GLOBAL BUSINESS: A VIEW FROM THE CHANNEL ISLANDS
The financial services edition • adapting to globalisation • role of alternative tech • change in client focus • plus future view supplement
ISSUE 73 MAY-JULY 2021
Tomorrow's world The future of financial services
ofbanking Premier Switching to a better banking service may be easier and more rewarding than you think. At the heart of HSBC Premier is a Relationship Manager dedicated to helping you manage your money and plan for a better future. You and your family will get access to financial experts, preferential rates on savings, mortgages and overdrafts, a credit card with no annual fee but with reward points, hotel discounts, extended warranty cover and more. There is no monthly fee1 for HSBC Premier. Instead, you’ll earn a £150 welcome bonus when you switch from another bank2 in just 7 working days, guaranteed with the Current Account Switch Service (CASS).
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Financial and other eligibility criteria apply. 2You must be a new customer of HSBC and open an HSBC Premier current account, fund it within 60 days to a minimum of £1,750 and register for HSBC Islands Mobile or Online banking services. Joining bonus may only be claimed on one new account. Offer ends 30 June 2021. T&Cs apply. 7-day guaranteed transfer with CASS. Not all banks in the Channel Islands and Isle of Man offer the Current Account Switching Service. Please check whether your existing bank supports the service.
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. In the Isle of Man HSBC Bank plc is licensed by the Isle of Man Financial Services Authority. HSBC Bank plc, Jersey Branch, is a participant in the Jersey Bank Depositor Compensation Scheme. The Scheme offers protection for eligible deposits of up to £50,000. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details of the scheme and banking groups covered are available on the States of Jersey website www.gov.je/dcs, or on request. HSBC Bank plc, Guernsey Branch, is a participant in the Guernsey Banking Deposit Compensation Scheme. The Scheme offers protection for ‘qualifying deposits’ up to £50,000, subject to certain limitations. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details are available on the Scheme’s website www.dcs.gg or on request. HSBC Bank plc in the Isle of Man is a participant in the Isle of Man Depositors’ Compensation Scheme as set out in the Depositors’ Compensation Scheme Regulations 2010. HSBC Bank plc is a member of the HSBC Group. Its ultimate parent company is HSBC Holdings plc. The UK Financial Conduct Authority is the lead regulator for HSBC Holdings plc. HSBC Bank plc places funds with other parts of its Group and thus its financial standing is linked to that of the Group. Publicly available information, including reports and accounts is obtainable from www.hsbc.com. 210319/JH/094
where do we go from here? WELCOME TO THE latest issue of Businesslife. Even prior to the global pandemic, the financial services sector was on a transformation journey. Advancements in technology were already rapidly evolving the customer experience – driving remote access, faster decision-making, automated processing and real-time activity. Covid-19 and the restrictions on movement that we have seen over the past year have, according to many, only accelerated that process. Depending on which report you read or which consultancy estimate you listen to, technological development advanced by between a year and four years in the first months of the pandemic, as organisations were forced to change the way they worked and connected with clients. As we find in this special financial services issue of BL, technological change is continuing at a rapid pace. But it’s not just the fallout from Covid-19 that is driving this change. Changing customer habits and expectations are also fuelling technological developments. Our article on the customer of tomorrow (page 22) explains that the changing customer demographic – to younger, more affluent, more socially aware customers – means banks and other financial institutions are having to deliver faster, more personal and more tailored products, information and contact points. Technology is the enabler.
TECH GAINS ITS VOICE In this issue, we also look at some of the specific tech developments taking hold in financial services – and how they are helping organisations stay relevant. The growth of voice-enabled devices in the home, such as Alexa and Siri, has led many across the sector to believe that voice services will be the next big thing in banking (page 66). As we find out in our feature, some businesses in the market are already offering voice services – and their purpose is far from just making the brand look ‘cool and modern’. The drivers are convenience, accessibility and access to real-time information across financial services providers. We also explore some of the alternative roles of tech in the sector – beyond the headline-grabbing innovations such as voice and automated intelligence (page 60). Here, we find how location-tracking is being used to help protect customers who might need support around gambling addictions, for example, and how it can be used to improve regulatory compliance.
Of course, tech and digitalisation are not the only areas of innovation and development in financial services. In this issue, we also look at other influences driving change and other ways in which the sector is evolving. In an increasingly complex regulatory environment, for example, what are financial services firms’ strategies for offering a truly global service to their clients? Our feature (page 28) explores this in detail – and looks at how Channel Islands businesses in particular are meeting the challenge. In another piece (page 70), we examine whether the rapid race among financial services firms to demonstrate their environmental, social and governance (ESG) credentials is a fad or something that will resonate with audiences for the long term. It seems every player in the market is talking green credentials right now. The risk is that failing to follow through on the commitment can do far more harm than good. All these changes will have an impact on the type of people and skills organisations need in future. And, as our article on page 56 explains, that will be a challenge in itself. It’s estimated that a staggering 85% of the job roles that will exist in 2030 – less than a decade away – haven’t yet been invented. Our article asks a selection of business leaders, HR professionals and recruiters how they can begin to tackle that challenge – to ensure that they have the right people and the right skills in place to meet the customer demands of tomorrow.
FUTURE VIEW Finally, this issue also includes the second of our annual Future View bound-in supplements – a collection of essays from a selection of Channel Islands business leaders setting out their views on the future of specific sectors. Addressing areas ranging from tax and governance, to fintech, private markets, audit, cloud technology and more, this exploration of the business landscape post-Covid-19 offers plenty of optimism and excitement around the opportunities ahead. The likelihood is that the issues discussed above will all play a crucial role in helping businesses seize those opportunities. Enjoy the issue. n
the tech developments taking hold are helping organisations stay relevant
Jon Watkins is Editor-in-Chief of Businesslife
May-July 2021 3
The power of technology. The understanding of tax.
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© 2021 PricewaterhouseCoopers CI LLP. All rights reserved. “PricewaterhouseCoopers” and “PwC” refer to the Channel Island firm of PricewaterhouseCoopers CI LLP, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. PricewaterhouseCoopers CI LLP, a limited liability partnership registered in England with registered number OC309347, provides assurance, advisory and tax services. The registered office is 1 Embankment Place, London WC2N 6RH and its principal place of business is 37 Esplanade, St. Helier, Jersey JE1 4XA.
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 firstname.lastname@example.org EDITOR-IN-CHIEF Jon Watkins ART DIRECTOR Angela Lyons
37 6 News
22 customer engagement
the lead that’s been set by Alexa and Siri
Financial services firms must meet the changing demands of customers
Top job moves across the Channel Islands
CI firms are set to serve clients’ diverse tax and regulatory requirements
Recent developments in Jersey and Guernsey
Keith Hale, Executive Chair of TrustQuay, on his company’s – and the financial services sector’s – route forward
SUB EDITOR Kate Wheal ADVERTISING email@example.com
56 skills and talent
Is sustainable investing really here to stay?
Weighing up the skills needed for the workforce of the future
We hear how Channel Islands leaders are squaring up to today’s new challenges
Alternative technology is changing the customer and business experience
As we return to offices, what will have changed?
Inflation may not pose the threat it once did
71 The knowledge Coffee in numbers, how to delegate, trading apps and much more
Financial services businesses are following
GENERAL ENQUIRIES firstname.lastname@example.org
37-54 supplement: future view
What’s at the top of business leaders’ transformation agenda?
66 digital transformation
NEWS AND EDITORIAL email@example.com
John Goddard, Head of HSBC Expat, on the central role of the Channel Islands
contributors The BL Global Discussion Forum
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.
We’ve all heard about the role that fintech is playing in delivering automation and artificial intelligence across financial services, but David explores some of the lesser-known roles it is playing.
With increasingly complex regional tax laws and regulation, Richard asks whether financial services businesses can ever truly be ‘global’, and how CI businesses are servicing global clients.
Sophie considers the challenges for businesses in identifying and recruiting the skills they need for their future workforce, when a staggering 85% of jobs that will be needed by 2030 don’t yet exist.
Meanwhile, Alex probes CI business leaders on their top priorities for future digital transformation – as the pace of digitalisation continues to accelerate post-pandemic.
may-july 2021 5
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in the NEWS Commission of, and seek prior approval for, a proposal to carry on management, administration or custody in connection with a specific non-Guernsey collective investment scheme. It will, however, continue to be a requirement that such activities, when conducted by way of business in or from within the bailiwick, are conducted by persons licensed under the Protection of Investors Law.
UBS INVESTOR SURVEY UBS has released the results of its latest Investor Sentiment survey of 2,850 investors and 1,150 business owners, held from 30 March to 18 April. Investors continue to hold elevated levels of cash in their portfolios but are considering allocating more to stocks. Cash forms 22% of individual investor portfolios, three percentage points down on September 2020. The high cash weightings contrast with positive market and economic developments over that time – the rally in stocks, the vaccines rollout programme and improving GFSC DEREGULATES REGIME economic indicators. The Guernsey Financial While 41% of investors Services Commission has are thinking about boosting revoked the Non-Guernsey their exposure to stocks in the Scheme regime for collective next six months, 12% intend investment schemes not to reduce it and 47% wish established or incorporated in to keep their portfolios the the bailiwick of Guernsey or same. In particular, 70% see registered by the Commission. technological transformation Licensees will no longer as an important issue over the be required to notify the next six months. n
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Done Deals RBS International has closed a syndicated €40m secured asset-backed facility to Tesseract Holdings, a wholly owned subsidiary of Aquila European Renewables Income Fund (AERIF). The facility has been structured as a scalable platform to support AERIF’s growth via a €60m uncommitted accordion, allowing the facility to increase up to €100m. Ogier has provided Guernsey legal advice to Burford Capital on the private offering of $400m aggregate principal senior notes by its wholly owned subsidiary, Burford Capital Global Finance. Ogier Partner Bryon Rees and Managing Associate Michelle Watson Bunn acted in the deal. Arndale / Shutterstock.com
JFA REVEALS FUNDS DRIVERS Accelerated digital adoption, upskilling and product innovation will be key to the Jersey funds sector, the Jersey Funds Association’s annual members survey has found. Digital transformation will continue to be pivotal to funds businesses, shaping approaches to regulation, tax and governance. And 92% of respondents said the pandemic had changed how their business uses technology. While 62% believed current skills training was sufficient, 37% said more support was needed to support a digitised future. On the regulatory front, Jersey’s response to economic substance rules had been broadly welcomed – 42% of respondents said the rules had had a positive impact on the island’s competitiveness, while 70% thought Jersey was striking the right balance between ease of doing business and regulation. Brexit was still seen as a neutral or positive factor for Jersey’s funds industry, with 31% of respondents anticipating an increase in business as a result of Brexit. The industry was also looking to grow and diversify, with 69% of respondents saying they were confident their business would expand in the next five years, driven by organic growth.
Crestbridge has provided administrative services in the launch of the Energy Transition Europe fund by Energy Transition International Capital. Set up as a reserved alternative investment fund in Luxembourg, it achieved a first closing of €55m, with a target of €200m. Carey Olsen has supported Coller Capital on the launch and $9bn final close of Coller International Partners VIII, which will focus on providing liquidity solutions to private equity investors worldwide. Northern Trust will provide fund administration, banking and depositary services for the fund from Guernsey. n
MERGERS AND ACQUISITIONS Imperium Group has acquired Jersey-based trust and corporate services provider STM Fiduciaire, part of the STM Group, renaming the business Imperium Trust Company Jersey. The transaction totalled £1.86m, with £1.26m payable on completion. The purchase, along with staff and office resources, highlights Imperium’s aim to develop a business platform in Jersey as well as Guernsey. Administrative services provider TMF Group has completed its acquisition of Venture Back Office, a US third-party provider of solutions to private equity, real assets, credit and emerging manager funds. TMF Group will now administer more than €150bn worth of assets on behalf of its global fund manager client base. IQ-EQ has acquired US business Concord Trust Company, the first deal for IQ-EQ in US private wealth. Concord will be integrated into IQ-EQ’s US and global businesses and Mark Fordyce, CEO of Blue River and IQ-EQ US Funds, will lead the group’s expanded US operations. Sanne Group has entered into an agreement to acquire STRAIT, a US fund solutions company for alternative investment firms. The business, based in Dallas, has more than 50 staff and services $20bn of assets under administration. n
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Appointments Walkers has made two appointments in Jersey – Matthew Dibb as Senior Counsel in the Insolvency and Dispute Resolution team and Tatiana Collins (pictured) as Senior Counsel in the Investment Funds and Corporate Law practice group. A specialist in cross-border financial disputes and commercial litigation, Matthew brings to the firm 14 years’ experience. He joins from Addleshaw Goddard, where he spent seven years in the banking litigation team. Advocate Tatiana – who is admitted in Jersey, Cayman and England & Wales – joins Walkers after more than six years with Ogier.
