold an HSBC Premier current account and invest a minimum of £25,000 or £250 per month. Charges will be applied. | For quality purposes and in the interests of security, your call may be recorded.
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Issued by HSBC Bank plc, registered in England and Wales number 14259. Registered office 8 Canada Square, London, E14 5HQ. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. HSBC Bank plc, Jersey Branch is regulated by the Jersey Financial Services Commission for Banking, General Insurance Mediation, Fund Services and Investment Business. HSBC Bank plc, Guernsey Branch is licensed by the Guernsey Financial Services Commission for Banking, Insurance and Investment Business. HSBC Bank plc, Guernsey branch is licensed to take deposits by the GFSC. In the Isle of Man HSBC Bank plc is licensed by the Isle of Man Financial Services Authority. Publicly available information, including reports and accounts is obtainable from www.hsbc.co.uk HSBC Bank plc. © HSBC Bank plc 2021. All Rights Reserved. 201211/JH/502
Interview
Channel Islands-founded SRJ Technologies started life supplying pipe repair and replacement services to the oil and gas industry but, following a successful listing, is diversifying into a wider range of services across different sectors. CEO Alex Wood explains how being based in Jersey set it up for success, what’s next – and why he is supporting others on the islands to achieve their dreams…
Words: Jon Watkins Pictures: Studio M
Why is local manufacturing such a key part of your proposition and so in demand? It’s all about the way customers operate. Saudi Arabia has something called IKTVA (In-Kingdom Total Value Add). UAE has a system that gives you 30% delta between
16 MARCH/april 2021
a foreign-sold product and a locally manufactured product. Australia has something similar, too, as does Brazil. It’s pretty much the case that every country now has some kind of incentive in place for using in-country products. So we have developed a product that can be manufactured in-country and we have pre-qualified service providers in those regions. Of course, what we provide is a highend, premium element. The benefit of our technology is that it vastly reduces the loss experienced by the customer. Getting back online and producing whatever you’re producing as quickly as possible is essential – and the downtime is far more expensive than the cost of our product will ever be. So that’s really where we are. Tell us a bit about your background. I actually grew up in Norfolk, not far from Norwich. After school, I went to Bournemouth University to do a degree in interface design, which had a bit of computer programming in it and a bit of neural networking in it. It was called human-computer interaction. But I worked out part-way through that most people probably aren’t going to be getting a guy from Bournemouth University to design MiG jet heads-up displays – they’re going to get a guy from Oxford University and a guy from MIT. And I worked out that I was probably headed for Argos middle management. So I turned left at Piccadilly and went into construction and worked for several businesses in the UK. Eventually I moved
to a family firm in Norfolk, generated them quite a bit of work over a two-year period, and then took the opportunity to go and work on the Dubai airport build, which was a dream for a 23-year-old. I lived in Dubai for three years, played polo and generally enjoyed life – probably a bit too much – before my wife came and saved me from all of that. I then worked in Africa for a while, in mining, and in Australia. So I moved around and kind of educated myself, came across this proposition, and moved to Jersey. Why did you come to the Channel Islands, and how did the opportunity to launch SRJ Technologies evolve? I’ve been an offshore tax resident since around 2003 and I’ve kind of bounced around a bit. I lived in the Middle East for the longest period on that journey, mainly in Dubai. I also spent time in Australasia and West Africa, working in oil, gas, mining and mineral processing. So I was very much in this space already when I came across this opportunity to launch SRJ. I and John Manning, an engineer by trade, had been asking ourselves how an industry like oil and gas, where you are talking highly flammable substances and pumping them at high pressure through pipes, didn’t have a weld-free pipe coupling that could be used for quick repairs. It was a simple as that. We decided that there was a better way to mend pipes in the highly flammable oil and gas industry – with a weld-free pipe coupling. The Channel Islands came into play because our initial finance came from an
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What does SRJ Technologies do and how do you position yourselves as a business. What’s the unique proposition? We’re an asset integrity business. We provide specialised engineering services and pressure containment management solutions – permanent or temporary pipe repair or replacement – predominantly to the oil and gas industry. But where we see real value is in offering a wider range of asset-integrity consulting services, helping our customers to better understand the operational risks and where best to focus resource to minimise these. That’s all about digital solutions that work with client platforms to analyse data and highlight leak prevention and repair programmes. What’s essential to our proposition is that we use pre-qualified service providers and manufacturers local to our customers. We’re what we call ‘geolocation-flexible’. We very much designed that business model and the technology to fit in with the global desire for local manufacturing, reduced complexity and reduced manpower via digital capability. What’s interesting is that we’re kind of perceived by the market to be a disrupter, while we very much feel this approach is what makes us synergistic with the marketplace. We manufacture our products in-country, utilising an IP that is coming out of Jersey.
Interview
The
interview Alex Wood www.blglobal.co.uk
february/april 2021 17
Interview
From there, you had an IPO and listed on the Australian Securities Exchange. Why Australia? As we started to achieve some commercial success – deploying the technology in Houston – we felt the next real opportunity was to look at a listing. We didn’t really find appropriate appetite or understanding for our sector in the London market. Through one of my contacts, Mick Doohan – a world former superbike and Grand Prix motorbike racer, who is now a lead anchor on Sky TV for MotoGP – I became more aware of the opportunity of the Australian market. Mick is a Queensland boy, a real Australian ambassador type, and is
18 march/april 2021
our IPO in 2020 was a very important move for us, and we were delighted when we saw the share price jump 60% on opening
incredibly well connected. He was very helpful in getting us in front of the right people – we made what was only the 17th IPO of 2020. That was a very important move for us, and we were delighted when we saw the share price jump 60% on opening. Aside from Mick Doohan’s involvement, you had some other well-known backers involved in SRJ in the early days. Was that useful and did it help with your profile-raising efforts? I’d say Mick’s business connections were the most important thing for us back then. He was vice president of Formula One
Australia. He owns a Melbourne private jet terminal, and another on the Gold Coast. He’s a wealthy businessman on the Gold Coast and, as a result, he’s friends with all the richest Australians. It was through Mick that we were also introduced to former Formula One team owner Eddie Jordan, who also became involved in the business. That was great for media interest and for attracting some focus on us – but the involvement of people like Mick, who could really help us on a business level and in terms of meeting the right people, was far more valuable to us than the ‘celebrity’ backers. Was access to funding and grants important in the early days – and did they play a role in making Jersey the right location for you? It was massively important. I mean, this stuff’s expensive. It isn’t easy to get done. And, relatively speaking, it’s expensive to do business in Jersey. In fact, if I have any concern about the jurisdiction, it’s that if it becomes too expensive to do business there, it could be very difficult to make it stick for people in the early stages of their ventures, because you’ve got to get through that development cycle to get anything to the point where it really delivers. We touched on the Jersey Innovation Fund specifically earlier. But access to funds and grants generally is essential in helping to get a business off the ground in the Channel Islands – and I hope that sort of support continues.
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investor based in Jersey, and most of our other investors up to the point of public listing were Jersey-based. We found offices in Jersey and we really felt the Channel Islands offered us the professional partners we needed to grow the business from a concept to a registered player in the marketplace. We don’t manufacture our products here – but our IP is held here, and the Channel Islands have really driven where we have reached today. As I say, we were massively well supported in the Channel Islands. One of the obstacles we hit was that we took an innovation grant from the Jersey Innovation Fund, which had some negative press coverage – and that really was a struggle because it reduced the appetite for investors to have an association with our business. So we actually paid that back, in full, a year early.
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Interview Around the SRJ boardroom table: (l-r) Dr Andrew Mitchell, Leasa Hosty, Alex Wood, Jaime Turpin, Stefan McGreevy, Tom Wilson
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Are such alliances likely to be your route to further growth going forward? It’s definitely something we want to explore in all regions, and we’re already making strides. Late last year, we signed an agency agreement with Zamil Operations & Maintenance in Saudi Arabia, to expand into that region. That, again, has put us in an amazing position. You mentioned the move into digital solutions in order to help clients manage their programmes. How far into that journey are you? We’re making some strong strides there, too, led by Dr Paul Eastwood, our Technical Director, who was previously head of digital solutions at Petrofac. Last year, we delivered a digitised coupling with sensor-embedded technology, which was a bit of a milestone, and we’ve just completed our first app. That will be deployed into some of our customers soon and will guide them through dealing with containment and maintaining compliance and regulation. Another of our team is considered
march/april 2021 21
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We work in an industry where reputations are important and we’ve worked hard to assemble a team with amazing credentials
Around the time you listed on the Australian Securities Exchange, you also signed a deal with Japanese conglomerate Mitsui. How is that deal integral to your growth plans? Yes, we signed a strategic alliance with Mitsui and it really was quite a coup that I don’t think was fully appreciated on the islands at the time. It allows us to promote our range of services to Mitsui’s portfolio of infrastructural assets. That’s been massive for us. Mitsui is a majority owner of the world’s largest provider of floating platform solutions for oil and gas. It’s a business that turned over $57bn last year. It’s a business that owns eight power stations. It owns the world’s biggest production storage and offloading company, MODEC. So it’s an enormous buyer of our product. And the ability for a tiny company like ours to have the clout of a $57bnturnover company behind us is just phenomenal. It’s a major global player and we hope it can be enticed to be a bigger shareholder in SRJ going forward.
Interview one of the top people in the world for vibration fatigue analysis. That’s something the IPO has allowed us to do – bring in a world-class team. And it’s because of that team that we have been able to adapt our offering to one where we can manage clients’ operations on a consultancy basis supported by digital developments. From where have you assembled that team – and how important is it to be bringing in people from other big-name businesses? It’s really important to us. We work in an industry where reputations and backgrounds are important and we’ve worked hard to assemble a team with amazing credentials. I already mentioned Paul Eastwood, who spent 17 years at global energy services giant Petrofac. One of our senior consultants, David Capeling, also spent eight and a half years with Petrofac. Bill Skailes is one of the world’s best-known experts in vibration fatigue. Our financial management comes from a former senior audit manager at PwC in Jersey. Roger Smith is our Managing Director of Middle East and America – and he’s built and sold multiple companies in the industry, including Bureau Veritas and Petrofac. And Rob Pinchbeck, our Chairman, brings more than 40 years of international experience, principally from BP and Petrofac. So you can see the quality of the team and why that will open doors for us. What other plans do you have for growth, and in which regions do you expect to see a lot of activity over the next 12 months? One of the key markets and locations to be present in this year will be Houston, North America. And Brazil is probably the most important territory. They’re the two most important for us development-wise, given that we’re already present in the Middle East, Australia and Europe. They’re the key geographies. We don’t have an objective to make acquisitions – but if there are acquisitions that are clearly beneficial, or partnerships to be made in areas we currently aren’t active, then there may be logic to such activity. Do you see yourselves diversifying out of your core oil and gas sector? Is that part of your longer-term vision? Yes, that was part of the logic of coming to Australia – that we’re not just chasing oil and gas revenue. We’ve already delivered revenues this year in mineral processing, mining and fertiliser production. We need to progress outside of the sector. Let’s remember, everyone is obsessed with the ending of the oil and gas market. Lots of the vessels, the floating production storage and offloading units on these gas fields have another 40 years to run on their
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FACT FILE Name: Alex Wood Position: CEO, SRJ Technologies Home: Jersey Studied: Bournemouth University Family: Married, with two young children Pets: A chocolate Labrador called Rudy Other interests: “We’re helping develop some acts on the islands, including the artist Bluntroller, using our connections and contacts to help them develop and gain some exposure.”
leases. Everyone needs to get away from coal. There is a general energy transition to occur, moving to the cleaner fossil fuels – that’s probably a 40- to 50-year journey at the moment. So, we’re already generating revenues outside of oil and gas. And Australia has been a great proving ground to get into aluminium production, too. You touched on hoping that Jersey remains competitive in terms of the cost of doing businesses. But how important do you see the Channel Islands being to businesses like yours going forward? The Channel Islands are a grand place to live and it was a very attractive opportunity to come here – due to the funding available and the great help and support we found in terms of investment and everything else. Moving forward, it’s important the islands protect that offering. We all understand the requirements for due
diligence and anti-money laundering and so on, but the islands have to resist an overly eager acceptance of regulation. If you’re not careful, it pushes the requirements for legal and financial services really high. The problem with that is it stifles innovation in other sectors. We opened a bank account in Australia in two weeks and it cost very little. If I look at the cost of my staff opening a bank account in the islands, and the fact that we need an independent sign-off from a lawyer and a trust company involved – it becomes costly. So, I think it’s really important that we protect the structures that allow businesses to establish themselves in the islands and to innovate. Finally, what other interests do you have in the Channel Islands? We have some fingers in some other pies. I own part of a business called AVI – which was responsible for building that weirdlooking office that sits at La Collette in front of the Sunseeker shed. We’re working with a young artist, Bluntroller, to help him raise his profile and progress his career. We previously bought part of freight firm Huelin Renouf, buying the DSV business when it went down, but we basically got squeezed out of the market and ended up losing money and giving it away. So, it’s not all been plain sailing. We had our fingers burnt a little by trying to run before we could walk as a new business. But we’ve had great success in other areas. We love the islands, we’re trying to do interesting things, we’re trying to add a bit of value. We like being here and we want to keep doing interesting things. n
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Interview UNITED KINGDOM | GUERNSEY | JERSEY | LUXEMBOURG | CYPRUS | SINGAPORE | AUSTRALIA
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Stronger together Marc Nightingale provides an update on the UBS Optimus Foundation Covid-19 Response Fund TWENTY YEARS AGO, we established the UBS Optimus Foundation to partner with our clients and employees and help them to improve the lives of the most vulnerable around the world.
COLLABORATIVE EFFORT When the Covid-19 pandemic struck, we mounted a comprehensive response across UBS around the world: supporting small businesses to access emergency funds so they could stay afloat; providing emergency grants to local grassroots organisations to address food insecurity, poverty and isolation in communities in which we have a business presence; and launching the UBS Optimus Foundation Covid-19 Response Fund to mobilise funding for trusted partners working in the world’s most challenging contexts. Though Covid-19 has affected everyone worldwide, it hasn’t done so equally. In higher income countries with advanced healthcare, sanitation and social support systems, economic and racial disparities exacerbated the virus’s impacts. Low- and middle-income countries, which lacked this infrastructure and support, faced significant struggles with the inability to socially distance or work or learn remotely. The challenges that have been faced by these countries not only threaten immediate health, but they also threaten to undo decades of hard-won progress in healthcare, education and protection.
Médecins Sans Frontières (MSF) – aka Doctors Without Borders – has been a partner of ours for years. We partnered with them in combatting the 2014 Ebola outbreak. In the last few months, MSF has been making sure that medical teams in more than 70 countries are able to provide lifesaving care and safely manage potential Covid-19 patients. Their much-needed work takes pressure off overstretched health facilities and helps care for vulnerable populations. 2. Offering support for our partners who are implementing impactful programmes at a local level throughout the world. Grants to these partners are allowing
philanthropy at scale is best placed to catalyse profound change
them to adapt and implement Covid-19 preparedness, response and recovery efforts. Plus, it’s helping them safeguard the progress they’ve made in recent years. The Citizens Foundation (TCF) is the largest network of independently operated low-cost schools in Pakistan. TCF hires only female teachers so that parents will send girls to school. And TCF faculty has experience with community outreach to make sure communities understand the value of an education. In response to Covid-19, TCF is protecting continuity of learning through teleschool (on TV and YouTube), activity books, learning packs and community outreach. 3. Helping to fill gaps for low-cost prevention and treatment solutions. Support for organisations providing critical equipment and training is creating capacity for Covid-19 response and building stronger health systems for the future. Lifebox is a pioneer in creating innovative cross-sector partnerships for safe surgery. Lifebox brings technology, design, manufacturing, distribution and local providers together for effective end-user adapted results. In response to Covid-19, Lifebox is rapidly procuring low-cost pulse oximeters to be deployed to hotspots and leveraging its distribution network to
FROM ALL ANGLES When the pandemic started, we knew we needed to address the immediate crisis while also helping our existing partners maintain their progress in improving health, education and protection. So, we have been funding programmes based on a three-pronged strategy: 1. Providing acute emergency relief for the most vulnerable. That’s why we’re supporting global organisations with emergency response capacity and experience to intervene based on identified on-the-ground needs.
24 march/april 2021
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Case Study How do you reach children who don’t have access to the internet?
put the devices in the hands of healthcare workers managing acute respiratory illnesses like Covid-19.