The International Stock Exchange (TISE) has appointed Andrew Watchman as its Chief Financial Officer. Andrew has served as a Senior Finance Manager at TISE since October 2017 and has responsibility for financial reporting, management information and the financial control environment. Prior to joining TISE, he spent 12 years with Kleinwort Benson, moving from trust accounting to fund accounting, including a portfolio of LSE-listed funds, and then to the finance team. More recently, he has worked as Head of Channel Islands Finance for Kleinwort Benson.
Tracy Lewis (pictured) and James Christie have been promoted to Directors on the board of Guernsey-based Oak Fund Services (OFS). Tracy joined the business in 2017 and has more than 20 years’ experience in the offshore fund administration sector, including periods with Northern Trust and Carey Group. She will take on the role of OFS’s Head of Operations. James joined Oak in early 2020 having worked at Heritage and Estera. In his new role, he will be responsible for managing client relationships for a portfolio of private equity and venture capital managers.
Hawksford has promoted Gavin Wilkins to the role of Group Chief Commercial Officer, based in Jersey. Gavin joined the company as Global Head of Client and Intermediary Relationships last year, having held a Director role with Oak Group. Prior to this, he spent 12 years with JTC Group. In his new role, Gavin will focus on the development of new markets and broadening the client service offering. Following STAR Capital’s acquisition of a majority stake in Hawksford, Gavin will help deliver on its organic growth and international business strategy.
Guernsey-based corporate, fund and private wealth specialist Carey has appointed Andreas Tautscher to its board as a Non-Executive Director. An experienced financial services executive, Andreas has served as Chief Executive of Altair Partners since 2018 and also holds Director roles with Brooks Macdonald Asset Management (International), MJ Hudson and Brevan Howard Global Fund. Earlier in his career, he spent 24 years in senior roles with Deutsche Bank, most recently as CEO Channel Islands and Head of Financial Intermediaries for EMEA and LATAM.
R&H Jersey, part of Rawlinson & Hunter, has promoted three Directors to Partner: Katrina Williams (pictured) and Matthew Christensen of R&H Trust Co (Jersey), and John-Paul Meagher of R&H Fund Services (Jersey). Katrina joined R&H in 2007. She specialises in offshore trust and fiduciary structures, working with entrepreneurs and high-net-worth families with a focus on estate planning. Matthew has been with R&H as a Director since 2018 having been a Director at Intertrust, Jersey. And JohnPaul joined R&H in 2011, having previously worked in audit at KPMG.
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Credit Suisse in Guernsey has appointed Glen Tonks as Chief Executive Officer and Branch Manager for Guernsey. In his new position, Glen will be responsible for strategic direction and operational performance of Credit Suisse’s Guernsey branch. He joined Credit Suisse in Guernsey as Chief Operating Officer last year, having spent 25 years in banking and financial services across five countries, most recently with HSBC in the Channel Islands. Glen also spent five years as Country Head for New Zealand with HSBC, having spent five years working for Westpac New Zealand.
Actuarial firm Dorey Financial Modelling (DFM) has appointed Sally Diamond as Operations Director, based in Guernsey. With more than 30 years’ experience of project management, Sally has held senior positions at both Guernsey Post and Jersey Post. She was also a department head within the States of Guernsey, responsible for the Guernsey Harbours leisure sector. Sally has spent the past four and a half years with Northern Trust in Guernsey as project lead for the development and integration of new business products and processes for ultra-high-net-worth clients.
Monique O’Keefe has succeeded Ian Wright as Deputy Chair of the Jersey Financial Services Commission, having joined the regulator’s Board of Commissioners in December 2018. Monique co-founded Jersey-based financial consultancy Kairos Wealth in 2015 and is still a Director. She has also held directorships at Merrill Lynch and Goldman Sachs, and currently serves on the boards of several financial firms. Her early career included five years as a lawyer with New Zealand law firm MinterEllisonRuddWatts, based in Australia, and four with Clifford Chance in London.
RBS International has named Bradley Davidson as Manager of Environmental, Social and Governance (ESG). Bradley will lead the bank’s ESG team, shaping sustainable outcomes in its jurisdictions and providing insights across its channels and clients. Now based in London, Bradley has for the past year worked for the bank in Jersey. He started his career in the firm’s corporate and markets graduate scheme in 2018 and has experience in relationship management, customer experience and markets. He sits on the Institute of Directors (Jersey) environmental sub-committee.
Enhance Group co-founder Richard Sayers has returned to the firm as its Client Services Director after three years elsewhere. With more than 27 years’ experience in investment management, oversight and fiduciary services, Richard was a Portfolio Manager for Barclays Wealth before launching Enhance in 2005. He relocated from Jersey to Singapore in 2015 to set up Enhance Group in Asia. Then from 2017, he spent three years as MD of Equiom Fiduciary Services in Singapore, before returning to Jersey last year as Head of Client Relations for TEAM Asset Management.
Ashburton Investments (International) has appointed Seb Volpe (pictured) as its Chief Operating Officer. Seb has been with the firm for more than six years, most recently as Operational Change Manager in the operations division. Before joining Ashburton, Seb spent more than 20 years with Kleinwort Benson. In addition, James Cooke has joined the board of Ashburton (Jersey) as Director of Investments for Ashburton Investments (International), following his promotion to Head of Global Equities. He joined the firm in 2019 having been a consultant at Asset Risk Consultants.
www.blglobal.co.uk march/april 2017 13
Meeting changing expat expectations
CO M M E N T
JOHN GODDARD Head of HSBC Expat
Why the Channel Islands are well placed to adapt to expats’ evolving demands
he world has unquestionably changed. Changed through major disruptive events such as the pandemic, digital and technological advancements, societal, cultural and economic shifts. Some things, however, have remained consistent for the world’s expats. It has always been the case that expats look for stable, safe and secure places to grow and access their money, and that remains as true today as it ever has been – peace of mind and simplicity are qualities prized by expats, and the Channel Islands have a good track record in delivering on them. Of course, events of the past 18 months were unpredictable, and expats will have been impacted in a variety of different ways during the pandemic and the restrictions it brought with it. Some will have deepened their ties to their ‘host’ markets and strengthened their reasons for living abroad, while others may have made decisions to return home or postpone a planned move. What is clear is just how important it is for those who are serving the expat market to have a profound understanding of the constantly evolving and increasingly complex lives that expats lead, the challenges they face and their thoughts about the future. EVOLVING SCENE Regardless of the pandemic, the expat scene is constantly evolving anyway, which is why we undertake an annual global survey – Expat Explorer – to help gain a better understanding of trends shaping expat lives. It’s become the longest running expat survey of its kind in the world, and we’re proud that it’s delivered by our team in Jersey. The survey regularly throws up interesting dynamics – in recent years, for example, it highlighted that the age range of expats is getting wider, with many choosing to make the decision to move abroad earlier. The reason why expats choose to move is
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changing, too. Career and financial goals continue to be major drivers influencing the decision to become an expat. However, lifestyle, work-life balance, adventure and even romance are, according to our data, becoming increasingly important reasons. The work-life balance and lifestyle factors are key reasons why the Channel Islands have fared so well in the most recent iterations of the survey. According to the last data set we gathered, in Jersey, expats moving to the islands had planned to stay for an average of 7.2 years but, after settling, the average length of expected stay more than doubles to 15.7 years. More than one in three (35%) expats who stay longer in Jersey than anticipated do so for love, topping other factors such as higher wages or career progression. Life is good for children as well as adults – 59% of expat parents on the island believe it is easy for their children to make friends locally and 55% say their children have become more adaptable to change as a result. For expats moving to Guernsey, disposable income may not go up as much as it does in neighbouring Jersey. Nonetheless, expats claim a very significant improvement in their work-life balance, even ahead of locations such as Australia, Ireland and Thailand. PANDEMIC FALLOUT The overall fallout of the pandemic is, of course, still to be realised and, with additional external factors also influencing expat decisions, it’s imperative that we as an industry are ready to respond to changing expat behaviours as they continue to evolve. Only by monitoring this can we continue to adapt and hone our proposition for the expat market. In particular, we need to make it easy for expats to do business with us through their channel of choice. That increasingly means through a digital-first approach, with the digitisation of banking having the potential to dramatically change the expat experience, from onboarding through to ongoing interaction. There is still much uncertainty in the world and it’s highly probable that those living abroad might feel isolated as restrictions persist in certain regions. That gives expat hubs such as the Channel Islands a real opportunity to develop their offering and provide new solutions to meet a real need. The key is being able to demonstrate an indepth understanding of a truly global market so that, as borders begin to re-open, we can continue to support expats through a defining moment in a generation. n
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Having spent his entire career in technology, Keith Hale is currently steering corporate services and trust market digital solutions provider TrustQuay on a growth journey. Here, he sets out how he expects the sector to evolve – as well as his expectations for the further digitalisation of the financial services sector as a whole Words: Jon Watkins Pictures: John Liot
Did you enter the world of technology because you foresaw the boom, or was it a coincidence that you entered such a rapidly developing area? I vividly remember the first time I saw a computer coming into my school and thinking:”Wow, that’s cool, I want to get my hands on that.” I was immediately engaged – programming was the main thing you could do with a computer in those days to create stuff. Then my father bought an Apple II and I was away. So it was very much that my interest in technology came first and then the industry boom followed. I’m delighted the boom followed, obviously, but that wasn’t the reason I got into it. My father actually warned me to be careful about going into technology – he said the bubble would burst, which he happily reminded me of in the dot com bust period in the early 2000s. I pointed out we are in the middle of the digital revolution, but he was sceptical. So that’s still an ongoing joke in the family – it turned out pretty well for me in the end.
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What impact did that background have on your career and the route you have taken since then? I really see my career so far as being three chapters – and I’m currently writing the fourth chapter. The first chapter, postuniversity, is what I call the ‘learning the ropes’ part of my life. After university I worked for a relatively small technology company, which meant I did pretty much every role – programmer, business analyst, project manager. That was the learning the ropes chapter, throughout the 90s. The second chapter came at the end of the 90s, when I launched a start-up with 10 friends and colleagues. The company was Netik, and we built that up to about 200 people before we got sold to Bank of New York. That was a great experience, partly because I lived in New York and San Francisco, as well as in the UK. I learnt an awful lot about building a software company from scratch and I also learnt a lot about what not to do. And then, from 2010, I did what I call a scale-up rather than a start-up – taking an existing company from a couple of hundred people, and doubling it in size. The company, Multifonds, provided fund administration software, based in Luxembourg. I left in 2018, a few years after we’d sold it to another larger public tech company, Temenos. As I say, the fourth chapter is being written at the moment – the TrustQuay chapter – which we hope will recreate successes I’ve had in prior guises. So what’s the story behind TrustQuay, what’s the USP and why is this such an exciting chapter for you? We provide end-to-end – or front-to-back – software for the corporate services and trust market, and to a certain extent the alternative fund administration market. We’ve got 460 customers globally across 30 jurisdictions. In the Channel Islands specifically, we have more than 60
customers in Jersey right now and about 35 in Guernsey. So we’ve got about a quarter of our customer base in the Channel Islands and it’s obviously a massive centre for trust and corporate services. What we think is that we’ve got the best technology and the widest global coverage, combined with the strongest team for our niche, which is corporate services and trust software. So that’s our differentiator – the coverage, the team and the best technology functionality associated with it. How was the company founded and what’s the roadmap for evolving the business? TrustQuay brought together two businesses. One was Touchstone Wealth Management, which has been in Jersey for many, many years and was headquartered here, and the other was Microgen. We bought the two businesses together because we really felt that they offered a strong proposition as a joint entity. We agreed the deal in November 2019 and signed it in February 2020 – and when you consider the timing of that, with Covid-19, we’ve actually done remarkably well. In the midst of the pandemic, we’ve signed another 34 customers and delivered 33 projects. When the pandemic hit, I did think: “Oh dear, this is going to be a problem”, because I had a business plan to execute on and we faced this huge disruption. But there’s a massive digital agenda in this market and to accommodate that we’ve delivered a new product, our client portal. Traditionally, we provided backoffice and middle-office software for our customers. How a corporate service provider or trust company interacts with its clients, be it a trust or a corporate or an individual, has been very manually based without any digital portal or apps. Enabling that kind of live ‘front office’ digital interaction is a major new driver for the industry and us.