PHILANTHROPY AT SCALE We believe that philanthropy at scale is best placed to catalyse profound change required to meet these goals. By investing with fellow philanthropists, and with UBS often matching funding, donations are leveraged to have an outsized impact. Together we’ve raised more than $30m supporting 48 partners working in 35 countries to achieve: Health • Nearly 60,000 health workers trained • 175 health facilities with improved quality of care • More than 13 million units of personal protective equipment procured and distributed to frontline health workers Education • More than 10 million children reached with remote learning models • Over 13,000 education professionals trained or supported Protection • 7,195 families with children supported with resources • Over 5,500 children living in institutions kept safe and protected • More than 70,000 individuals vulnerable to human trafficking supported. The global rollout of a vaccine programme has provided the world with some muchneeded good news. However, the journey back to a degree of normality for everyone is still going to be a difficult one and the effects of the pandemic are likely to continue long into the future. At UBS, we will continue to use the power of collective philanthropy to fund global projects to support and improve the lives of those most affected. n
Quality for every student We’ve been partnering with Rising Academies since they started in Sierra Leone in 2014 where, early on, they had the opportunity to provide emergency education to children kept out of school by the Ebola epidemic. By using an engaging curriculum, intensive teacher coaching and actionable data, Rising Academies helps teachers and school leaders bring quality to every classroom. Innovating through low-cost private schools they own and operate, Rising Academies then takes those learnings to governments and other partners to improve the quality of their schools at scale. They have grown to serve 50,000 students across more than 160 schools in Sierra Leone, Liberia and Ghana. Scaling over the air When schools closed across Liberia in March, radio emerged as the only platform that could bring lessons to students at scale. In Liberia and Sierra Leone, only one out of every eight individuals have access to the internet, so online learning is impossible. But radio reaches about 70% of the population. We quickly offered support to help them launch their distance-learning solution. Rising on Air redesigned their proven curriculum for delivery via radio and SMS. Rising on Air offers a free 20-week programme of lessons in English, French and Arabic. Pre-recorded audio and scripts can be adapted, modified, translated or recorded in appropriate accents by partners on the ground. Safety messages regarding Covid-19 are woven into the lessons. In addition, wraparound content is delivered via SMS and phone. Highlights of the initiative • More than 10 million children already reached • 35 organisations partnering • 25 countries reached • Five national ministries of education participating – Chad, Gambia, Guinea, Liberia, Sierra Leone
FURTHER INFORMATION
If you would like more information on the UBS Optimus Foundation, please contact: Marc Nightingale, Client Advisor UBS AG, Jersey Branch 1, IFC St Helier Jersey JE2 3BX Tel: 01534 701173 Email: marc.nightingale@ubs.com
UBS AG, Jersey Branch is authorised and regulated by the Jersey Financial Services Commission for the conduct of banking, funds and investment business. UBS AG, Jersey Branch is a branch of UBS AG (a public company limited by shares, incorporated in Switzerland whose registered offices are at Aeschenvorstadt 1, CH-4051, Basel and Bahnhofstrasse 45, CH-8001 Zurich) with its principal place of business at 1 IFC, St Helier, Jersey JE2 3BX. Terms and Conditions are available upon request. © UBS 2021. All rights reserved. www.ubs.com/jersey
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march/april 2021 25
Brexit
Following years of conjecture and concern, the post-Brexit trade deal between the UK and the EU arrived at the end of last year with little for the Channel Islands to worry about – in fact, plenty for them to cheer Words: Steve Falla
26 march/april 2021
AS THE BREXIT trade deal was finally hammered out by the UK and the EU at the 11th hour just before Christmas, Channel Islands politicians and finance industry professionals keenly scoured the 1,246-page agreement to ensure that it contained no unwelcome surprises. For the islands, dependent as they are on financial services, the elephant in the room was the lack of reference in the EU-UK Trade and Cooperation Agreement (TCA) to the finance sector. A financial services memorandum of understanding was expected to follow in March. In many respects, the finance community on the islands is relaxed about that. But there are areas of ongoing uncertainty. Will the MoU force changes to the demeanour and behaviour of the City of London, with knock-on effects for the islands? And will MEPs posturing on blacklisting overseas territories with perceived competitive zero-tax regimes find traction with the European Council? Despite these concerns, and with the characteristic optimism borne out of more than 60 years of success, the
islands’ financial services industry remains pragmatic. It prefers to see opportunities arising from the changes rather than fretting about the challenges – many of which have been seen off before. It’s not complacent, but positive. Moreover, mergers and acquisitions, corporate finance structuring, investment funds, insurance and private wealth are all areas in which the islands could reap benefits from their status in the new financial world. Industry practitioners have cautiously welcomed the outcome to date.
PROTOCOL 3 MOMENT Gordon Dawes, Partner at Mourant, says: “It’s almost as if the UK has caught up with the Channel Islands in terms of its relationship with the EU.” Referring to the arrangement by which the Channel Islands’ relationship with the EU is defined, he adds: “The UK has now had its Protocol 3 moment. It’s just the bare bones of a Brexit deal, and there’s scope for any amount of agreement from this point on. It’s the beginning of the story, not the end – but a good beginning, in my view.”
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Brexit
bonanza? relationship both with the UK and the EU, where there is no longer a so-called ‘friend in the room’. Tony Mancini, Head of Tax at KPMG in Guernsey, says: “I get the impression we’ve probably drawn closer to the UK and built relationships that, over the last 10 years, might have been a bit fractured. “Because we’ve tried to play the good guy in
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Also upbeat is James Gaudin, Managing Partner at Appleby in Jersey. “The UK customs union put in place in 2019 dealt with a lot of the issues we might have faced,” he says. “The position of the islands and their status has simply been reconfirmed by the transition agreement. “The risk that the sovereignty of the islands was going to be challenged has fallen away in favour of a more structured analysis of our regulatory and tax regimes. Having that restated is no bad thing, providing stability from an economic perspective, political perspective and regulatory perspective.” There’s consensus that the TCA has, in some ways, strengthened the relationship between the islands and the UK. As Dawes puts it: “We’re in the same boat.” Although this may be true, Guernsey and Jersey now need to place equal prominence on their
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Boris Johnson and European Commission president Ursula von der Leyen in Brussels in December
our relationships and because of the way we’ve worked with them over Brexit, it has helped to mend those fences a bit more. “Now, we have to go it alone to a certain extent. It makes the decision that Guernsey and Jersey took together to set up the Brussels office a good move. The role of the Brussels office will be even more important. “We’ve really got to work hard at building relationships and trying to find other friends in Europe. There are member states that will be well disposed towards us but none of them will be of the size of the UK, and with the weight that it carried.” Gaudin says: “Guernsey and Jersey are independent members of the World Trade Organization (WTO) and this notion of a greater degree of international personality is going to be a key theme across the piece. “The status quo is really what everyone’s looking for. The devil is always in the detail and the new transitional arrangements, but generally people want to preserve the relationships that exist.”
CITY CHALLENGES A factor that’s yet to fully play out is the transition from the UK being the islands’ ally in Brussels to the City of London being a potential competitor to the Channel Islands. Dawes explains: “Guernsey and Jersey survived on whatever was different in the
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margins. We are both third countries now. The UK is its own regulatory master and can compete in that way. It has the freer hand that we have had all this time. Our fortunes go hand in hand with those of the City, but we are looking over our shoulder a bit more now.” Mark Savage, Tax Director, BDO Guernsey, adds: “The biggest challenge now is if the City of London tries to reinvent itself – keeping pace with that and adapting accordingly. The City is going to have to do something to retain its strength as the centre of European financial services, because Frankfurt and Paris are going to be hopping up and down.” Indeed, in February, Amsterdam overtook London as Europe’s largest share-trading hub in what many called a symbolic blow to the City. Despite that challenge, for Gaudin there are “lots of reasons to be cheerful”. There’s dry powder in the market, which some say could lead to an investment fund boom; public and private M&A business is active; there’s optimism around real estate; and there’s been an increase in structured finance deals. A cloud on the horizon has already emerged in the shape of a vote by MEPs to place British Overseas Territories on a new tax haven blacklist. However, even that seems something of an empty threat.
We’ve got to work hard at building relationships and trying to find other friends in Europe
Ian Crosby, Head of Group Risk and Chairman, Stonehage Fleming, Jersey, points out: “It’s really important to note that the whole matter of 0% tax was an EU Parliament threat, rather than something that came from the Council of Europe (which sets the criteria for EU blacklisting). “There’s a lot of water to flow before we get to this and there’s no cause for panic. But you’ve got to read the temperature and watch this one carefully. I’m confident that the islands have it at the top of their agenda and are watching carefully.”
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Alexandros Michailidis / Shutterstock.com
Brexit
Brexit
Dawes adds: “The debate is one-sided and fails to take into account tax-neutral conduits of capital for cross-border investment. Also, there are low tax regimes within the EU, which are often overlooked, including in the Netherlands. There are double standards in the EU itself and no one proposes blacklisting EU states operating competitive tax regimes.” “It’s hard to envisage a situation, bearing in mind our compliance with the existing agreements and arrangements in place across the European Union and in other member states, where you could seek to punish or prohibit certain types of business in one jurisdiction and not another,” says Gaudin.
WTO WIN One undoubted benefit of the TCA for the islands is their new membership of the WTO, which Crosby says is long overdue. “We’ve been trying to get that for 20 years,” he says. “It provides a base case for us, gives us access to global base rules of trade, which is not just in goods, it’s also in services across the gambit. “I think that’s a win and while that membership is a helpful backstop, negotiated relationships and agreements will always have better outcomes. The efforts that the governments of Jersey and Guernsey and the UK are making around that, particularly in regard to the financial services part, are really important.” Mancini says: “It gives us a legal mechanism to start to challenge some of
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We want to be famous for being good rather than famous for being tax-efficient
the discriminatory measures that some jurisdictions have against us. It gives us something in our armoury to be able to defend ourselves.” And what of the imminent financial services memorandum of understanding? Joe Moynihan, Chief Executive Officer of Jersey Finance says: “For financial services, Jersey has access to the EU market through bilateral agreements and arrangements with member states, which are independent from the UK’s relationship with the EU.” Crosby is bullish: “I’m hoping to see a good, settled negotiation around equivalence, passporting and access to each other’s territories.” Meanwhile, Savage recognises that the way in which the City responds to the
MoU could be pivotal for the islands. “The MoU will dictate to some degree the way that London moves and, because of our relationship with the City, we are going to have to adapt. Depending on where London chooses to position itself, that will drive a direction for us.” Overall, the view is that the islands have everything to play for, and that they have a greater degree of independence and international personality. Savage sums it up: “There’s plenty we can do. For example, we’ve got quicker access to the regulators and historically we’ve been good at moving quickly. “We want to be famous for being good rather than famous for being tax-efficient. Our opportunity is to be that kind of thought leader.” n
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Advertising feature
Digitising the identity verification process: critical for business success Will Covid-19 present a watershed moment for digitisation – creating a far greater shift to digital channels, asks Lee Bosio, Managing Director, Vaiie EVEN BEFORE THE global pandemic, digital identity verification had already started to become an integral part of everyday life. Covid-19 has accelerated the need for businesses and governments worldwide to rethink their approach and digitise their identity verification process to facilitate day-to-day interactions and offer an effective and efficient customer experience remotely – a component critical to future business success in a digital age.
LIMITATIONS OF MANUAL VERIFICATION In recent years, checking identity documents manually has raised questions about validity and efficiency. How do compliance teams really know that a document is genuine, or whether it may open up their business to fraud down the line? Are the individual employees tasked to deal with these documents actually equipped to tell the difference between a counterfeit and the real thing? Even with sufficient and ongoing training, it’s one thing to spot a fake document in the office, but another entirely to do so working remotely with a lack of face-to-face interaction. With an increasing number of domestic and international identity documents to check, potentially at large scale and within tight timeframes, the task is becoming even more arduous, and this pressure increases the risk of human error.
DIGITAL ID VERIFICATION There is a wide range of applications of digital ID verification in the financial services sector, from account opening and meeting CDD requirements, to identity authentication as an individual carries out financial transactions. By using a secure, compliant verification tool, businesses can: • Record the session so it can be tracked and saved for reporting/audit needs
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• Analyse a selfie video for biometrics and match against the provided passport • Reduce identity fraud by performing liveness checks • Check all passport details against established databases and scan the RFID chip within to verify authenticity • Once approved, send out a contract/ terms and conditions via email to the customer with an e-IDAS qualified digital signature that uses a one-time password for validation • Once verified and validated online, enable online customer onboarding to continue.
CUSTOMER EXPECTATIONS Not only can digital ID verification enhance risk management, including through streamlined KYC and AML processes, it can be a chance to improve customer experience and boost efficiency. With a rapid number of services moving online and digital demands from customers increasing, it is paramount that any digital programme implemented into business processes provides a best-in-class customer experience with low friction. The user experience must put customers first so they have the best possible chance of passing through the verification process first time, whatever device they are using. If the experience does not meet customer expectation, it can be an easy way to lose customers, which can reflect negatively on an organisation.
with the majority of that business being classified as higher risk by providers. Finding a suitable platform that can support complex customer onboardings remotely, with automated verification and screening, syncing with core systems and creating a real competitive advantage for the provider, can be a challenging and complex exercise. Choosing a provider who understands the financial services industry in Jersey and internationally is key. Covid-19 may be a watershed moment for digitisation, causing a greater shift to digital channels as customers accept and embrace a new normal. Whether businesses are considering ramping up remote onboarding to meet new demand or moving existing services online, a robust identity verification solution is essential to customer adoption. Applying smart processes now will pay dividends when the pandemic is behind us, and will enable your business to remain competitive as we enter a new age of remote business. n As Managing Director of Vaiie, Lee Bosio is responsible for the creation and implementation of digital strategies to seize the current growth opportunities in the management of regulatory processes within the financial services industry.
WATERSHED MOMENT FOR DIGITISATION Jersey’s diverse financial services client base has always been mostly off-island, making the prominence of a digital ID verification solution topical, particularly today. International customers seeking to use Jersey financial services providers and products want to do so easily and efficiently, often away from timeconsuming, paper-rich processes, but
FIND OUT MORE To discuss the benefits of Vaiie’s Identify solution, contact: Email: hello@vaiie.com Tel: +44 1534 616760 Web: www.vaiie.com/regtech/identify
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Wealth advisory
The birth of the modern-day wealth adviser As wealth holders crave a more holistic understanding of their needs, and as trust in governments and institutions falls, demand is growing for a new model of wealth adviser. So what do wealth holders really want from them, and how can advisers equip themselves? “I HAD A conversation with a client Words: Sophie McCarthy
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recently, who explained that what she really needed was an educated best friend,” says Arabella Murphy, Founding Director of Propitious, a strategic consultant and mediator for wealthy families and individuals. “The woman in question is going through a divorce. She already has a solicitor and the couple are going through mediation. But what she wanted was someone who could help her navigate the process and make sense
of the offers that were being put in front of her. Did they really fit with what she had in her head for the future? She wanted to fully understand if she would be able to live in the sort of house she wanted, and have the right amount of time with their children. “Importantly, she also wanted reassurance that what she was getting was an honourable result for all – she didn’t want to beat up her ex-husband to the last penny.” This dramatically different way of working – based on two parties acting
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as partners, as opposed to a traditional client/adviser relationship – is becoming increasingly popular. And it demonstrates another shift that’s currently under way – whereby wealth holders arm themselves not just with one individual who is expected to perform multiple roles, but with several specialists offering different inputs. Russell Clark, Managing Partner at Carey Olsen, agrees that we are seeing a change to the role of the wealth adviser. What clients are looking for hasn’t actually changed, he says, but in the past there’s been a disconnect between client requirements and the support they’ve received. “Clients are, and always have been, looking for a trusted adviser, somebody honest and well connected,” he says. “Crucially, they are looking for someone whose judgement they have faith in.” Independence is also key to Clark. “The wealth adviser who is not independent will struggle,” he continues. “There will always
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be a role for the services they provide but the idea that any one individual will be the go-to person for a private, sophisticated client is dated. “You may be the person to whom the trusted adviser turns, once they have determined that the product you are selling is what the client needs. But anyone who pretends that they know everything about everything, that’s all they are doing – pretending. It’s impossible.
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Wealth advisory
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Wealth advisory “For me, the future of this work is about building a network of like-minded people, who think like you and work like you, and who are experts in their respective areas. So, when you have a client who comes to you with a problem you can’t solve with your own knowledge, product or skillset, you know who to go to and you can introduce your client to that person. “The best advice you can give is: ‘I can’t help you, but I know someone who can’, rather than trying to sell a product or a service that isn’t what someone needs.” This might mean arranging an introduction and standing back to allow a relationship to develop between the clients and the third party. But that shouldn’t be a threat. “You win kudos that way,” he says. Clark and Murphy say today’s client advisers need to be more akin to general practitioners, calling on specialist advice as they need it. But where has this change in desire and direction come from? Claire Machin, Group Director, Head of Private Wealth, at Suntera Global, believes the shift is being driven by instability and uncertainty in countries around the world. This is causing high-net-worth individuals to worry about the future of their wealth – and a single adviser’s ability to navigate them through it. “Clients want to be able to rely on their advisers for reassurance and an element of safety. Advisers, meanwhile, are beginning to understand that clients will require a more bespoke approach in order to accommodate and compensate for this ever-changing landscape. “This was acutely highlighted during the pandemic, which is still affecting our lives and will continue to do so for some time.” Robert Broughton, Senior Client Adviser at UBS Jersey, largely agrees, but adds that there is a “bigger picture” at play here, too. “What we’re seeing is an inescapable structural shift in the way that our economy operates,” he says. “This change is part of the fourth industrial revolution – the automation of traditional
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Anyone who pretends they know everything about everything… that’s all they are doing – pretending
manufacturing and industrial practices using modern, smart technology. “Consider the current pandemic. This is an example of an extraordinarily disruptive event, but it is an overture to another, greater disruption. Industrial revolutions are, as the name suggests, revolutionary. Society is transformed in these periods of economic upheaval.”
BRAVE NEW WORLD If this is the case, then how might advisers prepare themselves for this brave new world? “It’s fair to say that advisers are expected to have a broader knowledge base than was the case when portfolios were dominated by traditional asset classes such as equities, bonds and cash,” says Broughton. What is required, Broughton says, are people who can find long-term opportunities in trends that have been accelerated by the pandemic or the fourth industrial revolution. Ones that can help power a renewable future, and that tackle problems faced by us all – a more indebted and unequal world, but one still concerned by sustainability.
Advisers should, according to Broughton, be able to direct clients on how they might benefit from such trends, and indeed the investment vehicles that will enable them to access these themes. For Machin, however, education is only part of the equation. “Keeping on top of current affairs and global economics goes without saying,” she says, “but practical exposure to these issues and gaining experience from peers and other advisers, as well as living through client situations and learning from them, are also key. “Advisers who have had experience within different institutions will often have the edge that is required these days. “Consideration also needs to be given to multi-generational families who are potentially living in different jurisdictions,” she continues. “As such, wealth advisers will need to take special care to keep up to speed with international changes, to ensure that advice meets these needs in the present and in the future.” Murphy, too, draws on the complex nature of multi-jurisdictional families and the part that their financial affairs might have played in this movement. She believes that for those with “lots of things going on in lots of different countries”, a desire to unpick their intricate spider’s-web-like structures is tempting. Simplicity appears to be a theme that emerges time and time again around this topic. The need for bespoke, as opposed to one-size-fits-all advice is evident. A finger on the pulse is also a prerequisite, as is a desire to understand and solve newly emerging problems and to attempt to unearth the opportunity within them. But it’s this bold, clientcentric approach that is transforming the way advisers do business and in turn how wealth holders respond to it. Murphy concludes that the real difference is “knowing that you are sitting completely on the same side as your client, and that nothing is inhibiting that”. n
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Advertising feature
Registering a foreign power of attorney in Jersey If a person who is resident outside Jersey holds assets in Jersey, they may wish to ensure that they have made adequate provision to appoint someone who can manage those assets in the event that they lose capacity to do this themselves. Often, these considerations form part of a person’s wider estate planning. By Victoria Grogan, Head of Wills and Probate at Ogier
THERE IS NO facility at present for nonJersey residents to put a local, Jersey lasting power of attorney in place to cover their Jersey-based assets. Instead, the Jersey Court will recognise the foreign power of attorney (or equivalent document, such as a guardianship or deputy order) provided that the foreign power of attorney is registered with the Royal Court of Jersey. Once registered, the attorney appointed under the foreign document has the legal authority to deal with the assets in Jersey. This is confirmed by way of a formal Act of Court, which is issued by the Royal Court of Jersey and is appended to the foreign lasting power of attorney document. The application to register a foreign power of attorney is straightforward and is made in chambers by way of an application known as a representation. This application must be made by a Jersey-qualified lawyer and the following documents must be provided to the Royal Court of Jersey: 1. The original (registered) foreign power of attorney (or equivalent document) or a copy of this document that has been officially sealed and certified by the court in the foreign jurisdiction that registered the original. If it is usual in the country of issue for a notary to authenticate the foreign power of attorney document, then the notary can provide an official copy for use in Jersey. If the original document is an English lasting power of attorney, then the Royal Court of
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Jersey will accept a copy of the registered document that is certified by a solicitor. 2. Confirmation of the current value of the asset or assets in Jersey. A bank statement or share valuation or similar will be sufficient. 3. Identification documents from both the donor and the attorney, which are properly certified in line with our certificate guidelines. 4. A Treasury receipt to the value of £120 representing the stamp duty fee charged by the Royal Court of Jersey to register this type of document in Jersey. If the foreign power of attorney (or equivalent) does not need to be formally registered in the country of origin in order for it to be officially valid and utilised, then we will also require an affidavit from a lawyer in that jurisdiction which confirms this.
Once the Jersey Act of Court is issued, it can be lodged with the Jersey asset holder, who can then validly accept instructions from the attorney. In the event that the Jersey asset holder accepts instructions from the attorney appointed under a foreign power of attorney, without that document first being registered in Jersey, then they are at greater risk from the foreign document, or the instructions given by the attorney, being fraudulent. n
FIND OUT MORE
For more information on this process, please contact Ogier’s wills, probate and estate planning team at wills@ogier.com
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Relationship management
Virtual handshakes
The pandemic has overhauled the ways in which wealth managers liaise with their clients. But what has the impact been on those relationships? and which of these new-found ways of managing relationships will stay post-Covid?
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Relationship management
Words: David Craik
trend that has arisen is that interactions have become shorter. “Doing a number of video calls every day can be very intense and tiring for managers and clients alike. You are making eye contact during the meeting without breaking it,” says Bosman. “We have cut meetings into bite-size chunks, which is actually enabling us to go deeper and often to glean more information.” Danielle McIver, Vice-Chair of ICSA: the Chartered Governance Institute’s Guernsey Branch, has also picked up on this trend. “Virtual meetings are much more focused than face to face,” she says. “There is less general chat and people tend to stick to the agenda. Generally, the meetings are shorter as a result.”
BETTER ATTENDANCE They also tend to be better attended than pre-pandemic physical meetings. RBC has identified that with more time spent at home during lockdown, spouses and children who may not have been present in wealth management discussions before are becoming far more engaged. Clients either want to have their spouse present, or at least to state their spouse’s priorities and objectives as equally important in decision-making. Previously, relationship managers had to delve much deeper for this sort of information. “Quite often a husband and wife will both be on the call, something we found hard to organise face to face. That was either down to the logistics of getting them
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EVERYONE IS A homebody now. Even in regions that have been less affected by lockdown and even for people who have continued to work in offices, Covid-19 has steered us online – to shopping more online, using more delivery services and communicating through conference calls and digital tech. For many, digital services such as Zoom, Microsoft Teams and Skype have become a part of everyday life. But what does it all mean for the relationship between wealth managers, other financial services professionals and their clients? As the pandemic emerged, many firms moved quickly to shift the focus of their client contact from face-to-face meetings or over the telephone, and to remote video conferencing, explains Annabel Bosman, Head of Relationship Management for RBC Wealth Management International. “RBC was moving toward more of a remote working model before the pandemic and so when lockdown came, we were soon up and running with digital communications systems,” she says. “That helped us be very proactive in ensuring that clients also adapted quickly to the new virtual world.” Going fully digital has created more opportunities to enhance client understanding, but it has also delivered challenges, such as reading body language on the small screen. “You need to be more focused on the subtle cues that perhaps you wouldn’t notice in a face-to-face meeting,” explains Katherine Waller, Managing Director, Relationship Manager at RBC Wealth Management. “Maybe a client looks to their left when they are being thoughtful or picks up their phone during one part of the conversation. It lets you say, ‘Okay. Is there something else you would like to explore that you feel is more important?’” There is also more consideration given to the words clients use – how often they use them and what they mean in a sentence structure. “Understanding verbal cues gives you insight into how people are feeling and thinking,” Waller explains. “We have been running training sessions with our managers on how to best identify these communication differences and respond.” Given the unique nature of digital communications in the pandemic, another
Virtual meetings are much more focused than face to face. people tend to stick to the agenda, so meetings are shorter as a result
Relationship management
both in the same room at the same time or because there is a reticence among family members to talk about money,” Bosman explains. “Now it is much easier. We’ve even encouraged parents to invite their children on the calls. It has brought to the fore topics that were not being discussed before by the whole family.” That includes succession planning and trusts, as well as life insurance and wills. “People are thinking more about their own mortality now,” says Bosman. “When we speak with our clients, we lead with what is important to their family’s future. We ensure that is protected before we start thinking about investments.” Karen O’Hanlon, Senior Director, Private Client Services at JTC in Jersey, believes clients are ready for this new
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approach because they have ‘stopped the hamster wheel’. “Nobody is dashing from A to C like they were any more,” she says. “It has led to more ‘What if?’ conversations, such as whether they have the necessary wills in place and if all their global assets have been protected. A lot of the chats have been over family governance, allowing the younger generations to speak freely about how they want assets invested, such as in tech and bioscience. We are also seeing more discussion around philanthropy.”
HANDLING DIVORCE Another ‘difficult’ topic to gain more attention is that of divorce. “The pandemic has sadly shone a magnifying glass over relationships, and we’ve had to ensure that
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Relationship management
structures are in place to facilitate that,” O’Hanlon says. That can have a bigger emotional impact for a manager than before the crisis, because client relationships have become much more personal. “Every Zoom call, you get to see what your client’s home looks like” O’Hanlon says. “The gap between you has closed. We are all going through this Covid-19 nightmare together.” Waller agrees that mutual fear and uncertainty has led to more engagement and empathy. “You are not in a controlled environment any more. Children, pets, parents or postmen can appear at any time on screen, and it is interesting to see how people react,” she says. “Maybe a child comes in and overhears their parents talking to us. It’s clear by their response that they haven’t told the child about the value of the family wealth. That helps me as a manager in building bridges and finding common ground much quicker than before.” One area where going fully digital has not helped, however, is with onboarding new clients. “[New clients] want to press the flesh and look you in the eye. They know that when choosing a trustee, they are forging a lifetime relationship,” says O’Hanlon. “From our perspective we want to know how genuine the client is. Their requirements may be complex, and you need to get comfortable with their story. You can’t replicate the rapport, warmth and understanding you get from a face-to-face meeting.”
HERE TO STAY? So, what can we expect as the cavalry of vaccines and better testing arrive? What parts, if any, of this new virtual world will remain post-pandemic? What seems clear is that increased remote working at least is here to stay. A recent Institute of Directors survey found that 74% of company directors will be keeping increased home working after the pandemic. McIver says: “There are likely to be more virtual catch-ups with existing clients and occasional face-to-face meetings. But with new clients, nothing beats that handshake at a first meeting to build the initial rapport. Without the familiarity, strategic discussions with clients and boards can be cold or perceived as sales-like, and may not be as well received.” McIver also believes that virtual fund management events will be consigned to the past. “Networking is so much harder
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We’ve encouraged parents to invite their children on calls. It’s brought to the fore topics that were not being discussed before by the whole family
to do at an online event as you don’t have those coffee or lunch breaks to mingle and find new business,” she says. RBC believes there will be a blend of different methods, including face-to-face meetings, phone and video calls. That is because of practical advantages, such as the increased use and acceptance of digital signatures and electronic identification and verification. But it’s also because managers don’t want to let go of the relationship benefits from going virtual. “The closer engagement will continue to flourish,” says Waller. “When you’ve seen each other with children hanging off the side of the chair, it is difficult to go back. So, I will still have the odd video call at home with existing clients and propose that with new clients we also go virtual for one of our first meetings. Relationships have become more honest during the pandemic.” Indeed, RBC has found that clients have been asking more personal questions of the managers, including how they are coping with the crisis both at home and work. “Their conversations are much softer,” explains Waller. “They are also more interested in how RBC is contributing to the community and whether our ethical and cultural values match. “We are emphasising this much more in our client meetings because there is nothing more important than how we are helping our own staff and society during these difficult times.” n
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ESG investing
Greening the family tree Covid-19 has brought many wealth holders closer to the next generation – and that generation’s demand for ethical and socially responsible investing is further heightening the already rising demand for ESG products. And the industry is responding at pace
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ESG investing
Words: David Craik THERE HAVEN’T BEEN many silver linings to emerge from the
Covid-19 pandemic. But despite the stresses and strains of social distancing, one positive to emerge from the past year has been the strengthening of bonds across family generations, as sons, daughters, mum, dads and grandparents have come together to face up to questions of longevity and loss. While that’s been the case for families of all types, in the case of high-net-worth families, it has also had an impact on their wealth management strategies. “Very rarely are we given an opportunity to stop and think. Family founders have felt vulnerable in this time and the conversations around power of attorney, estate planning and wills that they had been postponing are now top of the list,” says Savvas Michael Mallas, Director, Family Office, at Stonehage Fleming in Jersey. “Engagement with the next generation has accelerated during the pandemic and it has led to improved and healthier family relationships.” This trend is timely – and crucial, given that, according to the UBS Global Family Office Report 2020, a third of the next generation admit they are either only slightly or not at all engaged with family wealth. “Any engagement with the next generation is driven by succession planning and the transfer of intergenerational wealth,” Mallas says. “It is about incorporating the next generation into family values and businesses and trying to identify roles for family members as they go through their personal development. “We are identifying the natural directions that family members are heading towards, particularly the next generation, and understanding their core purpose.”
According to Andy Sloan, Deputy Chief Executive, Strategy, at Guernsey Finance, this increased involvement of next-generation ideas is driving interest and investment in environmental, social and governance (ESG) issues. “Covid has brought the issue of ESG home,” he says. “It is a mindset driven by the young, and families are increasingly looking for service providers who share it.” That presents an opportunity for the industry, given that research shows around 70% of next-generation wealth holders would switch wealth manager given the opportunity. Those who can show they are ESG-ready stand to prosper. Stonehage Fleming, for one, has responded to more impactfocused investing since the start of the pandemic. “Some families retreated to protect their capital, but others saw communities struggling in the early days of the crisis and resolved to do something,” Mallas says. “That included putting capital towards SMEs, the homeless and the research and development of Covid vaccines.” He concedes this trend may have developed without more next-generation engagement, but it would not have been as broad. “There is a greater sense of urgency,” he says. “We have deployed more capital into ESG over the past 12 months than ever before. We are seeing more families deviate from their core intellectual property and go into unfamiliar areas. “The scoping of initiatives is much broader for the next generation. They are more attuned to general impact investing that mirrors their own lives, such as plant-based foods or ag-tech. They are more conscious of how they live, travel and interact with their communities.”
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ESG FRONT AND CENTRE
ESG investing
BALANCING ACT Mark Biddlecombe, In House Legal Counsel at PraxisIFM Trust, argues that this more intense focus on investments raises questions around balancing ethical considerations with the fiduciary duties of a trustee. “For trusts established under Jersey and Guernsey law, the starting point is their statutory obligation to preserve and enhance the value of the trust property,” Biddlecombe says.
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“Once, it was seen as contrary to your fiduciary duties to consider ESG investing because it meant market underperformance. Now, you need to consider the impact on the value of the trust if you ignore poor governance and sustainability in businesses. “Because of the Greta Thunberg effect – [the climate-change campaigner has helped raise the profile of environmental issues and enhanced the glare on corporates’ attitudes to them] – companies are being judged in a different way and won’t survive if they don’t pay attention to their carbon footprint and other ESG considerations.” The key, he says, is acting in the best interests of the beneficiaries. For some families, that may mean blocking any investments in companies involved with alcohol or tobacco, and perhaps acknowledging that this could lead to lower financial returns; for others, it will mean incorporating ESG but not sacrificing money growth. “It is too simplistic to say the next generation doesn’t care about returns. Many of them do and still expect you to enhance the value of their trust fund,” Biddlecombe states. Sloan agrees. “Families and advisers have to stay grounded amid the ESG rhetoric. Central to this is maintenance of and return on capital. That is key and you mustn’t get away from that.”
Whatever the approach, it is vital to incorporate growing ethical concerns and priorities into trust documentation. Guernsey Finance has worked with law firm Ogier to produce a guide for private wealth and family offices in developing sustainable trust deeds. It features a series of draft clauses enabling them to build sustainability into their client offerings, and ‘demonstrate that sustainable investing can be compatible with the duties of the trustee’. Example clauses include: ‘The trustee shall have the power to invest in sustainable investments’ and ‘The trustee shall consult an investment adviser in relation to socially responsible investing before exercising any function’. “Most family offices will want to ensure they have incorporated these issues into the investment approach, that their providers are on board and that their structures
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According to Mallas, ESG or sustainability labels are often associated with ventures, but often these ventures champion the ‘E’ and have poor ‘S’ and no ‘G’ at all. The next generation, he says, is looking to change that. “We have been approached to put together reports that show how a family’s assets are being utilised from an ESG perspective,” he says. “For the first time, we are receiving questions about the carbon footprint of banks or what the composition of the board is from a diversity perspective. “We are spending a lot of time with families sifting between genuine ESG programmes and ones that have merely painted over it with an ESG brush. We are doing deeper dives on companies and asking what their ESG data looks like.”