Tell us about your background and upbringing, and how that set you on the way to where you are today. I was born in the UK, in Hertford, from where I went on to study electronic engineering at Bachelor level, followed by a Master’s in information systems. That was in the 1980s and early 90s, but I’d always been interested in technology, even before university times – and before such a thing as digital natives existed. I remember coming second in a young programmer of the year competition in the early 80s – which pointed me toward a career in technology. The other big influence was my father, who was quite entrepreneurial. So I developed this dual interest in technology and building and growing businesses. And I’m lucky, because having always wanted to be building businesses and building them in technology – that’s what I’ve done.
interview Keith Hale www.blglobal.co.uk
may-july 2021 15
What are the longer-term growth plans for TrustQuay? The important thing to recognise here is the market context. The corporate services and trust market has some 2,200 corporate services and trust providers globally, so the market is very fragmented. There’s been significant consolidation already, but that is accelerating and there’s going to be a rapid reduction in the numbers. The market is growing but it’s consolidating. The other aspect is digitalisation. We did a survey last year, and the industry ranked itself only 5 out of 10 for digitalisation. And I think that’s a little generous. So, as the industry consolidates but digitalises, our ambition and our whole investment thesis is to enable that digital transformation in an industry that wants to catch up with other parts of financial services and other industries. That, primarily, is an organic story. We’ve already got a significant customer base, probably the biggest in the software provision market to this sector. And doing more for existing customers, attracting new customers and targeting other markets where we’re not as well-known are key elements of that. In Jersey, we’re reasonably well known, but we’ll be looking to do more in markets such as Luxembourg and Singapore, where more new potential customers are. If an acquisition comes along, and fits neatly in, we may take that opportunity. But we’re not one of these companies that goes out and buys everything we can. The intent is to build a world-class software company to service the corporate services and trust market, and expand more into the alternative fund administration market.
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You touched already on digitalisation of corporate services and trust providers. But what other factors are driving the evolution of the industry? First and foremost, there’s a regulatory agenda – with a number of essential and increasing hygiene factors that have to be adhered to. And this is really relevant to Jersey. To meet those requirements in an efficient, automated way is key and is the right thing to do. The example I think of is the economic substance regulation, where entities have to demonstrate economic substance within the specific jurisdictions – Jersey and Guernsey included. What we’ve done is to build a rules engine in partnership with a global accounting firm to assess whether you are now in scope to meet these regulatory requirements. Because it’s automated, it’s 96% more efficient to do it with this piece of software than it is to process it manually. And when you break that down, it’s really logical. You’ve now got a computer doing something rather than somebody checking a bunch of different questions on a bunch of different data. The second driver is increased demand for wider automation in general. Many tasks – not just regulatory – in corporate services and trust providers remain very manual and paper-based. Using automation to reduce the reliance on people increases accuracy, reduces the need for operational staff and is less repetitive and boring for those working in the business.
We’ll be looking to do more in markets such as Luxembourg and Singapore, where more new potential customers are
And it should reduce costs for the business and for the end client. It can deliver the corporate service and trust provider increased margins and, ultimately, make the businesses more valuable. The staff are better off, the clients are better off, the organisation is better off, and the shareholders are better off. That is why digitalisation is so important. That’s a compelling proposition, but does the traditionally manual nature of the industry make it challenging to persuade firms of the benefits of digitalisation? When we surveyed the market, there were a couple of statistics that jumped out. Two out of three firms said their end-clients wanted an increased digital experience. But what was really compelling was that 69% of firms wanted to digitalise their business in terms of client engagement over the next two years – just to remain competitive. That’s really important. It’s not an easy sale; there is some conservativeness. But I think it’s becoming a more compelling sale. Technology was looked down on as this pesky thing you had to have for a while –
Has that digital agenda been accelerated as a result of Covid-19 – particularly in the markets you are focused on? We’ve all heard the talk about that one month in March 2020 moving the digital agenda forward a year. And you might argue that the year we’ve had since then may well have moved the digital agenda forward 10 years. That being the case, and given the industry we’re in, there’s definitely plenty more digitalisation and digital transformation to do – because the industry is quite old-school, frankly, in the way it interacts with its customers and the internal processes. In the second half of last year, we did sign more customers than I expected. I guess the other relevant thing here is that all our projects are now delivered remotely. Buying something as sophisticated as enterprise software is a big ask without actually physically meeting somebody – but that’s what’s happened. Ultimately, we are seeing a significant digital transformation. I think that would have happened with or without Covid-19, but it’s certainly accelerated it.
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Interview and that was certainly my experience when I started in the industry 30 years ago. But it’s coming up the agenda. The other dynamic is that the market has moved in terms of how it charges its clients. Traditionally, you would get billed, like in a law firm, on the basis of time – because a lot of these businesses were spin-offs from law firms. But it now operates on much more of a fixed price for the entity you have or the process you have. If you’re using fixed pricing, you want to get the job done as quickly and efficiently as possible. That has really changed the dynamic over the past few years. How far do you see the market changing in, say, the next 10 years – and how far do you expect the consolidation to go? Well, you won’t have 2,200 players, you’ll probably have hundreds, and in Jersey you’ll have a handful of the global players and a reduced number of local specialists. I’m not going to guess the names but I predict around 20. I come from a long-only fund admin world and I saw that happen there over the last 20 years. The custodian banks merged into a top 10. Similarly in this market, I think you’ll have those that will be almost like global factories – production lines of highly automated activity covering a load of jurisdictions, covering the very largest corporates, funds and very large family offices. There’ll also be this polarisation to what I call the ‘specialist’ providers, the providers that offer very high-value, high-touch services to clients who are happy to pay more and have specialist skills – and that might be in a specialist location such as Jersey or Guernsey. But you’ll need technology at your core whether you’re a global player or a specialist provider, because the global player is all about efficiency and coverage, and a single view of the client, while if you’re at the other end of the spectrum you want the technology to back up your personal level of service with digital client portals as well as automated risk assessments and filing. The big global players will probably still have more of a patchwork of systems and technology, because of their scale; the specialist providers will want technology that can do their soup to nuts processing– probably deployed on a software as a service basis. Do you see the financial services sector as a whole moving in the same direction – with further, more rapid digitalisation and greater growth of fintech? The term fintech is often used in the wrong way. People have this view that fintech has to mean a start-up and it has to be disruptive. But what we’re really talking about is ‘financial technology’. It’s not about disruption in that sense. It’s about changing the way people work
FACT FILE Name: Keith Hale Role: Executive Chairman, TrustQuay Born: Hertford, England Educated: Birmingham and Liverpool universities Family: Married; three children; one dog; two rabbits Home: “Lucky enough to have several homes” Hobbies: Cycling (Keith is a member of Jersey Rouleurs), tennis and “a bit of golf”
and the way businesses reach and engage their clients – and the fact that we can all move in that way, rather than just a few ‘disruptors’. It’s like when Tesla came up with an electric car. Now, the whole industry is moving to electric cars. It’s changed the game. The same is happening in financial services and the same will happen in the corporate services market. People will move to a digital-first, technology-driven operation that isn’t manual – and if you don’t, you’ll be left behind. Businesses will embrace technology in a much more meaningful way. How they engage with clients, how they automate processes and how they deploy software in the cloud will change in the next 10 years without a doubt. The reason is that digital can massively improve the client experience. If I’m a client of a trust company, I don’t want to have to rely on post, email and calling somebody to
respond to a query. I want a secure portal or an app that will give me the data, so I can request and hopefully get a response in the middle of the night when I remember I need something done. As clients, we prefer to do that rather than rely only on a more antiquated, nondigital way of engaging. I still want to have my relationship manager doing the filing correctly, for example, but I want to have a digital way of engaging too. It’s what the next generation of digital natives expects. You’ve talked about how the islands’ corporate services and trust providers markets might evolve, but how do you view the islands’ longer-term strength? The Channel Islands certainly have a strong position when it comes to finance. Almost all the global corporate services, trust and alternative fund administrators are already very invested and committed to the Channel Islands. Also there’s a wide selection of specialist local providers. But it’s the islands’ regulators as well as service providers’ ability to remain nimble and embrace change, particularly given the rapidly consolidating and digitalising market, that are key to long-term success. Working in new ways that are far more automated, and engaging with clients digitally as well as traditionally, could and should be a real strength and differentiator. That’s why I can see the Channel Islands continuing to prosper in the future, but only if change is embraced. n
may-july 2021 19
Seeds of Change Earlier this year, UBS published Seeds of Change, a guide for philanthropists and changemakers to protect biodiversity and all life on land. Robert Broughton, Senior Client Adviser at UBS Wealth Management in Jersey, discusses how UBS is supporting and effecting change on environmental issues
OUR PLANET AND its inhabitants are
under threat. In the past 50 years, the world’s human population has doubled, and we are using the Earth’s resources at an unsustainable rate. Natural habitats are being destroyed and wildlife populations have fallen by 60%1. Many species are endangered or already extinct – and if we don’t reverse climate change, mankind could also join that list.
WHAT DOES UBS DO TO PROTECT LIFE ON LAND? Recognising the risks associated with biodiversity loss and the economic value of ecosystem services, we have defined specific standards that seek to promote biodiversity protection on a global scale. We will not engage in certain activities that endanger animal species and
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contribute to deforestation and its related impacts. Our standards for controversial activities and areas of concern not only take into account deforestation and forest degradation but also other activities, such as fisheries, that impact on marine species. As loss of biodiversity is intertwined with climate change, the transition to a low-carbon economy is even more vital. UBS supports this through a comprehensive climate strategy that underlines our commitment to the United Nations’ Sustainable Development Goals (SDGs) on climate action and affordable, clean energy. We aim to be a leading financial provider in enabling investors to mobilise private and institutional capital to climate change mitigation and adaptation, while supporting the transition to a low-carbon economy.
As one of the world’s largest global wealth managers, we regard it as particularly critical to help private wealth contribute to the development of a more sustainable world.
SUPPORTING CLIENTS TO ACT ON BIODIVERSITY LOSS We also recognise the importance of mobilising financial resources to conserve biodiversity and ecosystems and to help clients who are wanting to shift their portfolios towards alignment with environmental goals. In 2019, for example, our investment bank supported 25 high-profile issuances of green and sustainable bonds. These bonds support projects in the areas of energy efficiency, pollution prevention and control, terrestrial and aquatic biodiversity conservation, and climate change adoption among others. Our philanthropy services offer innovative ways to tackle some of the world’s most pressing environmental problems through advice, insights and execution. Our guides – including Seeds of Change and Sea Beyond the Blue – aim to help philanthropists make more informed decisions about their philanthropy, pointing out the importance of protecting biodiversity and how to drive systematic change. We support social entrepreneurs to scale their positive change by connecting them with our network of employees, partners and clients via the UBS Global Visionaries programme.
We regard it as critical to help private wealth contribute to a more sustainable world
Examples of support offered through this programme include IPE (Institute for Ecological Research), which is dedicated to biodiversity conservation in Brazil, and Parley for the Oceans. Parley was formed to ’bridge the gap between environmentalists and corporations’ by bringing together scientists, artists and brands to find solutions to prevent the destruction of the oceans.
ENGAGING IN INITIATIVES ADDRESSING BIODIVERSITY RISKS UBS is actively involved in relevant developments, demonstrating thought leadership on biodiversity topics. These include our membership of the Roundtable on Sustainable Palm Oil and our participation in various workstreams of the Natural Capital Finance Alliance, which aims to provide the knowledge and tools that help the financial sector to align portfolios with global biodiversity goals.
RAISING EMPLOYEES’ AWARENESS ABOUT BIODIVERSITY We have launched several campaigns to involve our employees and raise awareness of our environmental impact and biodiversity loss. A notable example is the campaign ‘Go drastic, cut the plastic’, set up to eliminate single-use plastic items from use throughout the firm. Another initiative is the creation of the Going Greener app, where UBS employees take on fun challenges and get interesting facts and practical tips around sustainability and climate-friendly behaviours for their daily life. Employees can also participate in volunteering activities to remove invasive species and protect the forest in the locations where we are active. Global biodiversity funding is estimated to be up to $91bn annually2. This sounds a lot, but to reverse biodiversity’s decline by 2030, research suggests that the world needs to spend up to 10 times as much for the next 10 years. Funding to tackle biodiversity, conservation and climate issues is limited, across public and private sectors alike. In a world of tightening budgets and struggling economies, public sector funding may be slow to increase, so it’s up to all of us to act, whether as philanthropists, investors, business leaders or individuals. n
To download the Seeds of Change guide, please visit www.ubs.com/land Alternatively, contact Robert Broughton for more information on how UBS can support your philanthropic goals: Robert Broughton, Senior Client Advisor UBS AG, Jersey Branch 1, IFC St Helier, Jersey JE2 3BX Tel: 01534 701173 Email: firstname.lastname@example.org
1 WWF (2018), Living Planet Report – 2018: Aiming Higher. Grooten, M. and Almond, R.E.A.(Eds). WWF, Gland, Switzerland 2 OECD (2020), A Comprehensive Overview of Global Biodiversity Finance Final report UBS AG, Jersey Branch is authorised and regulated by the Jersey Financial Services Commission for the conduct of banking, funds and investment business. © UBS 2021. All rights reserved.