Engagement with the next generation has accelerated and led to improved family relationships
ESG investing
We are spending time with families sifting between genuine ESG programmes and ones that have painted over it with an ESG brush
are properly worded to take these into account,” Sloan says. “It is core and central to the offer, not a ‘nice’ supplementary anymore.” He hopes it will also enhance the attractiveness of Guernsey to international families. “We are signalling to providers and clients that if you are looking for expertise in this area, come to Guernsey.” Biddlecombe praises the initiative. “Trustees will be able to use the guidance to reduce any tensions between what the trustees feel and what the families feel about ESG and any impact on financial performance,” he states. He believes ESG will continue to be part of the fiduciary landscape for some time to come and increasingly stoke the interest of regulators. “In the UK, pension trustees must already demonstrate how they have dealt with ESG factors in their investment decisions,” he explains. “It is not a stretch of the imagination that offshore regulators will be thinking
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along the same lines. If a trustee with no consideration of ESG factors keeps investing in old-school companies with terrible ESG and the investment suffers, then they will have an interesting discussion with beneficiaries about why they didn’t move with the times.” Mallas agrees that ESG will continue to be top of the agenda and help engage the next generation. “There have been challenging discussions in some families about the switch in direction, but the pandemic has created a reduction in maintaining the traditional status quo. It is very rare for the older generation to say ‘thanks, but we are sticking with what we know’,” he says. Technology has helped bridge this gap, with videoconferencing and FaceTime calls replacing formal face-to-face settings. “Before Covid-19, it was all about proper agendas and the warm welcomes and what-not,” Mallas explains. “Now, we are having more frequent but shorter meetings online with families, which the next generation is much more comfortable with. “Our engagement with them has been fast-tracked – I don’t think we’ve ever been closer with them. The founding generation, which used to find FaceTime uncomfortable, is also more relaxed with it – now, they call you.” John Goddard, HSBC’s Head of Wealth and Personal Banking, Channel Islands and Isle of Man, and Head of HSBC Expat, says that digital will be the core channel going forward. “It has become a hygiene factor in how you interact with customers,” he says. “It’s about onboarding but also about being there for a big decision such as buying a house or executing investments online.” Sloan is also hoping to make processes easier for families, including making philanthropic investments such as partnerships with non-governmental organisations. “We are looking at bringing the philanthropic offer more front and centre to holders of large private wealth,” he says. “We want to provide an A to Z of the various different structures and tools you can use.” It’s all about offering the necessary ESG services to meet evolving thinking and requirements. “ESG will continue to accelerate. The wealth firms that react most positively will be the winners,” says Goddard. “Getting that balance right between helping customers grow their wealth and doing it in a way that appeals to them in terms of their own compass is going to be really important. It is hugely exciting.” n
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Preserving family wealth through the generations Covid-19 has caused many of us to re-evaluate our priorities and focus on planning for the future, both for our businesses and for our personal wealth. David Benest, Managing Partner, and Emma Wakeling, Head of Family Law, at BCR Law, offer some useful steps to family businesses along the way MANY OF US wish to pass on our wealth to the next generation. This is often particularly important in the context of a family business. But there’s no magic formula for ensuring that this is done successfully – one cannot anticipate every change, or prevent every intrafamilial dispute. There are, though, some sensible steps you can take to maximise the prospects of a successful transfer of wealth.
WHAT DO YOU WANT? The starting point is to consider what you want to achieve with your wealth. While you may wish to pass future generations something, you might also want to enjoy your wealth yourself. You may have philanthropic causes that are important to you or future plans of your own to finance. It’s only once you have identified your goals that you can set about meeting them.
WHEN TO THINK ABOUT IT? It’s wise to reflect on your wealth planning regularly and certainly in advance of any significant life event. One such significant event is a marriage or civil partnership, whether that be your marriage/partnership or that of one of your parents, siblings or children.
THE IMPORTANCE OF A PRE-NUP! Pre-nuptial agreements are a practical way to protect and preserve family wealth in event of a relationship breakdown. These agreements are commonly used where there is a family business, a trust or significant inheritance prospects. A pre-nuptial agreement requires careful drafting and expertise if it’s to stand the best chance of being upheld by a court, so expert advice should be sought.
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While not yet legally binding, a pre-nuptial agreement is taken into account by the court. Parties are expected to be held to their bargain unless the result would be unfair. As such, they represent the best insurance policy to protect wealth where marriage/ partnership is in contemplation. Trustees, not just individuals, need to think about prenuptial agreements. Should a beneficiary be required to enter into a pre-nuptial agreement before a wedding or civil partnership? Without a pre-nuptial agreement, should that beneficiary be excluded from the trust? Unless the assets of the trust are protected in some way, then potentially everything is up for grabs in a subsequent relationship breakdown.
GET THE RIGHT ADVICE Most intra-familial disputes we see in our dispute resolution team arise because people did not take proper advice before (and during) taking action. Before taking an action, it’s imperative to be aware of the potential implications – for example, what impact this may have on your tax obligations. It is also essential to understand the relevant legal framework – for example, in Jersey, one does not have complete testamentary freedom over one’s movable estate – and the impact this has on your assets and your ability to deal with them. Equally, financial advice is needed to ensure that your wealth is held and managed in a way that best enables you to achieve your current and future plans.
TALK ABOUT IT There is a natural reticence to discussing death and money. This has to be overcome. Transparency and involvement in decision-
making are key. Transparency minimises the potential for misunderstandings; involvement ensures the aims behind the move, and the rationale, are understood, lessening the potential for disagreements. A will should be an essential part of your planning. Lasting powers of attorney, set while you are in good health, can protect you and ensure your wishes are followed in the event of you not being so in the future.
TAKE ACTION It’s very easy to put off dealing with these things. Don’t. Once you have established your aims, sought advice and discussed matters with those concerned, you need to follow through and take action. Make a will, settle a trust, if that’s what is advised. Appoint your successors within the family business that will ensure continuity. Don’t put off doing what you want to do with your time and your wealth either. It’s vital to seek specialist advice, as every action, or inaction, has consequences. Don’t leave it too late. Our team at BCR Law has extensive experience in advising clients in relation to wealth preservation, whether that be through a will, a trust or a pre-nuptial agreement. n
FIND OUT MORE
If you would like to discuss any aspect of wealth preservation, please contact the Private Client team, led by David Benest and Emma Wakeling. David Benest Managing Partner Tel: 01534 760850 Email: david.benest@bcrlawjersey.com Emma Wakeling Head of Family Law Tel: 01534 760873 Email: emma.wakeling@bcrlawjersey.com
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APPEAL OF ISLAND LIFE UNDERPINS STRONG MARKET Despite an uncertain economic backdrop and the impact of Covid-19, the property market in Jersey showed a remarkable level of resilience in 2020 which has carried into this year, says Geri O’Brien of Savills Jersey. The experience of lockdown and switch to home working encouraged many people to reassess their work/life balance and reconsider where and how they might now prefer to live. As a result we saw a huge increase in activity over the summer last year, across all property types, which has continued into 2021. So far this year, we have carried out more viewings than the same period last year and there is healthy demand for property across all price ranges, but a definite shortage of properties available under £2m. The market for properties priced around £1.3m and
under has been particularly active. When stock comes to the market at this level, it tends to go under offer very quickly. Due to the huge increase in demand for family homes in this price range, where you’d previously be looking to spend £1m, buyers are having to increase budgets to around £1.3m for the best in class. As last year proved a great time to sell, there are a lot of people in a cash position, having sold and gone into rented accommodation while they wait for the right property to come up. As a result of a shortage of stock at the upper end of this price bracket, properties where buyers can add value themselves have
also been particularly popular. There has been movement across the board, including both upsizing and downsizing, as well as a noticeable number buying and selling at a similar level. Having come to the end of fixed mortgage deals, some buyers have decided to use the opportunity to buy property at a slightly lower price point in order to restructure their household finances and decrease their monthly mortgage payments. In some cases, this enables them to help children get onto the property ladder.
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Over the last year, we’ve also seen an increase in demand for homes for three generations to live together. These buyers are pooling their money to invest in a property which is truly multigenerational, or which they can create for themselves, with separate accommodation for grandparents, parents and children. Many have valued spending more quality time with immediate family throughout the lockdown. In many cases, older children returning from university are deciding to stay long term in order to bring up families of their own on the island. We are very lucky with what we have here on our doorstep and there is a real sense of appreciation for island life. For some the prospect of continuing to work from home could lead to less off-island travel when normality resumes. The upper end of the housing market has also performed strongly over the last year. We have seen an increase in enquiries from high net worth individuals looking to relocate to the island and we anticipate this trend continuing throughout this year, particularly as lockdown and travel restrictions are eased.
SOLD Treboule, St Peter
Guide £2.55 million
SOLD Le Bourg Farm, St Clement
Guide £1.595 million
Keeping buyer and seller expectations on pricing aligned will be key to maintaining the momentum we’ve seen over the last year through the spring and beyond. If you’d like to discuss the property market in Jersey in more detail we’d be delighted to hear from you.
SOLD Les Jardins, St Clement
Guide £1.25 million
Cryptocurrency
Biting the
bitcoin
bullet Could the revelation that Tesla has invested a slice of its cash pile in bitcoin herald a new stage in the growth of cryptocurrency investment?
48 march/april 2021
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Cryptocurrency
Words: Richard Willsher
had bought $1.5bn of bitcoin out of its cash reserves. Businesses typically invest their treasury surpluses in short-term, low-risk assets, such as government bonds. They rarely put them in ‘unknown quantities’ or high-risk investments. So, what does Tesla’s move signal about the future of bitcoin – and does it mask continued uncertainty surrounding much-debated cryptocurrencies? Some see the move as nothing more than Tesla founder – and one of the world’s richest men – Elon Musk flexing his support for digital currencies. However, many investors, including corporate treasurers, are frustrated by the low returns available on their cash and are searching for greater returns, even if they come with greater risks. To some, bitcoin presents a much-needed potential upside. Meanwhile, a large influx of cash can move a market, especially when it is comes from a high-profile player such as the world’s most valuable carmaker. So, to many, Tesla’s move is viewed simply as a conscious market manipulation play – it resulted in the price of bitcoin and Tesla’s share price taking upward leaps.
GATHERING PACE AND CREDIBILITY Bitcoin is certainly riding high at present. At the beginning of January, The Economist noted: “With every bitcoin worth about $32,000, its total market capitalisation is now greater than the monetary base of Canada.”1 The previous day, research from Dublin-based group CryptoParrot commented on the recent bull run in the digital currency: “Bitcoin’s 30-day average daily trading volume stands at $39.1bn, which is more than the top five US companies, with $37.68bn in 30-day average daily trading volume.” By 9 February, just a month later, the price of bitcoin had risen to $45,834. Bitcoin is the poster child of cryptocurrencies. But there are plenty of others. The second most popular is ether, built on the Ethereum platform. Meanwhile, a number of corporates, including Facebook and JP Morgan, have made moves towards issuing their own private cryptos – while all of the world’s leading central banks are considering issuing digital currencies linked to their native or ‘fiat’ currencies. Given those moves, and the scale of the businesses and organisations behind them, it’s clear that digital currencies, built on blockchain technologies, are here to stay and are growing in popularity. Their appeal is the ability to act as mediums of exchange that are truly international, quick to transfer and which avoid the frictional costs and bureaucracy of
Toil and trouble: Bitcoin’s rally, The Economist daily email briefing, 5 January 2021
1
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using the conventional banking system. They also offer, as the Tesla move indicates, a potential investment asset. And, linked to this, they can act as ‘safe havens’ when other assets and currencies may be losing value or their future looks uncertain due to political or economic impacts.
ARE CRYPTOCURRENCIES SAFE? Bitcoin in particular has been berated by sections of the established financial services industry, as well as by central banks and regulators, for being highly volatile. Some have gone so far as to label it a scam. JP Morgan Chief Executive Jamie Dimon famously labelled bitcoin a “fraud”, although he later said he regretted using the term. Supporters counter that it’s no more volatile or open to abuse than the conventional markets. They point to the Wirecard scandal in Germany, where the payments firm collapsed with billions missing from its accounts, and the events surrounding US retail share trading platform Robinhood and Gamestop, which recently saw investor action disrupt the stability of the market. Those supporters also point to a steady evolution and tightening of the security of the crypto system over recent years as a sign that it is maturing fast. John Hunter, Business Development Director at the Guernsey office of wealth and fund solutions business Zedra, explains why that’s important. “Clients are all seeking reassurance in terms of the safety aspect and the security around bitcoin or alternative coins that are in circulation today. “We’ve seen an extraordinary amount of security come to the fore to protect the theft of bitcoin and other cryptocurrencies. In 2020, only 0.002% was stolen which, compared with just under 5% back in 2014, is quite a shift. “A number of companies are now working on this – creating compliance tools that can track bitcoin anywhere on the web, including the dark web, through blockchain technologies.” Hunter adds that such security developments have given greater confidence to investors concerned by the risk and volatility associated with cryptocurrencies and the technology behind them. Asked whether cryptocurrencies are an attractive investment, Steve Nelson, a Partner in the Cayman Islands practice of Bedell Cristin, says: “From the point
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IN EARLY FEBRUARY, Tesla announced that it
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Cryptocurrency
of view of most of our hedge and private fund clients, the answer is a resolute yes. “But [that’s] not simply in the longonly view, as the trading volatility and burgeoning mainstream acceptance of crypto are seen as tremendous opportunities for extraction of value using alternative methods – arbitrage, repo loans, and quant trading.”
APPETITE ON THE ISLANDS The role of bitcoin as a unit of exchange is what made it attractive to Tesla. The company has even mooted the idea of selling cars to clients for payment in digital currency. Moreover, if it can pay its suppliers in the same currency, a natural
Supporters point to a steady tightening of the security of the crypto system over recent years
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exchange rate hedge is possible as it would not be necessary to exchange into the dollar or another fiat currency either side of its business. But while acting as a currency is one function of cryptocurrencies, it is not the main attraction for investors, according to Luke Sayer, Senior Associate in the Guernsey office of Carey Olsen. “It appeared that bitcoin was previously considered by the majority of the population as a means of exchange,” he says. “I think there’s been a shift in that public opinion, and the majority now see it as a store of value. “One of the reasons we might have seen the considerable rise in bitcoin’s popularity is that people are using it to hedge against inflation against a background of declines in other financial assets, such as stocks, bonds and the US dollar. In many ways, that’s bitcoin living up to its nickname, ‘gold 2.0’.” Sayer continues: “This is an important point, because in bitcoin’s relatively short history there’s been low correlation with stocks and bonds, and it allows people to diversify to a greater extent. “So, where previously people may have been shifting into gold in volatile times, I don’t think gold has actually pushed on as much as the traditional markets might have expected. Bitcoin has probably appealed to that pool of people.” Carey Olsen’s Channel Islands offices have seen a number of instructions from crypto investors and service providers, helping with structuring holding vehicles
and establishing custody arrangements for crypto investments. Indeed, crypto is often viewed by investors as another alternative asset to sit within their portfolio of alternatives, Sayer adds. “There is demand from clients or businesses to utilise the Channel Islands because of its well-regulated environment,” he says. “We are seeing more and more instructions. “The important thing is that both Guernsey and Jersey have flexible regulators. While at the forefront of their minds is always protecting the reputation of the bailiwick, and protecting the underlying investors, they also remain open to innovative ideas. “Crypto is not something that’s going to go away, so it makes sense to allow both jurisdictions to have exposure to this, provided it’s tightly regulated and appropriately managed.” The question of risk versus reward still lingers. Zedra’s John Hunter is pragmatic. “The more mainstream it becomes and the more it attracts different types of users and adopters, and the more day-to-day usage it acquires, the more comfortable people become with it. “But it depends on your short-term, medium-term or long-term view of risk in terms of how you invest and how much you invest. “At present, most investors allocate only a small portion of their portfolio to it. And it’s definitely a case of caveat emptor: make sure you’ve done your homework. Don’t invest more than you can afford to lose.” n
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Libor
Libor, the long-standing but much maligned mechanism used to set lending rates, is being ushered out in favour of ‘risk-free rates’. So could the removal of a global rate-setting standard and a potential change of rates for existing loans prove a headache for borrowers and banks alike?
Life after
Libor 52 march/april 2021
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Libor
Words: Gill Wadsworth
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AS CRIMES GO, the Libor rigging scandal may not have captured the public imagination in the same way as the Brink’s-Mat robbery or even trader Nick Leeson’s near devastation of Barings Bank, but it was to have major ramifications for the financial system. Tom Hayes, the first person to be found guilty of fixing the Libor rates – used to underpin the amount of interest lenders can charge – was released from prison at the end of January this year. He had served half of an 11-year sentence, a prison term that perhaps indicates the severity with which the judicial system viewed the offence. While not a household name, Libor – the London Interbank Offered Rate – is of fundamental importance to all of us. The rate is used to decide how much interest borrowers will pay on trillions of assets covering everything from corporate bonds to mortgages and individual loans. However, despite its prominence, Libor is fatally flawed – and the Financial Conduct Authority (FCA) said in 2019 the rate will cease to exist from the end of 2021. Libor’s problems are two-fold. First, it is set by a panel of banks that decide the rate at which they think they can charge each other, based on the current market conditions. Leaving aside that, at best, Libor is somewhat subjective, the rate-rigging scandal rather conclusively demonstrated that it was vulnerable to fraud. Lee Morris, Investment Director at Rathbone Investment Management International, says: “The widespread manipulation of Libor after the global financial crisis, together with the dwindling number of interbank borrowing transactions, caused regulators to question Libor’s future. “There were only 15 interbank lending transactions of an appropriate tenor and size in 2019 for Libor-setting
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Libor
Moving from Libor is the financial equivalent of trying to get rid of Japanese knotweed
UNTANGLING FROM LIBOR Yet while Libor’s demise seems eminently sensible, replacing it is no small undertaking. According to Stephen
What is Libor? The London Interbank Offered Rate (Libor) is the rate at which major global banks will lend to one another. Administered by the Intercontinental Exchange, Libor is set by a panel of banks, based on how much interest they believe that they can charge to borrowers. Libor has long been used to set interest rates for retail products such as mortgages, and is also critical to the institutional lending market. Libor will no longer be used from the end of 2021 and it will be replaced by alternative risk-free rates, which are considered to be less subjective and volatile.
54 march/april 2021
Farrell, Audit and Assurance Partner at Deloitte, ditching Libor represents one of the biggest changes to the global financial system since the upheavals that followed the 2008 credit crunch. “[Moving from Libor] is the financial equivalent of trying to get rid of Japanese knotweed. Once it is enrooted and under your pavement, you have to do a significant amount of work to remove it,” he says. Farrell explains that banks and lenders are still trying to work out how many contracts reference Libor before they can even begin to start switching loans to an alternative rate. Getting ready for the change, then, even with three years’ warning, is a notable undertaking – even without the recent impact of the coronavirus pandemic of the past 12 months. Regardless, any hopes for a Covid-19related reprieve were dashed by former FCA chief – now Governor of the Bank of England – Andrew Bailey in July 2020. Speaking at a webinar hosted by the Bank of England and the Federal Reserve, Bailey said: “With the authorities, businesses and households all having to adapt to the challenges of lockdown and new ways of working, there have been calls to step back from the Libor transition as a priority. “We understand the level of disruption there has been, and central banks have worked to ensure financial institutions have had the support and capacity to be able
to ensure a continued flow of financing to support the economy. “But what we saw in financial markets in March in response to the shock of Covid-19 only reinforces the importance of removing the financial system’s dependence on Libor in a timely way.” Businesses and financial institutions in the US have slightly longer to switch away from Libor, but for the UK and its related jurisdictions, it is full steam ahead. Thomas Wakefield, Senior Product Manager, Lending and Portfolio Management, Europe, at HSBC, says: “The deadline of the end of this year is fast approaching, so the time for businesses to act is now.”
PROACTIVE RESPONSE The amount of work involved in switching from Libor to an alternative rate will vary across businesses and will depend on the level of borrowing or lending. For some businesses, it will be necessary to set up a dedicated project team with the appropriate funding, while for other organisations, leaving Libor’s administrative demands to their bank may be all that will be required. However, should the latter prove sufficient, Jerry O’Keeffe, CEO of JCAP Treasury Services and President of the Channel Islands Treasurers Association, advises corporates against a passive approach. “Businesses can take [the Libor transition] as a project, put in some
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purposes – hardly enough to produce a reliable industry benchmark.” The rate’s second weakness lies in its volatility. Since Libor-setters consider credit risk, when markets and economies are in a state of stress – such as we have seen repeatedly during the past 12 months of the Covid-19 pandemic – rates get choppy.
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Libor resources and ask, ‘What is our exposure?’. Or they can do the opposite and think that the banks will do it for them,” he says. “The danger is that this may just be taking what the banks offer rather than being proactive and choosing the best rates.” Wakefield agrees and suggests that businesses communicate with their advisers and banks and understand not only their exposure but the products and solutions that are now available. Most importantly, businesses need to understand which rate they want to use as an alternative. One of the advantages of Libor was its consistency; pretty much all borrowers and lenders used it. Under the new system, there will be a range of risk-free rates from which to choose. One Chartered Project Manager based in the Channel Islands – who asked not to be named – says: “There are a lot more potential rates that are going to be floating about. Every country is basically having to develop its overnight rate, while some existing rates are not disappearing overnight. All this complicates the move from Libor a bit more.” The favoured alternative, at least for sterling investors, is the Sterling Overnight Index Average (SONIA) rate, which is administered by the Bank of England and based on overnight interest rates in active and liquid wholesale cash and derivative markets. Rathbone’s Morris explains: “This makes SONIA more robust and less volatile than Libor. “It is also virtually risk-free as it does not incorporate any credit risk/ liquidity premium – which is inherent in the calculation of Libor because Libor is
most importantly, businesses need to understand which rate they want to use as an alternative
predicated on banks lending to each other over longer time periods.” Irrespective of the rate preferred, businesses need to start making changes to their existing loans. Morris says: “Lenders and borrowers should review their facility agreements. Changes to existing loans are likely to be required to transition to SONIA, even where those facility agreements incorporate interest rate benchmark fallback.” For new loans, he says, it makes sense to use an alternative rate, but if Libor is referenced in loans issued in the first half of this year, they should contain provisions to switch. Businesses also need to ensure that their
systems and processes can cope with the demands of a new rate. Wakefield says: “At the moment, businesses typically have 30 days to confirm the amount of interest that they will have to pay under Libor. Under SONIA, that will be reduced to just five days, which is a significant reduction in that notice period. “Businesses will need to assess if this is acceptable and whether their internal accounting and operating systems will cope.” For regulated financial institutions, the Libor switch should have been afforded primacy from at least 2020, and it is likely that most of these organisations have prepared for the switch. For other corporates, particularly given the recent distractions of Covid-19, it is possible the move to a new risk-free rate has dropped down the priority list. And while Libor may not seem to be such a pressing issue at the moment, failure to manage the transition presents a significant business risk. But, as Morris points out, even for those late starters, the Channel Islands are well equipped to make the change a relatively pain-free operation. “Jersey is an island of international financial experts and we’ve got the resources and capabilities to do deal with [the end of] Libor fairly easily,” he says. “The central authorities have been very clear that this is an important issue, but so far the switch has proved a great example of where industries, practitioners and regulators are working together. “Although it needs to be done over a short, tight time frame, the transition out of Libor could be relatively smooth sailing.” n
Libor transition action points Stephen Farrell, Audit and Assurance Partner at Deloitte and Co-Chair of the consultancy’s Global Libor Transition Steering Committee, shares his key points of action for businesses preparing to switch from Libor to an alternative risk-free rate: 1. Be clear on where you have indirect and direct exposure to Libor. 2. Reach out and communicate with banks and customers and leverage the wealth of Libor information already out there. 3. Be mindful of industry targets and milestones; they are there for a reason. 4. Negotiate new contracts and have these ready for sign-off as soon as possible.
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Code breakers: How the PwC Hive Academy is boosting young people’s confidence in their digital future Working closely with schools, businesses can play a key role in equipping young people to succeed in a digital world. This is what PwC’s Hive Academy aims to do. We don’t just teach technical skills, but also help to instil the 4Cs of edtech – curiosity, creativity, collaboration and confidence – needed to make the most of new technology. By Narelle Height, Senior Outreach Education Manager at PwC Channel Islands THE NEED TO get technical education – edtech – up to speed reflects a world that’s digitising at a phenomenal pace. By the time today’s year 1 pupils finish school, the way people live, work and interact could be almost unrecognisable. Change on this scale can cause apprehension. PwC analysis reveals that around 30% of jobs in Jersey and Guernsey are potentially at risk from automation between now and 2035. But digital transformation also brings opportunities to free people from mundane work and create new and more fulfilling tech-enabled forms of employment.
FALLING SHORT How can we ensure our young people are ready for this brave new world? As a teacher, university lecturer and now at PwC, this is the question I’ve spent my career seeking to address. Computing and digital skills form an important part of the national curriculum. Teachers do a great job in developing a digital grounding in the early years. But engagement in computing and related skills falls off as students go through school. The low uptake among female students is especially troubling.
This disengagement is compounded by gaps in teaching and not enough linking up between the key stakeholders. Non-specialist teachers often lack support and confidence in their ability to teach computing. Businesses are keen to help. But often what they offer schools isn’t aligned with the national curriculum and therefore teachers are reluctant to use it. In turn, businesses often complain that students come out of school without the basic skills they need in the world of work.
A BRIDGE TO THE FUTURE Here at PwC, we’re determined to play our part in bridging these gaps and ensuring school-leavers have the skills and confidence to succeed. Our Hive Academy provides tailored training and support for teachers, students and parents. Rather than just focusing on IT skills, the programme also looks at the kind of capabilities that are critical in releasing the potential of technology, fostering innovation and improving future employability. These include creativity, collaboration, communication, emotional intelligence, computational thinking, problem-solving and negotiation.
We want to play our part in creating a prosperous future
BRINGING COMPUTING TO LIFE Through the Hive Academy, we want to engage students by demonstrating the importance of digital technologies in all areas of life. We’re also determined to make computing fun. To encourage teachers to take up the programme, we want to make it as relevant as possible to the national curriculum. This includes curriculum-aligned coding courses and classes on how to create a profile for job platforms. To help build confidence among non-specialist teachers, we offer structured lesson plans and dedicated resources, training and support. Teachers can then deliver the programme themselves in the following school year, though we’re always on hand if they need help. This is a major investment for PwC. We provide the facilitators, customised course design, software, training for teachers and other elements of the programme all for free. What’s our motivation? Well, Hive Academy is good for us. We’re moving to a more digitally-enabled way of working and serving clients. Having the new generation come through with the right skills and training will provide a valuable source of talent for PwC, our clients and our suppliers. A lot of our people also volunteer as Hive Academy facilitators. This is hugely rewarding for them. It also enables them to apply their digital capabilities and hone their engagement and problem-solving skills. Ultimately, this is the right thing to do. We want to play our part in creating a prosperous and fulfilling future for the community here in Jersey. n
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Contact: Narelle Height, Senior Education Manager, PwC Email: narelle.height@pwc.com
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Cryptocurrency
The reluctant revolution Any reluctance from the wealth sector over going digital has been rendered immaterial by the coronavirus pandemic. So what does this mean for the future of the client relationship?
Words: Imogen Rowland
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IN A WORLD in which our faces and fingerprints can unlock our personal tech, our phones can be used as debit cards and we can speak ‘face to face’ with people thousands of miles away, it is perhaps not surprising that, as consumers, our expectations for wealth management have also shifted. The days of writing cheques, going into a bank to make a transaction, or relying on a single person to manage our portfolio seem archaic when we can track the progress of stocks and shares in real time from the palms of our hands. So why has the wealth sector traditionally resisted digital developments in contrast to other industries? “In years gone by, digital innovation was seen as a strand within a financial institution, rather than what it does,” says
Jamie Broadbent, Head of Digital and Innovation at RBS International. “More significantly, historically there was also a misconception by service providers and consumers that ‘digital’ somehow meant ‘less personal’. But that’s simply not true. Some of the most personalised experiences we receive today are on digital platforms.” Broadbent cites the tailored digital experiences we have thanks to algorithms that collate information on our online behaviours. It’s not so much the level of personal service that has changed, but our perception of what is personal, he suggests. Previously, the personal touch meant a named and trusted adviser who knew the ins and outs of your finances and could advise you based on your shared ambitions. Today, it means algorithms that know your
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Cryptocurrency
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PEOPLE POWER For JTC, Bettany says that digital advancements are creating marked efficiencies. “We have our own software platform called Edge, which allows clients to see all of their key assets from their smartphones, including recent activity and related documentation. “For that administration side of the business, technology reduces the chance of error, makes things faster and more thorough, and is far more cost-effective for us and our clients.” She is quick, however, to point out that it does not mean wealth managers are out of a job. “You still need a human being to choose which information goes into the system and identify what’s relevant to discuss. Often, there’s not a
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Some of the most personalised experiences we receive today are on digital platforms
interests and instincts better than many of your closest friends, leading to a bespoke curation of information based on your behaviours. “The expectation that we now have is that, instead of being treated as a particular segment of a mass market, we’re each a segment of one,” Broadbent continues. “The hyperpersonalisation we can offer via a digital channel is far superior than we could ever expect a human to be able to deliver.” At RBS International, explains Broadbent, teams are wholly focused on a digital-first delivery of services. “My role is about helping to transform the bank so that we can deliver the very best services and meet customer needs through the channels they expect to find us on.” Our worlds are becoming more streamlined, adds Broadbent. “[Previously] most financial service providers have looked to deal with money and money management in isolation, rather than as part of our broader lifestyles. “But money is intrinsically linked to just about every part of our lives – it’s tied up in our homes, where we travel, our relationships, hobbies and interests.” Legal developments are also playing a part in the sector’s inevitable digital shift. “Family offices are now subject to a lot of compliance regulations, so where previously you could get your friendly CFO in the family business to run the office spreadsheet in his spare time, now that’s not enough,” says Rebecca Bettany, Director at JTC Private Office in Jersey. “Consequently, families are having to institutionalise their offices, so they’re using providers like us.”
Cryptocurrency
Many of the highest earners are digital-native millennials who expect digital capabilities in every walk of life right or wrong answer – instead, you need to take into account the client’s emotions, opinions and time horizons. “It isn’t going to be a case of Video Killed the Radio Star with digital eradicating the client relationship – it still needs to be challenged and sense-checked. It can’t replace humanity.” While the industry’s reticence to adopt digital has largely been attributed to consumer distrust of these new systems, that too is changing. “Before now, wealth has been concentrated in the older generation, but now we’re at a tipping point where many of the highest earners are digital-native millennials who expect digital capabilities in every walk of life,” says Broadbent. “For them, not being able to do things digitally is an unwelcome friction.”
ACROSS THE GENERATIONS Bettany says that, at JTC, all generations of clients are embracing these changes. “While the young are more comfortable using tech and algorithms to shape their decision process, there are also a lot of very savvy older clients taking up the offering. “And conversely, plenty of younger clients are more suspicious of the security angle, so that’s something that needs to be constantly reviewed.” Again, she is keen to stress that this is not about replacing human wealth managers. “There are a lot of impressive investment funds with great returns that operate on quantum-based algorithms,” says Bettany. “But when something like quantitative easing happens, as we’ve seen
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over the past year, it changes the shape of the economy, so algorithms like that suddenly break down. It’s at moments like that you rely on humans to jump in to make sure that damage is not done.” Inevitably, the shift towards digital wealth management has been hugely accelerated due to the coronavirus pandemic. “Whether or not people wanted to move into a more digital way of life, over the past year we’ve all been forced to,” says Noel McLaughlin, Managing Director of Butterfield Bank in Jersey. As the island’s newest bank, having opened in 2018, Butterfield has been working hard to establish itself, pivoting to a digital-first approach. “Jersey has always been well positioned for a digital future, and at Butterfield we’re almost unrecognisable after a year of digital adoption,” says McLaughlin. That said, he’s keen to emphasise that this digital shift will not render more traditional methods completely redundant. “Trust is so important in banking, and we’re working really hard to build long-term relationships – so while our operational mechanics now work with online banking, digital signatories and the like, we’re just augmenting the traditional side with digital capabilities. “We would prefer to do things slowly and get it right – you only have one shot at making a good first impression.” McLaughlin does, however, think that traditional banks are likely to move away from products and towards a more client-centric model. “We need to get a holistic view of our
clients and meet their needs – that’s how we keep and nurture the client relationship. At the moment, we’re all thirsty for a bit more human contact, and I think there’ll always be a strength in that personal connection.” When it comes to the future, the wealth sector has some consolidating to do after a year of unprecedented digital progress. RBS International’s Jamie Broadbent cautions against anyone moving too slowly. “We don’t have to look too far into other industries to see just how quickly market leaders can be disrupted – look at Blockbusters, Nokia and Kodak. Each owned their industry and didn’t adapt quickly enough to changing trends. “I think the wealth sector is going to see a similar acceleration in terms of delivering personalised, bespoke services purely through digital channels – so if it isn’t a priority in institutions now, then it absolutely needs to be.” That doesn’t, he points out, mean replacing your people – but in certain areas retooling your business will be essential. After a year that has necessitated the shake-off of long-outdated systems and processes, the focus now needs to be on building the wealth sector of the future, says Broadbent. “If you anticipate being a fast follower in this space, you are already too late.” n
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Advertising feature
Am I trustworthy? Phil Eyre, Founder of Leaders, considers the five principles of trust and how to challenge yourself on whether you hold them
TRUST IS A powerful thing. It’s essential for sustainable high performance. Trust is the basis on which true empowerment happens within any organisation, the foundation for exceptional customer relationships and fundamental to investor confidence. Trust can be hard won and is always easily lost. It can’t be bought, yet can come at a cost and, right now, it seems that this valuable commodity is increasingly scarce. The 2021 Edelman Trust Barometer reports that trust has evaporated; there is “widespread mistrust of societal institutions and leaders around the world”. The research flags a crisis of leadership, with leaders of institutions deemed largely “not credible”. CEO credibility has dropped in some countries to all-time lows. This creates a huge challenge as we seek to navigate the pandemic, just one of a number of massive global issues – population ageing, climate change and extreme inequality, to name but a few. While it is clear we are in a “crisis of trust”, this situation brings an opportunity for leaders who are attuned to the importance of transparency and integrity to stand up, and stand out. Building trust is central to our work with leaders in any setting. Not the fallingblindly-into-someone’s-arms type, but fostering authentic relationships marked by high integrity. Simply start by asking yourself: “Am I trustworthy?”