May-July 2021 21
The customer of tomorrow Client demands are changing rapidly – not just a demographic shift, but also increasing demand for ethical finance and fast, automated services that still offer a personal touch. Meeting those demands can be a delicate balancing act Words: Alexa Robertson
conflicting demands for financial services providers. While the past 18 months have supercharged digital capabilities and streamlined processes, organisations are still managing a swathe of customers resistant to increasingly automated processes swiftly becoming the norm. Add to that a growing demand for ESG-linked products – led by baby boomers, according to the FT1 – along with increased competition from startups, and it seems the complex customer of tomorrow could be difficult to please. It is, however, a time to be embraced by financial services organisations, says Dan Gallienne, Account Director at Orchard PR, who is creating a guide on how providers can refresh their strategies to tap into new opportunities. “We’re seeing a growing cadre of digital nomads really, who are getting involved in becoming consumers at an institutional and retail level,” he says. “That, combined with the effects of the pandemic, where everyone has had to become more digital by necessity, means you’ve got a customer base that’s increasingly used to online interaction. What we’re seeing – and I think this is a
22 may-july 2021
consequence of the digital revolution the world has been undergoing for the past few years – is a more engaged customer base. People feel empowered and have the tools to serve themselves, to find information and manage data.” As a result, Gallienne says, expectations from customers are also changing. “Where previously it might have been acceptable for an investment manager to report twice a year or even annually on results and performance, now they have to report almost daily, perhaps more. “Clients know they can find that information, and people are becoming used to having information so quickly in other areas of their lives.” Nicola Mauger, Manager at Butterfield Trust (Guernsey), agrees, and says the shift toward digital communications is giving customers more choice over the method of communications that works best for them. “The way in which we deliver things to our clients has changed, depending on what their preferences are,” she says. “Clients are now asking for data and information in different formats, as opposed to big, formal board packs, for example. “It may well be that it’s provided digitally now, and more regularly, with
The shift to digital is creating new opportunities for authenticity
ON THE FACE of it, it’s a time of
May-July 2021 23
Ethical funds grew by more than 4% in the pandemic, nonethical funds made an average loss of 1.5%
more easily digestible summaries if that’s easier for clients.” As well as increased access to data, the sheer volume of digital transactions we now make through our phones, tablets and computers means customers’ expectations of fast, streamlined processes at all points of contact are high. Figures published by Forbes2 show that, in 2020, 44% of retail banking customers relied on mobile apps to conduct business, and that the number only looks set to rise. It claims that, in 2021, the sector is likely to increase investment in “modern data and analytics tools, artificial intelligence capabilities and digital platforms”.
GETTING CLOSER TO CUSTOMERS Although investment is required, Gallienne believes that the shift to digital is creating new opportunities for authenticity among firms that might previously have operated in a way that kept them relatively remote from customers. “Let’s say you’re a high-net-worth client,” he says. “You’re not meeting the director of your private wealth company at a fancy restaurant once a year any more. All of a sudden, you’re on a Zoom call with them in their spare bedroom, which has been hastily converted into a meeting room, and someone’s got a leaf blower going next door. It’s never been more apparent that we’re all just human beings
24 may-july 2021
living on the planet – engaging with someone on a human level has become increasingly important. “Society has changed and, with that, expectations and norms have, too. It’s about characterising communications activity, and that can only be a good thing.” Mauger says that, rather than being detrimental to client relationships, the increase in virtual communication actually makes it easier in many cases to maintain a regular dialogue. “Before Covid-19, we operated in a much more traditional manner,” she says. “We used to travel to see clients face to face and we didn’t use video conferencing. But that’s completely changed. We’re meeting a lot of our clients virtually now, and we’re finding that clients are offering that up much sooner than they would a face-to-face meeting. It’s much easier to pin people down. It’s actually been a very positive thing for us.” With many customers regularly active across a range of social platforms, there is increasing competition for the attention of new and current customers. The key to cutting through the noise, Gallienne says, is authentic messaging. “The important thing in engaging with customers in the current climate is something that’s always been true in public relations, and that’s being interesting and insightful,” he says.
“One of the things that’s coming up a lot with clients is an imperative to educate. We’re almost returning to those BBC principles of communications activity that revolves around educating, informing and entertaining. Being interesting is as vital as it ever was. That’s arguably more difficult because it’s noisier out there, but the way to do that, fundamentally, is to be authentic. “There’s an expectation in financial services now that the CEOs and c-suites, the people at the very top, are seen and heard, that the messaging has to come from the top down.”
A SHARED RESPONSIBILITY It’s not only authenticity that tomorrow’s customers expect. Growing urgency around climate change, and social movements such as Black Lives Matter, are creating demand for financial products that give back. And tapping into the gap is not only an ethically responsible move for providers, but also commercially smart. According to the FT1, a recent study by Moneyfacts found that ethical funds in the UK proved more resilient than other types. The average ethical fund grew by more than 4% during the pandemic, while non-ethical propositions made an average loss of 1.5%. “Purpose is increasingly important, so people want businesses to have a purpose and to stand for something,” continues Gallienne. “Customers expect the top-level people to be the embodiment of that and the voice of that. “I think that there’s a really great opportunity for financial services firms which, generally speaking, have been relatively conservative in their communicating. They can be bolder and establish a clear voice and identity.” For financial services providers, whether long-established or agile disruptors, one of the main challenges lies in balancing the convenience of automated processes with a personalised service. “It’s a delicate balance to strike between being seen as a technologically able and innovative business that puts effective solutions at the heart of what is offered, and the message that you’re still a load of people who are approachable and can provide excellent customer service,” Gallienne adds. “How do you balance that? It’s tricky, and organisations might need to try a little harder. You need to be more proactive and that’s where it comes back to having a strong brand identity and strong corporate messaging for what you want to achieve. Employees at all levels should feel empowered and supported in being proactive.” n
1 www.ft.com/goodmoneyweek 2 www.forbes.com/sites/googlecloud/2021/02/05/6trends-that-will-shape-the-financial-services-industry-in2021/?sh=2c33c76e42b6
Grasping the nettle on dispute resolution Not every couple can, as Bill and Melinda Gates have done, split with a benign message of no longer believing in mutual growth – and often familial disputes involving trusts and associated structures are now commonplace. We spoke to Trust Corporation International Director Paul Buckle about the increase in such disputes and how they can best be mitigated – or avoided altogether Paul, why are disputes increasingly common in the private client world?
Disputes are a fact of life, and an unwelcome reality. And they are just as much a reality for the ultra-wealthy as they are for all of us. All families disagree and sometimes fight, but in the case of high-net-worth individuals, there is often more to fight over, not to mention the complex structures and arrangements in place that govern those assets and dictate their ownership. As a result, we often find ourselves managing contentious situations across trusts, pension schemes and companies. So you could say that disputes – minor and major – are increasingly common across the board.
Can disputes ever be pre-empted and avoided entirely?
Sometimes a fiduciary is only involved once the dispute is in full swing. But a good trustee should be trying to spot problems before they occur
and be intervening to open up a dialogue and prevent the situation from getting any worse. These situations often escalate as they are ignored and placed in the ‘too difficult’ box. Constructive dialogue is the best way to pre-empt a dispute, but even where the matter of contention has already come to light, hope is not lost. At Trust Corporation, we believe that with careful management and guidance, disputes can be resolved, very often amicably, out of court and to everyone’s satisfaction.
All families fight, but HNW s often have more to fight over
Are fiduciary professionals qualified to mitigate disputes?
To be able, as a fiduciary, to manage, understand and positively contribute to disputes, technically and tactically, is an acquired skill (and very different to that of an adviser). Yet it is not a skill that is widely available. Those looking for proactive dispute resolution need a trustee who will confront difficult situations head on, whether that’s in the private wealth arena, or related to pension schemes, unit trusts or investment funds. Of course, trust disputes are very different from ordinary commercial disputes and bring unique pressures. They can be emotionally distressing, financially expensive and vastly damaging to reputations. Trust disputes can be intensely personal and highly charged for those involved. A trustee therefore needs to bring not only independence and a fresh perspective to the situation, but also to strike the delicate balance between being dispassionate but empathetic. And above all, they need to remain calm.
How does Trust Corporation International approach the more contentious elements of trust work?
Good trust work is built on solid relationships, so we always work with our clients as partners and identify what is important to them.
That informs all aspects of our work – where we are pragmatic and meticulous, commercially astute in our dealings with third parties and robust in the face of a challenge. Our experience in the contentious space is based on our team’s expertise and varied backgrounds. Many of our staff have legal, tax and accountancy backgrounds, which means that while we are not advisers, we are well placed to identify and understand the issues at an early stage. It’s always important to have an eye for the end-game. Sometimes people ask us to dismantle a structure they do not want, or even just to hold the ring, where there is a period of disharmony. In these cases, the structure will often be at the end of its life and needs terminating. However, in other cases, working constructively through a difficult period can lead to future stability and a more positive relationship. These days, contentious work is sadly unavoidable, but if you have to confront it, you should do it with confidence and sensitivity. n
FIND OUT MORE
For more information on trust disputes get in touch with Paul or the Trust Corporation International team: Tel: +44 (0)1481 730430
May-July 2021 25
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ciiom.hsbc.com/premier 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. HSBC Premier eligibility criteria: you’ll need to pay your annual income into your HSBC Premier Bank Account and have either (a) savings or investments of at least £50,000 with HSBC in Jersey, Guernsey or Isle of Man; or (b) you’ll need to have an individual annual income of at least £75,000 and one of the following products with HSBC in Jersey, Guernsey or Isle of Man: a mortgage; investment, life insurance or protection product.
2 You must be a new customer of HSBC and open an HSBC Premier current account, fund it within 60 days to a minimum of £1,750 and register for HSBC Islands Mobile or Online banking services. Joining bonus may only be claimed on one new account. Offer ends 30 June 2021. T&Cs apply. 7-day guaranteed transfer with CASS. Not all banks in the Channel Islands and Isle of Man offer the Current Account Switching Service. Please check whether your existing bank supports the service. 3 All credit applications are subject to status, our lending criteria and an assessment of the circumstances of the applicant. Representative 18.9% APR (variable). 4 3.3% APR representative for loans between £7,000 and £30,000. The rate is subject to change and the representative APR may not be the rate you’ll receive. We’ll offer you a rate based on our assessment of your personal financial circumstances. The maximum APR you could be offered is 21.9%. HSBC Green Loans are subject to approval for a green purpose and you must hold an HSBC bank account, financial and eligibility criteria apply. T&Cs apply.
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. In the Isle of Man HSBC Bank plc is licensed by the Isle of Man Financial Services Authority. HSBC Bank plc, Jersey Branch, is a participant in the Jersey Bank Depositor Compensation Scheme. The Scheme offers protection for eligible deposits of up to £50,000. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details of the scheme and banking groups covered are available on the States of Jersey website www.gov.je/dcs, or on request. HSBC Bank plc, Guernsey Branch, is a participant in the Guernsey Banking Deposit Compensation Scheme. The Scheme offers protection for ‘qualifying deposits’ up to £50,000, subject to certain limitations. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details are available on the Scheme’s website www.dcs.gg or on request. HSBC Bank plc in the Isle of Man is a participant in the Isle of Man Depositors’ Compensation Scheme as set out in the Depositors’ Compensation Scheme Regulations 2010. HSBC Bank plc is a member of the HSBC Group. Its ultimate parent company is HSBC Holdings plc. The UK Financial Conduct Authority is the lead regulator for HSBC Holdings plc. HSBC Bank plc places funds with other parts of its Group and thus its financial standing is linked to that of the Group. Publicly available information, including reports and accounts is obtainable from www.hsbc.com. 210420/MA/129
Going global In an increasingly globalised world, Channel Islands businesses can position themselves to handle the needs of clients across many nations in the face of ever more complex tax and regulatory challenges Words: Richard Willsher
financial services firms’ activities around the world, and constantly changing tax regimes across jurisdictions, is it possible for these organisations to operate globally? Or are they all really local firms operating under a global umbrella? The ‘easy’ strategy for financial services firms considering how to position themselves is to become specialists at doing business in particular countries or regions. However, the increasingly global nature of their clients – in terms of where they reside, where their businesses operate and the types of deals they want to do – means having a global offering is growing in importance. There is an in-between approach – linking up with specialist partners in other parts of the world to conduct crossborder business co-operatively. In this way, a business can more easily maintain a presence in culturally diverse locations and
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stay abreast of kaleidoscopically changing compliance requirements. But however firms get there, the need to be able to offer a global service, to have a global understanding of clients and to serve clients from anywhere in the world is growing. And that’s particularly the case for Channel Islands businesses, which are seeing more interaction with global clients than ever before. To explore how businesses are approaching the challenge, we asked a selection of Channel Islands business leaders how several influencing factors – substance requirements, taxation and international client demands – are affecting their ability to operate globally.
SUBSTANCE REQUIREMENTS A question for many in the Channel Islands might well be how the EU’s 2019 substance requirements colour their views. Is it a challenge for islands-based businesses
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May-July 2021 29
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TAXATION Given the low-tax environments of international financial centres, recent initiatives by the OECD and US President Joe Biden’s administration might appear to be disadvantageous. That’s not necessarily the case, however. Both bodies’ proposed tax legislation are actually aimed at ensuring tax transparency and getting corporations and individuals to pay tax of the right amount, in the right jurisdiction. This does not affect Channel Islands financial services businesses, as Anita Weaver, Director, Corporate Services, at wealth management and administration specialist Stonehage Fleming, explains. “Wealth is international and many of our clients are global citizens,” she says. “While we have moved across borders as our clients and their interests have done so, it’s also important that we have been able to provide a high-quality service from a tax-neutral jurisdiction in order to enable those cross-border investments, both from a funds perspective but also for our family office clients.
Wealth is international and many clients are global citizens
“But I think it’s important to note, that it’s not just the tax-neutrality that is important for our clients. They are also looking for service providers that are in a stable and resilient jurisdiction that has robust infrastructure. “The past 12 months have shown us that infrastructure is essential to the service that we can provide, and also that we have a high-quality workforce to be able to service different products that meet our clients’ needs.”
It is clear that what’s key is being able to meet the needs of international clients – which may indeed mean having an international presence. Regardless, there are no taxation barriers to Channel Islands firms operating globally, with clients continuing to meet their tax obligations in the appropriate tax jurisdictions. The focus is on clients’ businesses, what they want to achieve and where they want to achieve it – not where they pay their tax.
SUPPORTING INTERNATIONAL CLIENTS “If a client wants to structure a transaction in a certain way through one of our jurisdictions, our service providers here are more than capable,” says Daniel Hainsworth, Global Head of Corporate Services at Hawksford in St Helier. “The regulatory environment here makes it very clear what needs to be done and generally clients accept the required steps and processes involved. “Where you can meet little pockets of ‘international’ friction is from clients who are used to operating in other jurisdictions. “These clients have to go on a learning journey, and some may ultimately choose to structure things in a different way because they haven’t yet managed to understand the process required to have true substance
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to comply? “Absolutely not.” That’s the unequivocal answer from Mark Porter, Chief Executive of professional services firm Equiom, which has operations in Guernsey and Jersey and several other locations around the world. “The introduction of economic substance and the need to be global are not mutually exclusive. Being a truly global business is first and foremost about where and how businesses engage with their clients, understanding the cultural factors that drive business and personal decisions, and offering clients a genuinely locationagnostic delivery model, whatever their requirements,” he says. “The need to have economic substance in those locations is as critical for demonstrating to our global clients that our services are underpinned by a physical presence and on-the-ground expertise, as it is about satisfying regulatory and legislative obligations.” At law firm Ogier, which has offices on both of the Channel Islands among its 10 across the globe, Partners Tim Clipstone and Simon Schilder agree. “There’s a very strong group of administrators, managers, and corporate service providers, on these two islands. The introduction of substance requirements has effectively accelerated the position of the Channel Islands to becoming financial services hubs.”
in a jurisdiction like ours. Jersey is more advanced with legislation to be compliant – or even market-leading – from a European tax perspective.” Despite that, it is important for global financial services businesses operating in the Channel Islands to appreciate where clients are coming from when they look to do business there. “Businesses need to understand the distinction between the ‘what’ and the ‘how’,” explains Equiom’s Mark Porter. “Firms can maintain a global outlook on the types of clients and client segments they engage with, and what capabilities are considered to be strategically viable. “But ‘how’ those relationships are managed and how services are delivered will always be locally nuanced. “Therein lie the dangers of the top-down culture that exists in many global firms – where insufficient weight or respect is given to those local market dynamics and cultural values,” he adds. “By taking time to understand and respect local cultures, we can establish a global ethos centred on common objectives. We have got to be aware of cultural nuances, such as communication style, exchange of feedback and client interactions. Successful firms need to encourage openness and flexibility in order to strike the right balance.”
THE FUTURE IS BRIGHT Looking forward, the islands’ financial services businesses have plenty of room to remain or become global in their scope, reach and offering. Hawksford’s Daniel Hainsworth envisages a positive future. “There is nothing in tax legislation or substance requirements that will prohibit them,” he says. “A plethora of clients need our services, and that’s not going anywhere. “Ultimately, new regulations create a relatively level playing field, so there isn’t jurisdictional arbitrage in the same way as there may have been from a purely taxstructuring perspective. “It certainly isn’t a barrier for financial services businesses to be able to do it,” he adds. “What you need to do is make sure that, as with any other changes that exist out there, you have the right policies and procedures. That you have the right people keeping an eye out for legislative changes. That you implement those, you advise your clients of them and that you do everything that you’re supposed to do. “It’s not rocket science. It just requires a controlled environment and a skilled workforce to be able to carry out the required roles in accordance with policies and procedures, and ultimately legislation.” n
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Jersey – an international finance centre with a global view Given the legislative changes and tax compliance requirements around the world, how does an IFC stay relevant to potential business? Joe Moynihan, CEO of Jersey Finance, explains. How would you describe the global presence of Jersey, in terms of the international financial services and other business carried out in the jurisdiction? For more than 60 years, our industry and partners have worked hard to cement strong political, commercial, cultural and educational ties with countries around the world, from the Gulf and the Far East to Africa and the US. The political and economic stability found in Jersey, as well as our forward-thinking legal and robust regulatory infrastructure, enable us to provide certainty, confidence and transparency to global investors and set us apart from other IFCs. These jurisdictional attributes, coupled with our industry’s resilience throughout the pandemic, are especially attractive to those from, perhaps, less stable jurisdictions. What part do the regulatory and taxation regimes in Jersey play in attracting international business? Our regulatory framework is one of the strongest in the world, and it’s designed to bring clarity and transparency to the world of finance. As for taxation, the main driver has been our ability to maintain our position as a low-tax jurisdiction to the wider benefit of the island, while providing security and certainty through robust regulatory requirements for entities operating in and out of Jersey. We are regularly assessed and have received numerous positive endorsements from supervisory authorities such as the Organisation for Economic Cooperation and Development, the International Monetary Fund and MONEYVAL (the Council of Europe’s monitoring body for antimoney laundering). I believe Jersey’s resilience and the added certainty this can offer investors is a positive differentiator for our jurisdiction. These factors are increasingly at the forefront of investors’ minds now as they seek an effective jurisdictional partner, and will no doubt continue to be a key consideration for multinational clients in the future. How does Jersey stay relevant? The most forward-thinking IFCs need to be resilient in this evolving environment. They need to embrace digital and product innovation and develop products and services that meet the changing demands and expectations of clients, especially next-generation clients. What’s more, Jersey continually evolves and adapts to the external environment. For example, with a growing focus on sustainability, we launched a long-term strategy and vision for the finance industry to support and align Jersey more closely with global ambitions.
Future-proofing your business Nour Belal, English Solicitor at BCR Law LLP, considers how businesses can stay one step ahead of the risks and opportunities of tomorrow WITH UNPREDICTABLE WORLD
events, new and emerging technology and continually evolving regulatory requirements and risks, it is more crucial than ever for businesses to predict where new risks will come from to protect their future. As a law firm, we aim to support businesses to adopt a strategic approach when it comes to planning for the future. We can help businesses feel more confident around how they measure and control growth from a legal and commercial perspective. Here, we take a look at some of the key legal and organisation considerations that you should be considering to futureproof your business.
EMPLOYEE ENGAGEMENT Most businesses will know that a key consideration for success is an engaged workforce. Some of the ways you can look after your staff are: • Private medical insurance – Helping your employees to get back on their feet earlier reduces costs related to sickness absence. Private medical insurance does more for the progress and prosperity of your business than making sure the health of your employees is looked after. As part of a remuneration package it is a compelling way to attract and retain the best talent. If you are including a private medical insurance clause (in an employment contract or otherwise), it is important to make sure that this is appropriately incorporated into any company documents to make it clear as to the extent and level of the cover – whether it extends to the employee’s spouse and what range of cover it will include. •Bonuses – These can be contractual or discretionary. There is no doubt that this is a very attractive incentive for staff. However, employers should be careful with how they deal with their bonus incentive schemes. Decisions by the courts in recent years have determined that there is no such thing as an ‘unfettered discretion’ for an employer when considering what bonus payments to make. Businesses must be careful in exercising their discretion in good faith and on reasonable grounds to prevent any claims which could be brought for unpaid bonuses.
• Life assurance – In a pandemic-aware society, this benefit can end up meaning a lot more than share options, a company vehicle or pension if the worst happens. This is relatively inexpensive for businesses and highly valued by employees, as it is often much more expensive for them to take personal life cover. • Pension – This helps your employees reach the lifestyle they want in retirement. Many employees appreciate their employer helping them start their pension early, so that they can reap the benefits of compound investing. True employee engagement is based on trust and integrity between an organisation and its employees. It is an approach that increases the chances of business success, contributing to organisational and individual performance, productivity and general wellbeing.
CYBER SECURITY With 43% of cyber attacks targeting small businesses, cyber security really is something all businesses must consider. Cyber security is important because it protects all categories of data from theft, fraud and damage. This includes sensitive data, personal data, intellectual property, personal information and industry information. Businesses need to familiarise themselves with cyber security protection to avoid the costs associated with data breaches.
SUCCESSION PLANNING Succession planning is a process for identifying and developing new leaders who can replace key business leaders when they retire or otherwise leave the business. Many businesses lack succession plans either because they fail to recognise the fact that at some point the business founders will either want to or need to step down – or because too much trust is placed upon the expectation that the current leaders will deal with this when it becomes necessary. It might be wise to spend some time to initially create, and later revisit, any
agreed succession plan/management structure, to diminish financial or legal trouble for the company.
RELOCATION, RELOCATION, RELOCATION As businesses work towards reopening in part or in full, they must plan for a return to the workplace in a way that both supports their staff and safeguards their health and wellbeing. There are many factors that should be considered, including: • The size of the workplace • The nature of the workplace • The vulnerabilities of your staff/clients • Caring responsibilities • Flexible working arrangements. We are able to assist businesses to ensure that appropriate risk assessments are carried out and appropriate policies and procedures are in place to support organisations as they return to normality. It is of vital importance that businesses are aware of the benefits as well as the risks that growth brings. And businesses should be aware of their legal obligations to ensure that they continue to safeguard their future. n
This article does not constitute legal advice. Should legal advice be required, please do not hesitate to get in touch. For more information, contact: Wendy Lambert, Partner Tel: +44 (0) 1534 760 822 Email: email@example.com Ashley Quenault, English Solicitor Tel: +44 (0) 1534 760 856 Email: firstname.lastname@example.org Nour Belal, English Solicitor Tel: +44 (0) 1534 760 886 Email: email@example.com
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staying ahead with regtech Lee Bosio, Managing Director of Vaiie, on forging a new future of customer onboarding
currently differentiate between the use of recorded versus live video recording during remote customer onboarding, for example, but other regulators do. So it is imperative to seek a digital onboarding solution that accommodates factors that adhere to local and global legislation, which will also serve to futureproof your business.
HOW DO BUSINESSES KEEP UP WITH JURISDICTIONAL NUANCES?
COVID-19 HAS forced businesses to speed up their automation strategies. It has even been said that automation will become key to surviving a possible Covid-19 recession. As we look to the future of financial services and begin to navigate our way out of the pandemic, remote and automated client onboarding will be integral for any regulated business that wants to improve its customer experience, speed up compliance processes and reduce costs. However, what is critical in achieving true success with digital customer onboarding is balancing automation and usability with the ongoing and altering demands of regulation. A joint report from the World Bank and Cambridge Centre for Alternative Finance on the impact of Covid-19 on fintech regulation delved into the sweeping view of the impact the pandemic has borne on the regulation of fintech and
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regulatory innovation initiatives. Surveying 118 regulatory authorities across 114 jurisdictions, the study overwhelmingly found that Covid-19 has only served to push regtech up the agenda for regulators across the world. A fundamental internal challenge faced by one of the regulatory respondents was that working from home paused site visits to particular companies, making it impossible in locations where there are strict containment/travel restriction measures to access necessary data and insights for compliance purposes. This shift has forced regulators and other authorities to accelerate initiatives to put concepts such as digital identity verification or permitting electronic onboarding processes for customers into their manuals. The nuances, however, are evident between different jurisdictions. The Jersey Financial Services Commission doesn’t
The continual increase in regulation in financial services is fast becoming unmanageable without intelligent systems mitigating, reminding and delivering key updates to compliance teams at the right time. This is particularly the case considering there are around 750 regulators globally issuing on average of 201 regulatory alerts each day. Given the wealth of ongoing regulatory change – MiFID II, Basel III, AMLD5, IOSCO, ISO 20022, Dodd-Frank II, or jurisdictional updates such as Jersey’s AML handbook – the terminology of textbased directives can be daunting even to the most seasoned compliance and financial services professionals. Historically, a simple workflow process would be sufficient to provide enhanced levels of efficiency and risk assessment when onboarding a customer. However, with the development of regulations, rising cyber security threats and the expectation towards using newer technologies to validate multiple points on a customer journey, the need to consider advanced digitised intelligent customer onboarding technology is getting more critical by the day. According to the Financial Action Task Force (FATF), the impact of the Covid-19 pandemic, the resilience of national antimoney laundering/countering the financing of terrorism regimes, and the risks faced by the private sector, all vary significantly from country to country. The FATF has been highlighting the fact
Onboard’s workflow process supports risk mitigation and control
for some time that it is illogical to rely solely on a rating system available online to measure the accuracy of a risk assessment when onboarding a client. The methodology in which to assess all major risk elements needs to consider any jurisdiction in which a company operates. That means finding a customer onboarding solution that fully captures and considers global jurisdictional nuances in a timely and auditable manner – as is the case with Vaiie Onboard – remains paramount to reducing risk to your business. One of the most effective aspects of a sophisticated digital customer onboarding tool is that it can be leveraged to identify the correct entities based on a variety of datapoints. This revolutionises the investigation into enhanced due diligence. Something that historically has taken weeks and sometimes months for a report can now, through the use of technology, be done in a matter of minutes.