Trust is characterised within five core principles. Like the spokes of a wheel, all five need to be felt by others in order for trust to exist; a deficiency in one will undermine the impact of all the others. The five principles are as follows – how do you think you fare in each? 1) Transparency Transparent leaders communicate clearly and often, including the purpose of initiatives, their reasoning and their expectations. They communicate, also, with their ears, listening to learn and not just to respond. Transparent leaders tell the truth quickly, even – and especially – when the news is bad, refusing to invent excuses or soundbites that sound good but aren’t true. Challenge: What news – information, perspectives, opinions – are you holding back and from whom? 2) Relatability Trustworthy leaders are relatable, in that they understand where their people are coming from. Relatable leaders recognise that one size does not fit all, and they also make the effort to draw out individual team strengths. They actively seek out diverse experiences and perspectives, seeking to understand differences so as to respect them. In doing so, they become even better informed and make higher quality choices. They are interactive: genuinely interested and interesting. Ergo, they don’t talk that much about themselves. Challenge: How much of your conversation and thinking centres around you and your needs? 3) Consistency If you have worked with someone who doesn’t do what they promised, you’ll be well aware of the impact that this has on trust. Being consistent with promises, true to your word, and living what you preach and require of others, is crucial if trust is to be established and maintained. Challenge: Do you excuse yourself from policies that you expect other people to respect? (Hint: I often observe this in leaders who work excessive hours yet tell their colleagues to take better care of themselves.)
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4) Feasibility I enjoy being around “blue-sky” thinkers and dreamers. They can be exciting and thought-provoking. But for trust to be built, leaders need to be more than dreamers; they need to do the right homework to create a feasible plan. There’s a difference between taking a risk and taking a considered risk. Feasibility skill is marked by a willingness to learn from mistakes rather than simply dismiss them. Challenge: Are you running so fast dealing with immediate issues that you’re not asking the more important questions? 5) Empowerment Trust is all about power. Low-trust leaders hoard power and wield it over others. Trustworthy leaders actively share power, using a “powerwith” rather than “power-over” mindset. Team members have autonomy to pursue objectives and are not dependent on the leader. There will be high accountability in such a team – calling out problems and supporting in solving them. There will be high levels of encouragement, praising other people’s successes rather than seeking self-glory. Challenge: What proportion of your typical fortnight is spent doing work that others in your team could and should be performing? Solving the crisis of trust in leadership begins with each of us. Creating a workplace that is built on trust will bring long-term benefits to every business, but this must start from the top. So, start today by asking yourself: “Am I trustworthy?” n
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For more information, visit www.leadersconsultancy.co.uk
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Property
Safe as High-end property has long been growing in favour among high-net-worth investors. But has turbulence from the Covid-19 pandemic and Brexit changed what investors are looking for? And does property remain a secure way for HNW individuals to diversify their portfolios?
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Property
Sunshine Seeds / Shutterstock.com
WHEN GOURAY LODGE, a historic house
at Grouville in Jersey that was once the home of the Lieutenant Governor of the island, Sir Tomkyns Hilgrove Turner, was sold for just shy of £10m a decade ago, eyebrows were raised and headlines were written about the record price. “Now, we regularly see properties selling for £25m-£30m and beyond,” says Graham Marsh, Director, Private Wealth, at Equiom. “So that’s a big change we’ve seen in that time.” The relatively small size of – and limited space on – the Channel Islands means opportunities to buy trophy assets on the islands are scarce, with just a few dozen high-net-worth individuals having the chance to take up residency last year. However, luxury property has become a ubiquitous feature all around the world, establishing itself as an essential component
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buy in the Balearics… In fact, you can buy pretty much anywhere at the moment. But it’s very tricky to do so. You can’t get there, you can’t view the properties, the surveyors are taking ages and the banks don’t really want to lend. So, while it’s technically possible, no-one’s really doing it.”
ONLINE INVESTMENT That said, some determined buyers have persevered with their property-buying plans during the past year. “There has been a significant increase in online video tours of properties – replacing the in-person viewing experience – and that has proved sufficient for many buyers who cannot be present,” says Claire Hart, Head of Retail Products and Segments at Standard Chartered Bank in Jersey. Buying any property without physically viewing it would have seemed a far-fetched concept for most of us before the pandemic. But, as Hart points out, that’s less of an issue when property purchases are an investment rather than the purchase of a ‘home’. “Often HNWIs who are buying UK property from overseas as part of an investment strategy have less emotional
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Words: Alexander Garrett
of wealthy individuals’ portfolios. As a result, since the financial crisis of 2008-09, prices at many of the most sought-after locations have scaled new heights. But what impact has Covid-19 had on the market? While the pandemic hasn’t exactly brought the business of shopping for signature residences to a halt, it’s certainly made the purchasing process slower and more difficult. For the super-wealthy, buying property is often an international activity – and often closely aligned to travel habits. “Under normal circumstances, in the summer we would see the entourage from the various royal families within the Middle East getting out of the heat and spending time in Paris, London, New York and other similar places of interest. “And they would combine that travel with looking at marquee properties. The pandemic has obviously made that very difficult,” Marsh explains, adding that many other big buyers at the top end of the market travel in from Asia – China, Hong Kong and Malaysia, in particular. Islay Robinson, CEO of high-net-worth mortgage broker Enness Global, agrees. “You can still buy in France, you can still
Property
attachment than if they were buying for primary residential use,” she says. Regardless, many believe the easing of travel restrictions, expected later in 2021, will fuel a return to greater activity at the top end of the residential market. The demand for luxury property remains; it’s just that it’s been frustrated by the limitations on jetting around the world. In addition, the market may well receive an additional boost post-Covid-19, as wealthy investors who have done well during lockdown and been unable to trade, look to invest their wealth and become active again. While thousands of businesses have struggled during the pandemic, others have
You can buy pretty much anywhere at the moment. But it’s very tricky to do so
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thrived – not least the Amazons and tech goliaths – and many wealth holders will emerge from the lockdown with more to invest than ever. Having said that, there may well be a shift in the type of properties wealthy buyers are looking for. “I think we are seeing a real move towards buying bigger European lifestyle properties, with land and space, and somewhere you can stay for a prolonged period of time,” says Robinson. He believes the Covid lockdown has refocused the minds of many investors on properties that can support new ways of working and living. High-rise luxury apartments in cities, on the other hand, are struggling, he says. “There’s very little interest unless there is outside space now – land, gardens, features like that. Even if it’s the most amazing property in the world, if it hasn’t got its own entrance and the kind of flexible living space that can be used for gyms and homeschooling, there just isn’t the same interest.”
HOT PROPERTY MARKETS So where are the private wealth clients looking to buy? London remains high on UHNWIs’ shopping lists. Demand for UK property has been high in general during lockdown, says Hart, thanks to government incentives aimed at keeping the market moving. In addition, the pending introduction of a new 2% stamp duty land tax (SDLT) surcharge for overseas investors who are
not resident in the UK has hastened activity for some, Hart says. “It’s resulted in an increased urgency and demand for deals to be done prior to that time,” she says. Brexit, it’s generally agreed, has done little to put wealthy overseas buyers off the UK. Marsh believes his clients are aware of Brexit, but they don’t regard it as a major issue when it comes to purchasing high-end property. “Outside of Europe, they don’t really see it as either a negative or a positive factor. In fact, going forward, I think it could come to be seen as more of a positive,” he says. Other key global cities favoured by the wealthy, such as Paris and New York, are also expected to retain their cachet postCovid-19, while ‘playground’ locations such as the south of France and the Balearics are likely to be more popular than ever in the post-pandemic world. Robinson picks out Ibiza as “still one of the most desirable property markets there is, particularly because of the lifestyle”, and says Italy is also growing in popularity, with HNW mortgage lenders starting to cater for wealthy overseas buyers. For UK investors and HNWIs, Brexit has raised a barrier, however. UK passport holders can no longer enjoy freedom of movement and are restricted to staying a maximum of 90 days out of 180 in the EU – not much fun if you want to winter on the Med. However, there is a solution that money can buy. Many European countries now offer ‘golden visas’ – effectively a shortcut to an EU passport if you are prepared
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Property
The world’s top-performing luxury property markets to invest a certain amount of money in property, a threshold that would often be passed at the luxury end of the market. Portugal, Greece, Malta, Cyprus and Italy are among the countries offering schemes that provide residency, with free travel in the Schengen Zone, and this can lead to a full EU passport. The Portuguese scheme requires investment from as little as €350,000. Despite the pandemic delivering a relatively temporary interruption to high-end property investment, and Brexit creating some technical issues that require creative workarounds, there remains no shortage of appetite and money available for high-end purchases. And, with interest rates set so low in many parts of the world right now, many investors are seizing the opportunity to invest in high-end property without risking their own wealth. The strategy for many is to borrow for investment and create “a hedge against inflation”, according to Robinson. “The amount of stimulus into economies around the world must lead to inflation. And using debt with property – other than things like gilts – is one of the best ways to protect the real value of your assets. Your borrowings shrink over time. So there are strategic reasons to buy property.” Within the context of a private wealth portfolio, residential property keeps pace with inflation and provides diversification from equities and other securities, Marsh points out. “If there’s a crisis – a banking crisis, for instance – then other assets tend
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There’s very little interest unless there’s outside space now
to all react in the same way,” he says. “Property tends not to, depending on what type of property it is and where it is located.” Ultimately, wealthy individuals buy property partly for rational reasons – such as investment – and partly because they like it. A penthouse in Manhattan with marble floors, handmade panelling and gold taps is something you can show off to your friends, family and business associates – a particularly valuable attribute in some cultures. So long as there is wealth in the world, it seems, there will be luxury real estate to cater for those who own it. And that will be true long after the pandemic. n
The annual Christie’s International Real Estate Luxury Index rates the relative luxuriousness of primary market cities with at least one million residents. It includes the following factors: market record sale price, average price per square foot for luxury homes, number of sales over $1m, percentage of listings over $1m, average price for luxury homes sales, percentage of international and non-local buyers, and percentage of secondary home sales. It ranks the top 10 markets at the moment as: 1. London 2. Hong Kong 3. New York 4. Los Angeles 5. Singapore 6. Sydney 7. Miami 8. San Francisco 9. Paris 10. Toronto
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Alternative investments
Thinking outside the box Amid increasing appetite for diversified portfolios, investors are turning to a wider range of alternative investments. But what are the challenges posed by investing in movable physical assets, both for investors and trustees? Words: Dr Desné Masie
WITH RECENT GLOBAL economic and political turbulence, many family offices and investors are wondering if the traditional safe haven investments are as sound as previously thought or if they need to be thinking about diversifying their portfolios. As a result, increasingly investors are looking to alternative assets such as fine art, collectibles, cryptocurrencies, yachts and jets, to name a few. But while these can offer great opportunities for investment returns, and large rewards in terms of the personal enjoyment delivered by ‘passion’ purchases, there are also unique risks to be considered. Lawrence Wintermeyer, Executive Co-chair of Global Digital Finance, says cryptocurrencies in particular have been maturing as an asset class. Recent research shows that Americans find bitcoin twice as attractive as gold, with 20% of respondents
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claiming to have used cryptocurrency. However, increasing interest in crypto and volatile movement have seen bitcoin quadruple in price since January, prompting the UK Financial Conduct Authority to warn investors there are still huge risks in the industry – and that they should take particular care with the companies they are dealing with. Notwithstanding, the sector is becoming mainstream, and serious investment players are beginning to build positions, including BlackRock and Tesla.
ARTISTIC EDGE Fine art investments also offer potential to profit handsomely, although due diligence is key here. Amanda Gray, Partner in the luxury assets group at Mishcon de Reya, warns that anyone acquiring such assets should be mindful of their authentication, provenance, valuation,
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Alternative investments
condition, customs, tax liabilities, attribution, title and ownership – to name just a few considerations. Gray also cautions that the art world is notoriously small, and the closeness and friendship of all those involved – dealers, agents, sub-agents and art advisers – should be considered. She says particular care should be taken when artworks are offered as a security, and to keep an eye on developing trends. The shift to online sales, for example, accelerated by Covid-19, compounds the problem of guaranteeing authenticity and provenance, creating increased scope for transactions to be intercepted, and for data to be stolen and misused through identity theft or fraud. Brexit uncertainty, such as changes to import and export requirements, may also present challenges.
The art world is small and the closeness of all those involved – dealers, agents, sub-agents and art advisers – should be considered
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For the more practical issues around the transacting and custody of such assets, family offices can turn to trust companies, banking trusts and fiduciary services, and private client service providers to accommodate their unique considerations. Joel Chinn, Director, and Silvia Andriotto, Associate Director, of JTC Private Client Services, explain that family offices often provide support for unique assets ranging from yachts to fine art, and that specific expertise is needed for the maintenance, performance or transfer of such assets. But family offices are also turning to alternative structures to organise the management of complex assets. In fact, research by Ian Rumens, Head of Private Wealth at Intertrust, Jersey, shows that, while the family office arena has been dominated by trusts and foundations, fund structures now allow families to invest directly into a wider variety of assets. Fund structures can be particularly effective for crypto, says James Burnie, Partner at City law firm Gunnercooke. “After the recent bitcoin highs, we are seeing a resurgence in crypto funds. The new offerings are far more polished than the previous rush of crypto funds in 2017, and we are seeing established fund managers beginning to support crypto.” Funds that are investing in crypto, he adds, “have very different risks involved, so it is important to recognise this both as an investor and when preparing risk disclosures as part of selling a product”. Mo Baluchi and Timothy Townsend, Senior Managers at Standard Bank
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FAMILY OFFICES FOCUS
Alternative investments
xSquared / Shutterstock.com
International, have also seen greater demand for crypto and other alternatives to be added to client portfolios. “Our investment team at Melville Douglas International almost exclusively invests in more traditional asset classes, so a client’s portfolio would normally form their ‘core’ investing, while seeking to preserve capital as well as incorporating liquidity. “When clients seek advice for the ‘satellite’ investment components, such as the asset classes mentioned, we tend to suggest bringing in the appropriate expertise via specialist advisers – through strategic partnerships.”
MANAGING CHATTELS Often, alternative investment comes in the form of chattels. These are classed as any item of tangible movable property – personal possessions, including household furniture, paintings and antiques, cars and motorcycles – as opposed to real estate or intangibles such as shares. Chattels are wide-ranging and complicated: even items of plant and machinery that are not fixed to a building are considered chattels. Andrew Walters, Director at Trust Corporation International in Guernsey, says: “We are a firm of trustees and always look at these things from the perspective of what the trustees’ underlying duties are. “So if ever we are asked to acquire a chattel on behalf of the trust, the most important question we have to ask ourselves is whether it is in the best interests of the wider class of beneficiaries. “We need to make sure that we adequately protect the trust fund and the chattel, and therefore need to take measures specific to that chattel. This includes issues such as custody, unique insurance and risks such as theft, fire and accidental damage. “ As for trustees acquiring chattels such as artefacts or artworks, Walters says: “When trustees hold chattels on behalf of beneficiaries, they tend to form part of a diverse collection forming a balanced portfolio of assets, to ensure that, where
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When finding advisers, it’s important to look out for conflicts – such as advisers acting as brokers as well
necessary, it can provide financial assistance to beneficiaries. “But, where you have unique artefacts or antiques, or artwork, there may be less liquid markets for those kinds of assets, so this can be challenging,” he adds. “The trustees would also need to satisfy themselves with the authenticity and provenance of the asset because there is a great deal of fraud that goes on in the chattels industry.” Trustees will also normally employ the services of professional custodians. “Sometimes, an artwork will be on display at the home of a beneficiary, for their enjoyment,” Walters continues. “In such instances, the trustee needs to satisfy itself that it’s in a safe place and adequately insured, and that here is a user licence document that sets out how the artwork is made available to the beneficiary.” Valuation is also very important but, when finding experts and advisers, it is important to look out for conflicts – such as advisers acting as brokers as well, or being offered some sort of commission.