AUTOMATED ONBOARDING WORKFLOWS As we look to the future of the compliance function, there is an evident shift in viewing compliance as more than just a regulatory
gatekeeper and more as a service function integral to a business’s overall customer service experience, even using it as a competitive advantage. The slow and complex customer onboarding process has become the Achilles heel for businesses as well as their clients. In an ideal world, compliance departments should be reviewing data that has already been analysed, giving them more time to evaluate, review and approve new business. To counter threats from money laundering and terrorism financing, financial institutions must be able to identify the individual or entity and perform various checks to ensure the customer and their funds are legitimate. In addition, this includes fulfilling a robust audit with full evidence, policy and procedures that compliance staff have undertaken. By having an inbuilt audit and reporting feature online throughout this process, with all decisions made available in one single file, any subsequent investigation or remediation is made much easier. It also
improves transparency, validation and speed on decisions reached. If now or in the near future you are not exploring the use of a digital onboarding workflow when conducting your due diligence as part of your customer onboarding, you will be: ● Limiting the quality and accuracy of information available to your business ● Requiring considerable time to be spent on reviewing your findings and removing any false positives ● Forced to rely on your existing sources therefore limiting your compliance function’s capability. By utilising a secure and compliant digital customer onboarding tool such as Vaiie Onboard, you can now profile and onboard a customer in less than five minutes, a drastic improvement to the manual process or the many non-compliant systems available in the market. Your over-engineered internal processes can be transformed into an efficient, controlled and managed digital process.
FUTURE OF OPPORTUNITY By providing cutting edge technology through your systems to your clients, you will become more efficient and affordable and able to provide valuable additional resources to what matters most – compliance reviews and approvals, strategy, customer satisfaction, relationship management, reporting, brand and continual growth. Vaiie Onboard offers a hasslefree customer onboarding experience compatible on any internet-enabled device, speeding up the enrolment process while still remaining extremely user-friendly and easy to implement. After all, if customers don’t find a regtech solution easy to use, they will find ways around it, adoption will lag and that critical return on investment will suffer as well. Drive down the cost of compliance by simplifying and standardising your compliance processes through automated mapping of regulatory risks to key business processes, thereby reducing the need for manual and duplicate checks. Not only will this provide your business with growing revenue, but it will also provide regulatory clarity and, most importantly, continue to exceed customer expectations with service delivery. n
Audit and reporting functionality sit at the heart of the Onboard workflow
To find out more about Vaiie Onboard and how it could revolutionise your customer onboarding, contact: Email: firstname.lastname@example.org Tel: +44 1534 616760 Web: www.vaiie.com/regtech/onboard
May-July 2021 35
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AS WE EMERGE FROM LOCKDOWN, CHANNEL ISLANDS BUSINESS LEADERS CONSIDER THE ROUTE AHEAD
This second edition of our annual Future View supplement brings together a collection of thoughtleadership essays from Channel Islands business leaders on how they see the future of their sectors evolving. As we continue to move through the pandemic and as the latest wave of lockdown measures are eased, optimism for a return to normal is rising and business leaders are increasingly exploring how they can adapt their businesses to seize the longer-term opportunities of the post-pandemic world. It is with this in mind that we invited a selection of leaders to share their outlook for their sectors and their vision for the future. As with last year, the responses are fascinating. While the pandemic has taken us on a longer course than expected, leaders’ expectations around a return to normal and a return to the longer-term trajectories we were on pre-pandemic remain. Many tell us there will, of course, be some long-term impact – not least technological change and a greater reliance on connectivity and automation. But it is clear that all are focused on a positive outlook. And many believe that the changes we have had to embrace during the pandemic can be a catalyst for positive wider change across international business. That’s certainly some welcome news after a challenging year. I hope you enjoy this exploration of the future business outlook across the Channel Islands. Jon Watkins Editor-in-chief
Inside 38 Deloitte Fintech
44 Deloitte Audit
50 Sure Cloud technology
40 Mourant Private equity
46 Jersey Finance IFCs
52 Deloitte Tax
42 Viewpoint Governance
48 PwC Private markets
FUTURE VIEW: FINTECH
Are we entering a new era for fintech? “Technologies are no longer just the brainchild of innovative new disruptive start-ups, as disruption from the inside – ‘intrapreneurship’ – is becoming well established, supported through evolving ecosystems and maturing and emerging technologies”
y way of introduction, I want to start with a definition of what fintech now stands for. Fintech in its current guise really started after the 2008 financial crisis and, in many people’s eyes, focused on innovative new start-up banks and the emergence of crypto currencies such as Bitcoin, established in 2009. Simply put, fintech could be described as the technology designed to improve the delivery of financial services. It is true that fintech companies have influenced the direction, shape and speed at which technology change has influenced every banking subsector. However, I now hear fintech being spoken about more broadly, with the term generally being synonymous as a collective description for a range of disruptive solutions – fintech, regtech, invest-tech, insurtech and emerging ESGtech. Furthermore, these technologies are no longer just the brainchild of innovative disruptive start-ups. Disruption from the inside – ‘intrapreneurship’
– is becoming well established, supported through evolving ecosystems and maturing and emerging technologies. With this in mind, I truly think that fintech is entering its next era. BLURRING AT THE EDGES I would suggest that many aspects of fintech and digital transformation are now simply interchangeable. Whether disruption is an external force or one of an internal mindset shift to innovation, the rapid pace of convergence across maturing technologies is leaving financial services executives with a vast array of choices on how to meet strategic priorities and where to invest. Technologies such as cloud computing and robotic process automation are established and maturing, while an array of emerging technologies – artificial intelligence (AI), Internet of Things (IoT), distributed ledger technologies and eventually quantum computing – will move the dial again. Cloud-enabled infrastructure service (Iaas), software as a service (SaaS) and platform as a service (PaaS) 38
Simeon Moss, Jersey Advisory and Consulting Lead, Deloitte LLP
have opened up opportunities, not only for organisations to shift from capital outlay to consumption-based operational expenditure, but also, more importantly, to redirect IT roles away from operational activities and towards developing new capabilities, increasingly in collaboration with fintech and other third parties. Deloitte’s work with the World Economic Forum, The Multiplier Effect, sought perspectives on new capabilities enabled by existing and emerging technologies, and the multiplicative impacts they will unlock across different sectors of the industry. In summary, the report categorised the findings into four themes: •E stablishing ecosystems beyond finance – we will see growth in the combination of financial and nonfinancial services offerings built round ecosystem partner relationships. •R eorienting transaction flows – modern data architecture and enabling techniques will be used to automate the digital flow of assets and funds between participants. • Integrating digital and physical processes – data will be embedded, related to physical processes, into financial products to improve risk and value assessment, assure identity of
DELOITTE LLP transaction initiators and validate the provenance of physical information while optimising product distribution. • Reimagining core functions – organisations will perform more granular, accurate and robust calculations by tapping into leadingedge analysis methods, improving cross-enterprise data organisation. These new technologies will help organisations overcome traditional industry legacy issues, such as understanding customer habits, attitudes and goals. They will use data to hyper-personalise product offerings and scale proactive relationships. Addressing data fragmentation and providing a true 360° view of clients will also be enabled through increased trust and democratisation. CONVERGING TECHNOLOGIES With the opportunities offered by converging technologies, and the digital awakening Covid-19 has accelerated, now is the time to further enable your strategic thinking and conversations. Deloitte is observing that clients who made strategic investments in emerging technology in recent years have shown resilience against new sources of competition, margin compression and volatility, and are better able to integrate acquisitions. Few strategic decisions will be made without understanding the technology enablers to execute the strategy. Increasingly, boards are becoming digitally aware, with an innovative mindset. So what does this mean in practice and where does fintech fit in? Increased collaboration holds the answer, supported by stronger ecosystems and regulation. OVERCOMING BARRIERS It is sounding good so far, right? But what are the barriers to enabling the islands’ organisations to take advantage of emerging technologies? And what role must the traditional financial services firm now play? Existing financial organisations still hold the most valuable asset in this debate – data – and they best
understand the regulatory environment in which it operates, particularly when operating across multiple jurisdictions and servicing a global client base. So traditional organisations can be instrumental in combining emerging technology, digital talent and data to build their capabilities. These capabilities will be needed to evolve service offerings at pace and scale, and to embed and drive trusted relationships with clients, employees and investors. In support of this, the surrounding ecosystem will need to manage partnerships across many types of organisation. The Kalifa Review of UK Fintech, which Deloitte supported in the UK, made recommendations on developing the ecosystem. But what struck me most was the sentiment that there was a lack of coordination, with not everyone pulling in the same direction. Jersey and Guernsey are well under way in developing their own ecosystems, with great progress made, particularly on building a digital talent pool, and the Isle of Man has recently launched an insurtech initiative. Given that so many firms operate across jurisdictions, would closer regulatory alignment on fintech deliver greater value and permit firms to invest more? Fintech prides itself on driving customer connectivity, navigating market trends with more agility, and disrupting for the benefit of society – and this does drive competition. Regulators need to support this innovation growth and ensure that compliance is built in to protect those very same customers and investors. Balancing the desire to innovate with regulatory certainty will always be needed, and the local sectors are
Additional information Initiatives by the World Economic Forum and Deloitte Global: www2.deloitte.com/global/en/ pages/about-deloitte/articles/ worldeconomicforum.html
continuing to gain momentum. Fintech enquiries at the Jersey Financial Services Commission’s Innovation Hub – set up to help business models and technology firms navigate Jersey’s regulatory regime – grew 24% in 2020. RISKS AND ETHICS New digital risks are evolving as fast as technology, as are emerging ethical concerns. Firms must recognise this – and risk frameworks and the supporting controls, processes and operational data need to be dynamic and agile in response. Managing new digital risks, where malicious actors have access to the same technologies, could expose new capabilities to attack through the development of advanced decryption techniques, manipulation of IoT devices or sophisticated social engineering. A focus on operational security and resilience will be required, particularly to address the ‘human’ risk factor. Ethical, social and environmental challenges also need to be addressed, particularly in understanding how machine-led systems and AI might incorporate bias, compounded by this being perceived as unexplainable. Development of AI must address new risks of bias, sources of systemic risk, the unintentional risk of collusion and meeting fiduciary responsibilities as further customer-facing responsibilities are performed through AI. The many established approaches to governance and regulation may not yet be suited to wide-scale deployment, despite the benefits and momentum. My concluding thoughts are of fintech becoming an organisation’s friend rather than a competitor, and that we are just at the start of the digital age. Regtech and invest-tech will see strong growth across the Crown Dependencies and amplify the jurisdictions’ reputation for regulation and compliance, while reducing the cost to serve and empowering talent to build out new customer propositions. Supporting ecosystems and regulatory adaption will need to continue to evolve for this to happen. ●
FUTURE VIEW: PRIVATE EQUITY
The asset class of choice in a volatile economy
Darren Bacon, Partner at Mourant Ozannes LLP Guernsey Corporate practice
“The global landscape seems to be lending itself to PE reinforcing its position as the asset of choice. If this trend continues, Guernsey looks set to benefit, as its stability is a natural ally of PE”
The 2010s may have ended, but the short-term market volatility that characterised the decade’s latter half certainly hasn’t. Huge government borrowing and spending worldwide to combat the effects of the coronavirus pandemic, together with the sharp market shock created by the initial outbreak, have resulted in a unique landscape. But this is arguably to the benefit of PE investors, who will see their assets grow from the sector’s position that seems destined to thrive.
he long-term investment horizon of private equity (PE) is even more appealing to investors in a global financial market characterised by short-term change – and the climate is right for it to maintain its position as the go-to asset class of choice for many investors. Recent times have certainly been good for PE. The stability offered by the asset class was attractive in the turbulent 2010s, meaning that fundraising wasn’t an issue. Private investors are sitting on a record $1.5trn in cash, according to new data from Preqin. That is the highest on record and more than double the figure five years ago. Analysts say investors are flooding to private equity thanks to low interest rates, hedge fund underperformance and lower than expected returns from public markets. The flush of cash means more competition for the same deals, however, pushing up valuations. Some analysts think returns will disappoint. In Guernsey, the total flow of investments from UK investors facilitated by Guernsey funds has roughly doubled since 2013. The most recent statistics available from Guernsey Finance show the island has more than £120bn of regulated PE funds domiciled here. In the funds space overall, Mourant has continued to drive a strong PE practice. Its commercial judgement and technical expertise has led to us having the second greatest market share locally by number of funds, including leading PE funds.
IN IT FOR THE LONG HAUL PE’s long-term investment horizon has always been appealing to investment managers looking for steady returns. That allure is arguably greater now, with low interest rates and volatile markets combining to make other investments riskier from the outset. Similarly, a shock like Covid-19 can be devastating to investments reliant on short-term returns. The contrasting buy-and-hold model favoured by PE – which is predicated on generating wealth over the long haul – seems a sound strategy in this economic climate. Stable conditions, of course, don’t guarantee good returns, but they are conducive to a steadier yield, or ultimately a larger payout. There is a clear alignment with Guernsey as a preferred location for fund domiciling. The island’s stable political system, flexibility to adapt and pragmatic regulatory regime 40
have all played their part in confirming Guernsey’s continued position as an established, secure, safe and robust jurisdiction. Our clients around the world continue to recognise this. A long-term investment horizon is also inherently aligned with environmental, social and governance (ESG) factors, which are rapidly climbing up the corporate agenda together with their green bedfellow, sustainability. In the funds space, managers are increasingly being asked to report on their ESG performance. The longer your investment horizon is, and the longer you are posting returns, the more data you’re going to have and the more accurate your reporting can be. The tide has turned on ESG and sustainability, and mandatory disclosures will be introduced sooner rather than later. PE’s advantage here is that it has always been geared to the long term, giving it the platform to succeed in a greener future.
of certainty remains quite far away. In addition, a new government in the US is settling in, but its attitude towards the rest of the world, and most importantly China, is yet to be fully revealed. Continuing protests in Hong Kong and Myanmar give a glimpse of political unrest in Asia, and the developing world continues to feel the impact of Covid-19. There are certainly global challenges, but for PE these (hopefully) short-term uncertainties increase the attractiveness of the asset class’s long-term view. The economic situation has caused depressed valuations across the board, which is a double-edged sword for PE. On the one hand, it’s a good time to have capital to invest, and PE has plenty of dry powder. But it does increase the need to find quality assets to invest in – cheap isn’t necessarily good. Overall, the conditions are ripe for PE to continue to thrive, and this is backed up by EY’s finding that PE historically performs well after a recession.1 The global landscape seems to be lending itself to PE reinforcing its position as the asset of choice, and the allocation patterns of the increased levels of private capital suggest this is the case. If this trend continues, Guernsey looks set to benefit, as its stability is a natural ally of PE. Mourant’s Guernsey heritage is a vital part of why the world’s leading PE houses choose us as their provider of a full-lifecycle PE fund offering – from fund formation, through investment, to exits and beyond. ●
A POSITIVE OUTLOOK FOR PE The increased focus on ESG and sustainability is the result of shifting expectations, partly provoked by people looking for certainty amid the short-term volatility. In the UK, the vaccination programme has people dreaming of a return to normality, but we’re a long way from that in economic terms. Brexit may have been agreed, but it continues to represent a challenge. And with trade deals still to be negotiated and finalised – along with wrangling over vaccines - a sense
PE has always been geared to the long term, giving it the platform to succeed in a greener future
FUTURE VIEW: GOVERNANCE
The value of digital entity governance “Perhaps the way to judge the worth of going digital is by assessing whether it actually brings better and, in particular, the type of ‘better’ that the user will identify and value”
here is always a danger that we reframe much of what we do in business through the prism of digital. As though ‘going digital’ in some way offers a panacea for doing something better. Automation, for example, has great potential to speed up processes and offer an open-all-hours solution to a range of business client requirements. Over-automation, though, too often ignores the value of trust generated through relationships between people. Perhaps the way to judge the worth of going digital is by assessing whether it actually brings better and, in particular, the type of ‘better’ that the user will identify and value. Entity management is just such an example. As a function of business, it ensures legal entities adhere to the appropriate regulations and best practices whether they are companies, trusts, or partnerships. This, then, begs the question: is one provider much like another; are they all made equal? In short, no they are not, and careful consideration should be exercised when seeking the right partner with which to work. For international finance locations, such as Jersey, Guernsey, Luxembourg,
Hong Kong and others, entity management has evolved into a highly specialised professional service that underpins many of the other financial and legal services available in international finance centres. Digitisation has provided a pathway to dedicated niche solutions, such as Viewpoint, to offer service providers, and clients, not only secure relational database systems but also the ability to integrate the previously disparate parts of an organisation, such as compliance, billing and accounting, into a single platform. VALUE-ADDED BENEFITS For clients, a capable digitalisation solution opens the door to a vast array of value-added benefits. For example, in governance, by utilising business process management – or BPM – our clients have transformed their day-to-day activities and standard operating procedures across all areas of their business, into controlled and prerisk-assessed standard operating processes that seamlessly guide users through every aspect of every task. The use of digitalisation also enables once laborious tasks to be done in a 42
Rolf Heemskerk, Managing Director, Viewpoint Software for Business
fraction of the time. This means that from the completion and submission of a statutory form, to the sending of thousands of reminders to clients, success is a just a few clicks away. Dynamic solutions, such as the Viewpoint platform, automate processes and thereby significantly reduce human error. In addition, a state-of-the-art entity management solution offers extensive data validation verification tools to further increase accuracy by reducing the classic ‘garbage in, garbage out’ adage issues that are still apparent in lesser solutions. With the introduction of BPM and automation, the latter introduced
VIEWPOINT because it has tangible value, it is possible to achieve very high-level degrees of consistency on all aspects of business, both in terms of quality and service delivery timeliness. Consistency brings fewer errors, reduces risk and, in turn, promotes improved client satisfaction. The availability of data in a high-quality, relevant solution can make oversight fully attainable and comprehensive. For example, BPM offers details of the status of every activity, information on the time spent and bottle necks. Additionally, digitalisation allows highly customisable intuitive dashboards to provide instant insights on any aspect of your business, assuming you have a platform offering an integrated solution. MANAGING COMPLEXITY Managing entity data is being affected by volume and complexity. As global governance and compliance regulations become more stringent and wide-ranging, adherence to the regulations requires providers to continuously maintain more data and documentation than previously. GDPR, CRS, economic substance and DAC6 are recently introduced mandatory regimes that have an impact on all professional entity management practitioners. Each has its own specific requirements, increasing the volume and complexity of the documentation and data that the service provider needs to obtain and maintain. Selecting the right provider is key to this. A tier-one digital solution, such as Viewpoint, is proactively developed to cater for industry requirement changes. Frequent updates and enhancements to its solution cater for the increased volume of documents and data requirements of its clients. If a solution provider is behind the curve on changes within its client base, unfortunately it is the client that suffers, not only in not being able to service its clients appropriately, but also in being able to comply with regulations. Critical to that digital element is the
support for compliance professionals in navigation and delivery under the burden of increased reporting. Despite compliance and regulatory reporting diverging into distinct specialist areas, both rely heavily on digitalisation to perform their activities effectively. For compliance, there are so many variables to consider it would probably be impossible to work without a digital solution. The integrated name screening functionality in Viewpoint does in seconds what would have historically been impossible to achieve manually. For regulatory reporting, it is a similar story. Changes in reporting frequency, content, and format – for example, XML refiling – mean that without a solution that stays ahead of the technology curve, service providers will be unable to perform their regulatory obligations. CREDIBILITY Functionality by itself is not the key, though; relevant practical functionality designed by professionals, for professionals, is. Any software developer can create functionality, but that is not the same as a solution provider with a proven development framework delivering relevant functionality based on a roadmap that has constantly evolved to represent the needs of its client base. Identifying a suitable supplier requires identifying a professional entity management service provider that is niche – a Google search is not likely to be the best way of finding a solution. Indeed, this may result in finding the provider with the biggest advertising budget, not the best solution. In many cases, peer referral and globally recognised accreditations (such as ISO 20000 and ISO 27001) can bring insights that a service provider’s website cannot. For example, what do existing clients think about the support services? How responsive is the solution to industry changes? How many people are dedicated to developing and supporting the solution in which you are interested? 43
Viewpoint offers a trusted partner, a strongly stakeholder-oriented organisation. We believe that our longterm client partnering approach to our solution delivers unparalleled quality and client involvement. Many of our clients have been with us for more than 15 years. Our solutions are fully integrated with industry-relevant functionalities beyond that of any other entity management system. Our commitment to improving our clients’ operations via digitisation and digitalisation over the past 25 years is unquestionable. Viewpoint is the only truly international entity management solution provider. Not only do we have clients in more than 80 jurisdictions, support service providers in more than 13 jurisdictions, and support resources speaking 10 languages, but our turnkey solution also comes pre-configured (including statutory forms) for more than 30 countries. Finally, our team, and approach to what we do, is genuinely client focused. This has made us the largest global entity management solution provider in the world – yet we have no sales team or advertising budget. Our growth has been purely client-satisfaction based. Viewpoint as a solution provider holds the ISO/IEC 27001 Information Security Management Systems (ISMS) accreditation. This essentially certifies that Viewpoint’s ISMS processes are regularly independently audited to conform to the highest international standard – a very prestigious certification. From an in-solution perspective, we offer the latest tools to help our clients stay safe. For example, we offer AES 256-bit encryption, two-factor authentication, and multiple security models. And for our cloud clients, we utilise the security of the state-of-the-art Microsoft Azure hosting security facilities. Contact Viewpoint today and let us show you why entity management providers are not all made equal. ● Goviewpoint.com
FUTURE VIEW: AUDIT
Creating trust to drive recovery “Our purpose globally is to make an impact that matters for the companies we work with, people and society. Within audit and assurance that means building trust and confidence in business and protecting the public interest”
As a result of this change, there will be a ring-fenced audit business that provides audit and assurance services to clients that are allowable under the revised ethical standards.
Theo Brennand, Partner, Deloitte Channel Islands, and Siobhan Durcan, Partner, Deloitte Channel Islands
ne of the major questions raised by commentators has been whether large professional services firms providing both audit and advisory services create issues around conflicts of interest and their ability to challenge companies. During this time, there were suggestions that the Big Four firms should be broken up to address this (referred to as structural separation). Although structural separation isn’t happening now, the Financial Reporting Council announced in July 2020 how it intends to address this issue. It has set out a series of principles that the Big Four firms will need to apply between their audit and advisory businesses. This is known as operational separation. The objectives of operational separation are to ensure that Big Four firms’ audit practices are focused above all on delivery of high-quality audits in the public interest, and do not rely on persistent cross-subsidies from the rest of the firm.
HIGH AUDIT QUALITY High audit quality outcomes have never been more critical for stakeholders, people and society. Audit firms need to constantly evolve to keep raising the bar on delivering the highest possible standards of audit and assurance quality. Robust professional scepticism is vital to delivering high-quality audits. However, recent events have reinforced the need for a broad focus on internal controls, fraud and viability, which are critical to assessing whether a business is honestly run and has a future. The scope of an audit is also changing. It is expected that UK SOX – a UK version of the Sarbanes-Oxley Act – as well as front-half assurance in areas such as climate and diversity disclosures, will become an important feature of our largest and most complex audits, both public and private. Market and regulatory drivers, such as audit quality and growth 44
in demand for high-quality assurance services, independence, competition and choice, contribute to the audit product becoming more evolved. There is no doubt that audits are becoming more complex and challenging. Audit relationships – especially those in Jersey and Guernsey, where many businesses are headquartered or consolidated – operate across borders and have to navigate the complexity of local country requirements. There is the need to draw upon deep knowledge specialists such as IT, corporate finance, tax and valuation experts, all of whom are becoming ever more important to the audit process to provide the robust challenge to support judgements and conclusions reached.
DELOITTE IN THE CHANNEL ISLANDS While the regulations only require the Big Four firms to separate from 2024, at Deloitte we have taken a proactive approach and will implement an operationally separate model from 1 June 2021. We will still continue to focus on our core markets of private equity, real estate, debt, asset servicing, family offices, banking and insurance. Deloitte in the Channel Islands is part of our UK practice, and our close alignment as part of the UK firm also enables us to leverage off our market-leading experience and a team of more than 20,000 professionals. ●
FUTURE OF AUDIT We have seen a significant increase in the demand for wider assurances services. Companies and their investors want an independent assessment of more than just the historic numbers. While this started with listed companies and increased assurance over the front half of their financial statements, this is broadening to private companies. Independent controls assurance reports are now seen as a requirement for a lot of investors and we are seeing this expand into other areas, particularly around responsible investing and ESG. In order to ensure that we have the right skillset to deliver the audit of the future, we work closely with local schools. We adopt a ground-up approach of supporting, mentoring and coaching to enable high-calibre local students to achieve success in joining the workforce straight from school as well as from university. In addition to offering skills sessions across schools, we have recently partnered with Hautlieu School, sponsoring the IBCP scheme, where students study accounting exams as well as their IB subjects. We donated more than 80 laptops to assist students in their studies through the challenging Covid-19 period so their learning did not fall behind. This is in addition to piloting with Every Child Our Future (ECOF), the numeracy programme that ensures primary school children have mastered numeracy and analytical skills before heading into secondary education and have the building blocks for future success.