Walters adds: “We have seen very big swings in prices for art, wine and classic cars. These assets are best held for the long term, but that does not mean you can’t profit out of them in the short term. The difficulty trustees face is identifying the correct time to sell – which varies widely on taste and investor appetite.” Yachts and jets are particularly complex, with issues such as depreciation, maintenance and running costs often bearing down. Walters says: “Yachts and jets could also be acquired for the benefit of the beneficiaries. In such cases, you have to think about the terms on which you acquire the use of that yacht or that jet, and how it should be made available to the beneficiary – whether they should be absorbing the cost associated with its usage, for example.” He continues: “With a yacht, one commonly referred-to expense ratio is that it will typically cost 10% of its total value to run each year. There need to be adequate liquid funds to meet those costs, and sufficient funds to protect those assets, because by, their very nature, they require maintenance to preserve their value. “But, as a trustee, you equally need to ensure these assets are not run in a manner that presents a danger to third parties and that they are run within the proper regulatory frameworks.” n
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Knowledge Brain food for the busy business professional
The Knowledge is compiled by Alexander Garrett Young look abroad
Talking
points Minority report
The number of black leaders at FTSE 100 companies has fallen to zero, according to research from executive recruitment and diversity consultancy agency Green Park, whose annual Business Leaders Index recorded no black people in the role of chair, CEO or CFO for the first time since it began running its reports in 2014. According to its latest research, which examined the backgrounds of 6,172 individuals in total as of December 2020, only 10 out of 297 employees in these ‘top three’ roles have ethnic minority backgrounds at all – the same proportion as when Green Park first began its analysis.
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One in three young people (aged 16 to 35) is considering leaving the UK to work in another European country due to uncertainty around Brexit as well as the Covid-19 pandemic, according to research from Adecco Workforce Solutions, carried out by YouGov. The survey, conducted among 1,000 UK workers, also found that 76% of those over 55 years old and 66% of those aged 45 to 54 years old said they would not consider leaving the UK to find work. The research further found that those working in the capital are the most likely to consider moving to another European country for work (40%) when compared with other regions in the UK, with all citing Brexit uncertainty and the pandemic as deciding factors for them.
Eight out of ten cats
Cat owners fall into five categories in terms of attitudes to their pets’ roaming and hunting, according to a new study by the University of Exeter. Researchers surveyed UK cat owners and found they ranged from “conscientious caretakers” concerned about cats’ impact on wildlife and who feel some responsibility, to “freedom defenders” who opposed restrictions on cat behaviour altogether. “Concerned protectors” focused on cat safety, “tolerant guardians” disliked their cats hunting but tended to accept it, and “laissez-faire landlords” were largely unaware of any issues around cats roaming and hunting. Conservation organisations have long been concerned about the numbers of animals caught by the UK’s large population of domestic cats.
Battery power
Volvo is set to launch the world’s first fully-electric heavy-duty truck, with a range of up to 300km. The company has announced that it will push for half its truck sales in Europe to be battery powered by the end of the decade. The truck to be launched in 2021 will be designed for regional transport and urban construction, rather than for the longest delivery journeys, but will aim to demonstrate that battery power works for the largest commercial vehicles. It will go into full production in 2022.
On thin ice
More people are drowning in winter because of climate change, according to York University in Ontario. It looked at 4,000 drownings in 10 countries including Canada, the US, Finland, Sweden and Germany over the past 10 to 30 years. At temperatures from -10ºC (14ºF) to –5ºC (23ºF) the number of drownings rose significantly. Closer to 0ºC (32ºF), they increased fivefold. Above freezing, the numbers dropped – probably because the ice was visibly unsafe.
Driven to drink
Ride-hailing firm Uber is buying the largest US alcohol-delivery app, Drizly, for $1.1bn. It beat rival food delivery app companies to buy Drizly, which has grown rapidly during the pandemic as consumers have used it to buy beer, wine and spirits while staying at home. Uber plans to integrate Drizly’s infrastructure into the Uber Eats app, while maintaining the existing standalone service. Drizly, based in Boston, will become a wholly-owned subsidiary of Uber. The acquisition will allow Uber to offer beer, wine and spirits in the majority of US states in addition to groceries, package and prescription delivery, which it recently launched in some regions.
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THE KNOWLEDGE
New in… BOOKS
maxwell nous
mother ship
Fall: The Mystery of Robert Maxwell by John Preston (Viking, £18.99, hardback) A timely revisit of the life of the erstwhile press magnate, approaching the 30th anniversary of his disappearance over the side of his yacht. Captain Bob, owner of the Daily Mirror and New York Daily News, quickly attracted infamy after his death when it was revealed he had plundered the Mirror Group pension scheme. Yet his life was beyond fiction: growing up in a small village in the Czech Republic, losing most of his family at Auschwitz, becoming a war hero in the British Army, then founding a publishing empire second only to Rupert Murdoch. His funeral, attended by so many Israeli leaders, sparked speculation he had been a Mossad spy all along. Whether he jumped or fell is one question not resolved here.
Power Moms: How Executive Mothers Navigate Work and Life by Joann Lublin (HarperBus, £21.94, hardback) Lublin uses interviews with 85 women running corporations to compare how two generations of ‘power moms’ have balanced a dynamic career with having children. The post-War boomers, many now in their sixties, were pioneers who often had to overcome the disapproval of their own families, while the later generation were able to at least draw on support from technology and understanding partners. Nevertheless, the increased pressures on business leaders mean juggling work and home for today’s generation is as tough as ever.
email rocket fuel
sense check
Email Attraction: Get What You Want Every Time You Hit Send by Kim Arnold (Rethink Press, £11.99, paperback) This promises to show you how to turn “dull, dry emails into productivity rocket fuel for your business”. Communication consultant Kim Arnold says she is “allergic to bad emails”. Her book is a self-help guide to doing them better. The answer, it seems, is to ditch the ponderous, formal way that many people approach the task and find a pithy, snappy style that encourages the reader to jump into action. Worst of all, says Kim, many of us write emails we shouldn’t be sending at all because they are about frustrations in some other part of our life. Her advice: “Ask yourself what the real problem is. Is it really that colleague/client/co-worker? Or something or someone else entirely? Write your thoughts down and see how you feel. You might find the writing process so cathartic you don’t need that email or conversation after all.”
The Ministry of Common Sense: How to Eliminate Bureaucratic Red Tape, Bad Excuses, and Corporate Bullshit by Martin Lindstrom (John Murray Learning, £14.99, paperback) This is very much a rail against the lack of common sense in big companies as almost every aspect of their operations leaves customers and employees alike feeling as though they are wading through treacle. Random examples of this range from having to wade through Powerpoint presentations, to sitting through Zoom calls without a toilet break, to the case of an airline passenger at 30,000 feet unable to break open the plastic wrapper of his complimentary headphones. Lindstrom has a five-point plan for dealing with this, and it is delivered with wit and irreverence. It will, he promises, enable you to “remove unproductive BS, unblock innovation, create an amazing culture… and ultimately reinstall common sense”.
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In numbers: Tesla RESOURCES
577
Percentage increase in Tesla share price, 12 months to 5 February 2021 Source: Nasdaq
Rich, richer, richest: The pandemic billionaires This podcast from Channel 4 looks at the super-rich business owners whose wealth has soared during the pandemic. In a year of hardship for many, the world’s billionaires have grown their fortunes to a record high of $10.2trn. C4 correspondent Helia Ebrahimi looks at why this has happened and what it tells us about how the economy works. www.channel4.com/news/rich-richer-richest-the-pandemic-billionaires
499,550 Number of cars sold by Tesla in 2020
Source: Tesla
Horizon Europe The EU has kicked off its seven-year scientific research programme with a €94.1bn budget for research and innovation projects. It has identified five mission areas: curing cancer, fighting climate change, saving the oceans, developing 100 climate-neutral cities, and food security. Pillar II, which will finance industrial partnerships, has been allocated 56% of the entire budget. ec.europa.eu/info/horizon-europe_en
827.3bn Market capitalisation of Tesla in US dollars, equivalent to $1.6m for every car sold Source: Nasdaq, 5 February 2021
Flagship Cellars American Airlines has branched out into the wine business with a subscription-based service that allows customers to order the wines they would normally get in-flight to be delivered to their home. Described as “a wine passport to the world with flexible wine subscriptions or buildyour-own-case options”, it gives customers access to the wines chosen by award-winning sommeliers and normally served in premium cabins. There are also discounts for AA’s loyalty scheme members. tinyurl.com/eav4slvh
401m
Value in US dollars of emissions credits sold by Tesla in Q4 2020. The company’s profit in the same period was $270m Source: New York Times
Build Back Better Council The UK government has launched a Business Council designed to unlock investment, boost job creation and level up the UK as the country recovers from the pandemic. The Build Back Better Council will be comprised of 30 members representing industries from retail and hospitality to finance, science and technology. It will be co-chaired by Prime Minister Boris Johnson and Chancellor Rishi Sunak. www.gov.uk/government/news/prime-minister-and-chancellor-launchnew-business-council
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20.7
Percentage of Tesla’s shares owned by Elon Musk Source: Investopedia, 15 December 2020
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THE KNOWLEDGE
How to… ...Manage mental health in your workplace After a year of the pandemic, with many people feeling isolated working from home and others struggling to manage family responsibilities such as home tuition alongside their normal workload, mental health has become a concerning issue for many organisations. How can you support your people to deal with the stress and get back on an even keel?
Make the business case Before you do anything else, make mental health a priority for your organisation by building a business case. In the UK, the Mental Health Foundation estimates 70 million working days are lost each year due to mental health, costing £70bn£100bn. “It’s vital to get buy-in from senior leadership and make sure conversations about mental health and wellbeing happen at board level,” says MHF. “Be prepared to make the business case and have figures to back this up – figures on staff turnover and morale – and bring relevant feedback from exit interviews.”
Create a mental health plan
“70 million working days are lost each year due to mental health, costing between £70bn and £100bn”
This could be an ongoing plan or for the duration of the pandemic. Either way, charity Mind says it should include: how you will promote the wellbeing of staff; tackling workrelated causes; how you will support staff; sources of information and support available; and acknowledging what is expected of employees. As a starting point, you need a robust system of reporting sickness, absence and wellbeing, adapted to the current mode of working. “Organisations that make use of paper returnto-work forms and face-to-face
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meetings will need to consider digital alternatives, as well as considering accurate ways to report new reasons for absence,” says Mind.
Establish an open culture It’s important to maintain a positive culture where people feel able to talk about their mental health without stigma, says Mind. “This is more important than ever as employees are likely to be experiencing a range of different interconnected issues; including money worries, caring for others, but also increased feelings of loneliness and isolation due to social distancing.” Mental Health Awareness Week in May is a good time to launch your initiative and get people talking about the subject.
Take the temperature Carry out an anonymous survey to gauge your people’s wellbeing, ask them to score their mental health, and gain intelligence on any workrelated causes of stress. That will give you a baseline from which to monitor whether mental wellbeing is deteriorating or improving with regular follow-up surveys.
Take action Work-related stress can be reduced or eliminated by taking measures against the factors that are causing it. Conflict at work is one significant cause of stress and poor mental wellbeing, according to the Chartered Institute for Personnel and Development. “CIPD research shows that the most common impact of conflict at work is that people find it stressful – underlining the need for employers to foster healthy working
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Business leaders on making it to the top
environments with a zero-tolerance approach to bullying,” says the body. “The impact of conflict at work also tends to be felt beyond the individuals in dispute, with the performance of wider teams potentially affected – for example, by employees feeling they are covering for a colleague or if conflict leads to increased absence.” Other workplace causes of stress include unrealistic deadlines, employees not being given a clear understanding of their role, and giving people responsibilities beyond their experience.
Look for problems Managers should be trained to be on the lookout for employees who are experiencing problems. That could be seen in prolonged absence, or conversely in some cases in presenteeism, with people working long hours and not taking breaks. When people are working from home, get your managers to contact each of their reports on a regular basis for an informal chat, and make sure they ask how they are feeling.
Provide support The CIPD recommends that you have a confidential dialogue with anyone who discloses that they are having mental health problems, and ask them what support they think they need. Then work with the team member to develop an individual action plan, which identifies the nature of the problem, the triggers for stress, who they should contact in a crisis, and what other support they need. The CIPD says: “The plan should include an agreed time to review the support measures to check if they have been effective or whether any further adjustments are needed.”
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Getting ahead Julie Melia Head of Property, Mourant Jersey When did you set your sights on becoming a lawyer? I thought about becoming a teacher but discovered that it wasn’t for me after some challenging work experience! I decided to study law after some holiday work at an international patent practice and a local law firm. I started in general practice in 1989 while studying to qualify as an advocate. I’d always enjoyed property work, so in 1998, I specialised. In 2020, Mourant decided to focus on commercial property, so it was the perfect time for me to join and lead the team.
What are the pros and cons of working offshore? Jersey is home and where I want to be. We work with teams from elsewhere when Jersey properties are part of a wider transaction, or when dealing with an investor buying on the island, but otherwise it is very much locally facing and focused. Jersey has been a hugely rewarding place for me to work and I’ve been involved in some of the most notable deals in recent years, including the first building to be sold at the International Finance Centre. It’s always a pleasure to see properties I’ve been involved with and recall the people and teams at the heart of those negotiations.
Which aspects of property do you enjoy the most? What I like about property is it’s a physical asset, rather than something abstract. The time frame for a property transaction is often shorter than other areas of legal practice, and usually it’s a positive result for everyone involved. Property work is a lot more personal than other areas of legal practice, particularly on the residential side, but as time has gone on, I’ve become more interested in commercial work. You can become a trusted adviser who clients are comfortable talking to, and that’s something that I really enjoy from my work.
What do you look for when you’re hiring young lawyers? We’ve got to be good at dealing with people, very practical and direct. You must be able to work efficiently, and be responsive, and the clients must be able to trust and enjoy working with you because ultimately it’s about achieving what they want – that has to be what drives you.
How have you relaxed during the pandemic? Baking is my passion, so I’ve been doing far more than is good for me. I’m in the Jersey Joggers, so they regularly have cake foisted on them to offset the benefit of the jogging – but they don’t seem to mind too much!
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THE KNOWLEDGE
GURU
WATCH
Lynda Gratton
T
he pandemic has prompted a great deal of reflection on Minister Abe of Japan to join a new advisory council, ‘Council how the workplace will change once the world returns to for designing the 100-year-life society’. During her time at LBS, normality. If there’s one person well positioned to answer Gratton founded consultancy the Hot Spot Movement, which that, it’s Lynda Gratton, Professor of Management Practice established the Future of Work consortium. Founded a decade at London Business School (LBS). One of the UK’s handful of ago, this initiative has worked with more than 100 member management thinkers with a worldwide profile, in recent years organisations around the world, including Shell, the Coca-Cola she has devoted her attention to the future of work, and Company and Tata Consultancy Services. It has researched what greater longevity will mean for individuals in the future leadership, trust and ethics issues, and automation. workforce and companies as employers. Gratton took a psychology degree and Phd before “Executives Last year she published, with Andrew Scott, The joining British Airways, where she became Chief should be preparing Psychologist. She then became PA Consulting’s New Long Life, a follow-up to The 100-Year Life, both looking at how longer working lives can be youngest ever director, before switching back into now to experiment turned into a blessing, rather than a curse. The new academia at LBS. with four-day book spells out some of the actions corporations The pandemic may have highlighted the frailties working weeks” must take – changing recruitment and retention of older people, but Gratton believes it hasn’t set back policies to focus beyond graduate level; supporting staff planning for longer lives. She told Japanese news agency with childcare and looking after parents; championing Nikkei: “Will we move swiftly back to the traditional lifelong learning; and tackling institutional ageism. model? We doubt it, and executives should be preparing now to Her expertise in this area has led to her becoming an adviser for experiment with four-day working weeks and to accommodate @GoogleOrg’s initiative to help people prepare for the changing more employees who ask to work late in the evening (or early in nature of work. She was also the only foreigner invited by Prime the morning) instead of 9-5.”
authentech
We’ve had fintech, proptech, edtech and healthtech; now it’s authentech – community-based, uplifting, compassionate and, of course, authentic tech. Entrepreneur Rebekah Bastian says it will prove an antidote to the commoditisation, alienation and disempowerment that characterises much of technology. In the social media space, platforms urge users to compete for likes and followers; the authentech equivalent will be a “vibrant, supportive” community that brings people together rather than shaming. The Attention Economy will be replaced by the Intention Economy in which consumers define what they want from a company; and success comes from needs being met rather than how addictive a product is. When it comes to making money, authentech firms will put customers before profits. Bastian’s own Seattle-based venture, OwnTrail, is described as “a new platform where women share the journeys of their careers and personal lives, providing each other support and connections”. Just don’t confuse the new lingo with authentication technology or AuthenTec, the fingerprint recognition company snapped up by Apple.
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Perennials That ageless generation of consumers who are always up to date with whatever’s new
Superjobs The AI-enhanced jobs of the future that result from digital transformation – according to Deloitte
BUZZWORDS…
JARGON BUSTER
ALSO NEW IN THE WORLD OF
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Top tech WHAT’S
Robot care
HOT
THE COVID PANDEMIC HAS SWICHED ATTENTION FIRMLY ONTO THE CRIPPLING SHORTAGE OF CARERS FOR AN AGEING SOCIETY – SO HOW EFFECTIVELY CAN SOME OF THE WORK BE TAKEN ON BY ROBOTS?
MASTER CHEF British-made Moley claims to be the world’s first fully robotic kitchen. It makes meals to order, re-orders ingredients, and will even clean up afterwards. £248,000, moley.com
The pandemic has highlighted the vulnerability of care homes and the difficulties of finding care workers to look after elderly people. And that issue’s only set to worsen in most western economies, with falling birth rates and increasing longevity set to accelerate a demographic shift that will further push up the dependency ratio. The solution, in Japan at least, is for robots to provide care services. According to a paper published in January by the US National Bureau of Economic Research, by 2016 some 17.6% of care homes were already deploying robots, which are subsidised by the government. But official projections suggest there will be a shortage of 380,000 care workers in the country by 2025, and robots are widely expected to fill that gap. In the UK, there were some 120,000 unfilled vacancies in the care sector before the pandemic arrived, and interest is also growing in using robots to take some of the load there. A trial conducted in both the UK and Japan last year found that older adults in care homes who interacted with the robots for up to 18 hours across two weeks had a significant improvement in their mental health. The largest ever global study on the use of culturally competent robots in caring for the elderly, it was carried out by the University of Bedfordshire, Middlesex University and Advinia Healthcare, in partnership with the University of Genoa. The trial also demonstrated a “small but positive impact” in the reduction of loneliness among residents, and claimed a “significant positive impact” on participants’ attitudes towards robots. Advinia Healthcare, one of the largest providers of dementia care in the UK, said it was “working towards implementing this into routine care of vulnerable people to reduce anxiety and loneliness and provide continuity of care”. The robot used in this study is called Pepper, and moves around on wheels. It’s made by Japanese company Softbank Robotics and its
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‘conversational personality trait’ has been created by a company called Caresses. Pepper uses AI to learn about the interests and backgrounds of individual care home residents. Based on this knowledge, it can then hold simple conversations with them. The results of the trial were not wholly positive: it also found that the robots lacked compassion and altruism – regarded as two key values in the care of elderly people. Irena Papadopoulos, Professor of Transcultural Health and Nursing at Middlesex University, was responsible for developing the cultural concepts and guidelines for the robot, to make it able to respond to the culture-specific needs and preferences of older people. She said: “Socially assistive, intelligent robots for older people could relieve some pressures in hospitals and care homes.” But she added: “No-one is talking about replacing humans – the evaluation demonstrates that we are a long way from doing that – but it also reveals that robots could support existing care systems.” The US study found that robot use in care homes did have an impact on the human employees. “We find that robot adoption increases the number of care workers and nurses. These effects are concentrated on non-regular employees and have no effect on regular employees,” it said. It found robot adoption reduces the monthly wages of regular nurses, but speculated: “This may be due to the reduction of care burden at night, including night shift hours, afforded by monitoring robots, the kind of robot most frequently adopted by nursing homes.” It also reported that robot adoption reduces the likelihood of nursing homes reporting difficulty in staff retention. Meanwhile, a US robotics company is already working with the NHS to provide robotic pets for dementia patients. The battery-powered robotic cats and golden retriever puppies – around £104 and £124 each – make realistic purring and yapping sounds and contain sensors that enable them to respond to motion and touch.
FACE TIME The Poly Studio P21 Personal Meeting Display is a screen designed just for video calls. It has a high-spec webcam and microphone and ambient lights designed to illuminate your face to best effect. £753, tinyurl.com/ ej49qgpd
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Directory To advertise in the directory in print or online contact Carl Methven on carl.methven@blglobal.co.uk
Unleash the Power of Automations with Agile Automations Agile Automations specialise in developing bespoke Robotic Process Automations (RPA) and Robotic Desktop Automations (RDA), putting automation at the very heart of your organisation’s infrastructure. An organisation – where employees perform predictable, rule lead, highvolume, transactional processes and data manipulation – will boost their capabilities, increase accuracy, save money and time with RPA. Our robotics act with outstanding efficiency and accuracy, 24 hours a day, while offering enhanced Risk & Governance controls, sometimes eliminating the need for human engagement altogether. At Agile Automations, we do not use any robotics platforms, which allows us to offer a complete, yet flexible solution, for our clients; each automation is bespoke, designed to their unique individual requirements, without any need to compromise. This results in an enhanced Return on Investment. Just as we have seen robots revolutionise manufacturing – by increasing production rates, improving quality and cost savings – RPA is revolutionising the way we think about business processes. To find out how Agile Automations could automate your business, please do not hesitate to contact our CEO Martin Keelagher Email: rpa@agileautomations.co.uk Website: www.agileautomations.co.uk Twitter: twitter.com/AAutomations LinkedIn: www.linkedin.com/company/ agile-automations/ Facebook: www.facebook.com/ AgileAutomations/
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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. 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. 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. 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. 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 us to discover great learning opportunities: T: 01534 873785 E : alex@alxtraining.com www.alxtraining.com
As a full service Jersey law firm, we are best placed to support our clients no matter their personal or business related legal needs. Led by industry recognised litigator, David Benest, our team of expert Jersey lawyers provide our clients with sound, practical and commercial advice you’d expect from larger Jersey law firms, with the personable and responsive agility of a smaller one. Since establishing in 2016, we have worked with a variety of clients ranging from private individuals, large and small local businesses, and government departments. We are known for being an authoritative voice that cuts through complexities to provide accessible advice without the jargon while maintaining our approachability and high standards of service. Our private client team offer expert advice in helping individuals make key decisions when it comes to preserving their wealth now and in the future. We offer a wide range of legal services which include: Dispute resolution Criminal l Business law l Commercial l Commercial property l Employment l Family law l Residential property l Wills and probate l l
For more information on how we can be of service to you, please visit our website www.bcrlawjersey.com or contact us on: Tel: 01534 760860 Email: enquiries@bcrlawjersey.com
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Deloitte LLP provides audit, tax, consulting and financial advisory services, bringing world-class capabilities and high-quality services to clients. The company has the broadest and deepest range of skills of any global business advisory organisation and is a world leader in the professional services industry. We advise and deliver for the public sector as well as global and local businesses across every industry. Deloitte employs over 200 professionals in Jersey and Guernsey and is part of Deloitte North South Europe (NSE). The NSE firm brings together 13 countries and over 40,000 talented people, giving the firm the expertise to solve organisations’ most complex challenges and make an impact that matters. John Clacy Partner, Guernsey D: +44 1481 703 210 jclacy@deloitte.co.uk Jo Huxtable Partner, Guernsey D: +44 1481 703 308 jhuxtable@deloitte.co.uk Alex Adam Partner, Guernsey D: +44 1481 703 214 acadam@deloitte.co.uk Martin Rowley Partner | Jersey D: +44 20 7007 7665 mrowley@deloitte.co.uk Siobhan Durcan Partner, Jersey D: +44 1534 82 4274 sdurcan@deloitte.co.uk Theo Brennand Partner, Jersey D: +44 20 7303 0035 tbrennand@deloitte.co.uk www.deloitte.co.uk
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Fiduchi is a leading independent financial services company providing solutions to high-net-worth individuals and businesses around the globe. Our independence ensures we have the flexibility to deliver bespoke solutions - that’s what makes us different! Over 25 years, our director-led teams have built long-term valued relationships with clients and their professional advisors, ensuring a pragmatic and trusted approach to their wealth structuring needs. Using the latest technological cloud-based solutions ensures we have the flexibility to deliver timely and innovative solutions that our clients require. Visit our website to see the comprehensive range of services we provide in the following areas: l Private Wealth l Corporate Services l Fund Services l Yacht Services l Employee Services For more information, visit www.fiduchi.com Alternatively, you can contact: Robert Ayliffe - Executive Director Tel: +44 7700 349 750 Heidi Thompson - Executive Director Tel: +44 7797 966 408 Terry Northcott - Executive Director Tel: +44 7797 715 421 Follow us: Dubai / Jersey / London Fiduchi is regulated by the Jersey Financial Services Commission. Full legal, data and regulatory notices are published on our website. Fiduchi® is a registered trademark of Fiduchi Group Limited.
Intertrust is a global leader in providing techenabled corporate and fund solutions to clients operating and investing in the international business environment. The Company has more than 3,500 employees across 30 jurisdictions in Europe, the Americas, Asia Pacific and the Middle-East. Intertrust delivers high-quality, tailored fund, corporate, capital market and private wealth services to its clients, with a view to building long-term relationships. The Company works with global law firms and accountancy firms, multinational corporations, financial institutions, fund managers, high net worth individuals and family offices. In the Channel Islands we offer a comprehensive range of services to our clients and business partners:Corporate Services Fund Services l Real Estate Services l Capital Markets l Private Wealth l Performance & Reward Management Services l l
We pride ourselves on providing professional, personal and cross-border services to our clients across the globe, enabling businesses to grow sustainably. For further information, please contact Jacob Smed Managing Director, Jersey +44 (0) 1534 504000 jacob.smed@intertrustgroup.com Marie McNeela Managing Director, Guernsey +44 (0) 1481 211275 marie.mcneela@intertrustgroup.com Intertrust Jersey is regulated by the Jersey Financial Services Commission and Intertrust Guernsey is regulated by the Guernsey Financial Services Commission. www.intertrustgroup.com
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Directory
Julius Baer’s origins date back to 1890. From that time the renowned Swiss private banking group has been dedicated to serving and advising sophisticated private clients and family offices from around the world – going on 125 years now. Julius Baer employs more than 120 personnel in Guernsey and offers a full range of financial services, including discretionary portfolio management, investment advisory, structured products and credit services. There is also a dedicated team that supports the needs of External Asset Managers and the Branch works closely with the wider Julius Baer Group through the provision of administration and support services that are delivered from its booking centre. Stephen Burt Branch Manager stephen.burt@juliusbaer.com Jean-Luc Le Tocq Head of Private Banking jeanluc.letocq@juliusbaer.com Craig Allen Head of Investment Management craig.allen@juliusbaer.com Shaun Kelling Head of External Asset Management shaun.kelling@juliusbaer.com https://www.juliusbaer.com/gg/en/home/ Bank Julius Baer & Co Ltd, Guernsey Branch is licensed in Guernsey to provide banking and investment services and is regulated by the Guernsey Financial Services Commission.
Ogier provides legal advice on BVI, Cayman, Guernsey, Jersey and Luxembourg law. Our network of locations also includes Hong Kong, London, Shanghai and Tokyo. Legal services for the corporate and financial sectors form the core of the business, principally in the areas of banking and finance, corporate, investment funds, dispute resolution, private equity and private wealth. Ogier has strong practices in the areas of employee benefits and incentives, employment law, regulatory, restructuring and insolvency and property. We are a registered listing agent for The International Stock Exchange (TISE, formerly known as The Channel Islands Securities Exchange or CISE) and frequently advise companies listing on other exchanges whether offshore or onshore.
Building trust in society and solving important problems We focus on three things at PwC in the Channel Islands: assurance, tax and advisory services. But how we use our knowledge and experience depends on what you want to achieve. So whichever one of our 390 staff in the Channel Islands you work with (or 225,000 people across the PwC global network of member firms), they’ll start by asking the following questions: Are you looking to build trust? Give your shareholders more value? Or do you want to do something completely different with your strategy?
We also provide pan-Island legal services for local Channel Islands businesses and individuals.
When we work with you we really listen, to understand you better. We’ll get to know you, your business and your goals. Then we’ll share what we’ve learned to help you get there. We want to deliver the value that you, our clients, our people and our communities are looking for.
Contact:
Talk to us about your issues and aspirations.
Guernsey Redwood House St Julian’s Avenue St Peter Port Guernsey GY1 1WA T +44 (0)1481 721672 E gsy@ogier.com
For further information, please contact:
Jersey 44 Esplanade St Helier Jersey Channel Islands JE4 9WG T +44 (0)1534 514000 E jsy@ogier.com
Follow us: @PwC_CI
John Roche, Partner, Guernsey Phone: +44 1481 752040 Email: john.roche@pwc.com Karl Hairon, Partner, Jersey Phone: +44 1534 838276 Email: karl.hairon@pwc.com
www.pwc.com/jg
Website: www.ogier.com
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Software designed to automate your JFSC registry reporting
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Our innovative software package has been specifically designed to monitor business activity and generate accurate and compliant JFSC regulatory reporting. JFSC Regulatory Compliance Manager is easy to use and can be integrated quickly and simply into your existing business systems with no clunky add-ons.
Redcoin are a Jersey based IT Security Distributor, providing Cyber Security Solutions, Services and Support across the Channel Islands and UK markets, through our established Reseller Channels.
We deliver a long-term, automated solution to future-proof your regulatory reporting. •S ave time - you will never need to file updates or confirmation statements manually again • Comply with JFSC requirements - our software is always up to date on the latest requirements and will report in accordance with these • Meet deadlines - our support ensures you will meet deadlines and avoid penalties • Remain accurate - you can quickly and easily validate your reports and ensure each entity is accurate • Reduce risk - integration with your existing business systems removes the risk of human error and inconsistent data • Report and compare - you will be able to constantly compare data in line of business systems against data held by the JFSC Get your data automated today. www.xrm.je/products sales@xrm.je +44 (0)1534 505010
Our objectives are to deliver guidance, education and support to the Islands businesses, to enhance their protection and understanding of the ever-changing Cyber Security Treat landscape. Our Independent security reviews are designed to give a baseline understanding of the Companies current IT position, supported by an informative and high-level report summarizing areas of strength, areas that can be improved by optimizing existing IT investment, along with key areas for consideration when planning future IT spend. Our technology portfolio provides Industry leading technologies, at an affordable cost, for all sizes and requirements of our Channel Islands clients. We can supply and support local resellers with the implementation of chosen solutions or make unbiased recommendations of other more suitable offerings outside of our portfolio. For more information please visit – www.redcoin.co.uk or email sales@redcoin.co.uk Follow us on Linkedin – Redcoin Limited
Digitalising Corporate Services, Trust and Fund Administrators with integrated software TrustQuay was formed from the merger of Microgen Financial Systems and Touchstone Wealth Management to become the global leader in technology for the corporate services, trust and fund administration markets. With 30 years’ experience, TrustQuay serves more than 450 clients and 17,500 users in over 30 jurisdictions, through 9 offices worldwide in key markets including Jersey, Guernsey, United Kingdom, Luxembourg, Singapore and Australia. The corporate services, trust and fund administration market is undergoing unprecedented change, and the need to help firms leverage technology and digitalise their business models to drive innovation has never been more important, not just from a back-office perspective but with regard to client engagement. TrustQuay offers corporate services, trust and fund administration clients in the Channel Islands and worldwide the strongest product range and widest global coverage to help clients maximise efficiencies, reduce costs, ensure compliance and drive new revenue opportunities. We continually invest in our technology and have the highest targeted R&D spend of any provider in our sector. To find out more about how TrustQuay can help you, please visit our website: www.trustquay.com Or contact us at info@trustquay.com
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march/april 2021 81
Data Xxxxxfocus
Where the wealthy live The 10 world cities with the highest ultra-high-net-worth residents
UNHW Population (2019)
New york 10,435
San Francisco 3,410
Paris 4,670 London 4,535
Dallas 3,165 Los Angeles 6,150 chicago 3,890
Tokyo 7,800
Washington, DC 3,230
TOP WEALTHY CITIES
Plenty is written about the habits of today’s ultra-high-net-worth individuals, where they invest their money and what they invest in. But where does this small group holding a significant proportion of the world’s wealth reside? Analysis carried out by visualcapitalist.com, based on data from Wealth-X, reveals that six of the top 10 UHNW cities are in the US – New York, Los Angeles, Chicago, San Francisco, Washington, DC and Dallas. That may not be surprising, considering the US is the world’s largest wealth market, holding more than 29% of the world’s wealth. However, with Hong Kong and Tokyo now sitting close behind in second and third places respectively, it’s clear the spread of wealth is diversified. Source: Wealth-X World Ultra Wealth Report 2020 and visualcapitalist.com
Hong Kong 9,950
BL
BUSINESS LIFE
future of financial services edition PUBLISHING IN MAy FOR EDITORIAL QUERIES, CONTACT jon.watkins@blglobal.co.uk FOR ADVERTISING, EMAIL CARL.METHVEN@BLGLOBAL.CO.UK
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Focus on the Channel Islands
Local businesses are the engine room of the Channel Islands’ economy. With nine offices around the globe and a diverse practice, we’re known for our work with international organisations. But our heart is in the Channel Islands and we’ve never taken our focus away from the local market.
Local legal services in Jersey and Guernsey Business and commercial law Commercial and residential property Competition law Construction, planning and environmental law Data and privacy law Dispute resolution Employment and immigration law Offshore relocations of businesses and HNWIs Private wealth and family offices Regulatory law Wills, probate and estate planning