What makes a successful audit? There is, quite rightly, an increased focus on the quality of the audit work performed by the auditor, but we believe a successful audit is driven by: • Early engagement between the audit partner, the board and the management team and regular open communication • Planning early, considering areas of operational stretch across the business, as there will be pinch points within all companies • Agreeing upfront on the additional areas on which the board or management would appreciate insights. For example, companies should be using the audit to get an independent view on the quality of their controls, their teams or how they operate across different jurisdictions.
FUTURE VIEW: IFCs
IFCs’ critical role in the global recovery “Jersey for Fintech, launched in 2020, means an island-wide supportive environment and vision for fintech businesses to start up, grow and flourish”
ollowing such a challenging year as 2020, economies around the world are fixed on a path toward sustained economic and social recovery. I remain convinced that leading international finance centres (IFCs) such as Jersey have a critical role in that resurgence. Recovery from the impact of this devastating pandemic requires huge investment. It will be the economically and politically stable jurisdictions with a sound regulatory infrastructure in place that are best placed to help channel capital to where it is needed most in the world, ensuring assets are secure and protected. But the landscape for global financial services is changing fast and IFCs cannot afford to stand still and await the outcome of events. In purely commercial terms, Covid-19 has not only accelerated the pace of change in respect of digital technology, but it has also shifted the way we all work and interact with each other and how we transact business. More specifically for us, it has brought into sharp focus the future direction of the financial services industry globally. For Jersey Finance, it has focused our minds even more on four areas: our resilience as a jurisdiction; our connectivity to the rest of the world; the ongoing value to international investors of our political and economic stability; and the increased focus on the natural world, climate change and other sustainability issues. STRATEGIC REFRESH It is against this backdrop that we took the decision to refresh our strategic objectives, which in many ways mirrors the direction of
Joe Moynihan, Chief Executive, Jersey Finance
travel prevalent within global financial services. Priorities in the months ahead are to follow through with our sustainability agenda, our focus on digital connectivity and innovation and our ambition as a leading IFC to drive positive change in local and global communities. We have taken these decisions in a swiftly evolving global marketplace in which there will be far more emphasis on environmental, social and governance (ESG) matters. It is predicted, for example, by Deutsche Bank that ESG assets are likely to increase exponentially over the next 20 years to surpass $100trn by 2028. The global shift towards a greener, more inclusive economy is gathering pace. Investors are no longer focused solely on returns, with growing demand for portfolios to reflect purpose, leading to ESG principles becoming embedded in firms’ investment processes. These measures will ensure sustainable finance remains at the top of the agenda for the foreseeable future. Mindful of this, we have already launched our new sustainable finance strategy and long-term vision that, by 2030, Jersey will be recognised by its clients, key stakeholders and other partners as the leading sustainable international finance centre in the markets it serves. The opportunity is clear, but more than that, Jersey has a responsibility to leverage its expertise and capital to support the transition to an environmentally and socially sustainable global economy. We have taken steps locally in that direction 46
JERSEY FINANCE adapting to the highest global standards on tax. The important issue in relation to global corporate tax is that standards are applied in a non-discriminatory manner to achieve a level playing field. We would also strongly advocate the importance of tax neutrality in supporting effective cross-border investment. Jersey’s finance industry remains committed to supporting the government, which has a strong track record of cooperation with the EU and others on matters of tax and good governance. We will also continue to work with our partners in order to support the development of further highquality regulatory standards. I am more confident of our position, given that there is a greater appreciation and understanding within governments of the positive role that jurisdictions such as Jersey play. However, we must continue to amplify our message whenever we can with governments, regulators and global standard-setters.
and our most recent initiative this year was the launch of the Jersey Fund for a Wilder World in association with Durrell, the Jersey-based conservation group. The fund has been designed to give fund service providers in the island the opportunity to contribute a portion of their fees earned to support Durrell projects around the world. TRANSFORMATION New ESG thinking is, of course, not the only big driver of change. The so-called ‘fourth industrial revolution’, the digital transformation of commerce worldwide, continues to gather pace. So we have also made fintech a core differentiator in an environment where cutting-edge digital connectivity is critical. The Jersey for Fintech initiative, launched in 2020, means an island-wide supportive environment and vision for fintech businesses to start up, grow and flourish. I believe the collaboration between key fintech stakeholders such as Digital Jersey, Jersey Finance and Locate Jersey sends a powerful message in the fintech arena that we are open for business in an integrated way, making doing business easier for clients worldwide. ACCESS There were other substantial developments during 2020 that will influence future direction, not least the formal exit of the UK from the European Union. The UK remains a major partner for Jersey and, as the UK maps out its position as a Global Britain, Jersey’s existing connections with the UK and its shared interest in seeing Britain prosper globally, should be the foundations for an even closer partnership in the years ahead. While we expect to forge an even closer partnership with the UK, Jersey retains access to the EU market through our own bilateral agreements and arrangements. Competition around levels of taxation, the debate over transparency, the increasing range of new regulatory standards, will continue to be debated, and pressure will remain on IFCs to be at the forefront of the implementation of new rules. We can anticipate further impetus in this direction for the foreseeable future, with the recent US call for a global rate of corporation tax being a case in point. Jersey has a strong track record in meeting and
CRUNCH TIME Earlier this year, I spoke about ‘crunch time for the IFCs’, a once-in-a-lifetime opportunity for IFCs to demonstrate the value they can add. From Jersey’s perspective, to use our stability, global connectivity, expertise, capabilities as a facilitator of capital flows around the world and all our experience as a jurisdiction of 60 years standing, to help to rebuild economies and communities. As a forward-thinking jurisdiction, Jersey has devoted considerable resources and time in recent years to building partnerships with the local regulator and government. We have been able to add appreciably to our international footprint, growing our range of global clients while evolving our product offering. This sets us up with a solid platform to meet the opportunities and challenges ahead, while we also have robust regulations in place to stand up to the scrutiny that is inevitably faced by leading IFCs. We proved our resilience during 2020 and this will serve us well in the months ahead. More than anything, it fuels my belief that we are well placed for the journey ahead. I strongly believe that there will be a need for ever more resilient, stable, neutral jurisdictions, with the ability to evolve rapidly to changing market conditions that can support secure, impactful investment in the future as the world recovers from the devastation of the pandemic. ●
FUTURE VIEW: PRIVATE MARKETS
How private markets can be a game-changing force for good “As investors go in search of returns that other asset classes may struggle to deliver, private markets are one of the fastest growing areas of asset management globally” Mike Byrne, Partner and Asset Management Leader, PwC Channel Islands
capitalise on the potential. Under our base-case growth scenario, we anticipate that private markets AuM will increase by $4.9trn to reach $14.4trn by 2025 – around 10% of overall AuM worldwide (see chart, facing page).
ver the past 40 years, the private markets sector, often referred to as ‘alternatives’, has grown to become a bedrock of high-value employment and prosperity in the Channel Islands. In Jersey, private markets now account for nearly 90% of funds under administration. In Guernsey, private markets are helping fuel the impressive recent growth in fund values. As assets under management (AuM) in private markets continue their rapid expansion worldwide, they’re set to play a key role in driving recovery and creating more sustainable and socially inclusive economies.
NEW RULES FOR A NEW GAME As our Prime time for private markets report highlights, however, this is an increasingly challenging market in which the prizes will be hard won: In search of return With entry multiples so high and economies still fragile, traditional value levers such as financial engineering and cost reduction may no longer be enough to deliver target returns. Forward-looking private markets managers are therefore broadening their value creation lens in areas ranging from strategic repositioning and top-line growth to longer hold and ‘permanent capital’ models.
MOVING INTO THE MAINSTREAM What, then, do I mean by private markets and why are they so critical to all our futures? The private markets designation brings together private capital (private equity and credit) and real assets (infrastructure and real estate). Both private equity and real estate are especially strong here in the Channel Islands. At PwC, we’ve consciously moved away from the term ‘alternatives’ as these asset classes are now very much part of the mainstream. As investors go in search of returns that other asset classes may struggle to deliver, private markets are one of the fastest growing areas of asset management globally. Earlier in the year, we published Prime time for private markets: The new value creation playbook, an in-depth exploration of how the sector is evolving and how to
Competing in a concentrated market Growing demand among institutional investors for multi-asset mandates is making it difficult for smaller, single-asset-focused managers to compete with big, diversified rivals. There’s still room for specialised players with the right capabilities. The firms that are most vulnerable are those that have neither scale nor specialisation. They risk being squeezed out of the picture. 48
PWC PROJECTED GROWTH IN THE ASSET MANAGEMENT SECTOR
Picking your spot The most crucial decision is whether to be a scale or niche specialist player. Even within the subsidiaries and support services of larger groups, it’s important to think about why business would want to come here and how to build on these standout capabilities. Challenging assumptions Further questions centre on how to address changing investor demands. The ever-increasing risk of being called out for ‘greenwashing’ is a clear case in point. As a result, governance – the G in ESG – is rightly at the centre of the agenda. Yet, the response can often be reactive – closer monitoring and control of existing policies. However robust, this approach can still leave fundamental issues unaddressed. Chief among these is gauging what investors really want and how to stay ahead of the game – the goalposts are moving all the time. It’s also important to determine what qualifies as an ESG investment and how to report this in a credible way – the criteria are still vague and even at times contradictory. Rather than tighter oversight, it might therefore be more effective if boards could get inside the minds of investors and use this insight to develop and challenge assumptions and strategies. Ensuring boards are attuned to changing investor sentiment would in turn call for more diverse and inclusive membership.
Keeping pace with changing stakeholder expectations The other, and in many ways most far-reaching, challenge is the shift in stakeholder attitudes. As environmental, social and governance (ESG) priorities in areas such as health, sustainability and social inclusion come to the fore, ESG performance has become as important as financial returns. This isn’t just altruism. As pension and sovereign wealth funds’ private market allocations increase, reflecting the ‘people’s priorities’ will be ever more important in securing large mandates and sustaining scale and growth. Embracing ESG would help private markets managers to reframe public perceptions, cultivate closer affinity with investors and generate new forms of value. Investment opportunities include helping portfolio companies to move towards net zero production. Private markets managers could also help to bridge the funding gap for small and innovative growth businesses and boost infrastructure investment in areas ranging from healthcare to digital communications. With government coffers drained by the Covid-19 pandemic, the record levels of dry powder at private markets managers’ disposal could make them a vital contributor to recovery and regeneration – a Marshall Plan for the 21st century. This would need to be weighed against the increased public scrutiny that would come from a more prominent role in socially critical areas such as small business finance and infrastructure development.
Nurturing talent The need to create more diverse boards is just one of the areas where a deepening of skills and talent availability is so critical. Increased talent demand from private markets can only add to the growing skills shortages in areas ranging from green investment to data analytics. Stepping up the recruitment and upskilling of women in the Channel Islands would enable firms to tap into a still largely underutilised pool of local talent. Attracting more women into private markets would also help to reduce the gender pay gap locally by opening up more opportunities for high paid employment. EARNING THE RIGHT TO WIN The evolution and expansion of private markets offer the win-win of high-value economic growth locally, and an opportunity to help address pressing social and environmental priorities globally. But all those involved in the sector – including PwC as advisers – need to earn the right to win. How are investor demands changing? How can the Channel Islands keep pace? What can we offer that other financial centres can’t? ●
SEIZING THE OPPORTUNITY The Channel Islands’ specialist expertise, record of innovation and supportive regulatory environment put them in a strong position to take advantage of private markets expansion. But just as the sector must adjust to a changing world, firms here in the islands need to work out how they can sustain relevance and, where possible, take the lead. 49
FUTURE VIEW: CLOUD TECHNOLOGY
The past, present and future of connectivity
Alistair Beak, Acting CEO, Sure Group
“Throughout the pandemic, secure access to cloudbased business systems and the ability to route calls to softphones, mobiles and remote landlines has kept communications flowing”
he Channel Islands have always enjoyed being connected. Our historic affiliations to, at various points, the United Kingdom and France have meant that cultural, political and familial ties have formed key parts of the islands’, and islanders’, identities. Telecommunications may seem like a modern means of staying connected, but Jersey’s first telephone exchange opened in 1888, and Guernsey established its States Telephone Department in 1896. The phrase ‘early adopter’ wasn’t around back then, but if it had been, the islands would certainly have fitted the label. That legacy has carried through the last century up to the present day, where the islands are home to some of the most advanced telecoms services in the world. Islanders’ desire to be connected has been enhanced by the Covid-19 pandemic, as the power of connectivity brought people together, enabled a sense of community and facilitated the transmission of vital news updates. In 2021, many services we provide are used by business customers – from SMEs and freelancers up to multinational operations, and everything in between. The pandemic has, of course, seen a sea change in business practices, and telecoms services have been instrumental to the evolution.
periods. Whether they like it or not (and the vast majority do), every business is now digital in some way. With the islands’ economies doing relatively well throughout 2020 and into 2021, IT departments have to take an enormous amount of credit for working so quickly and effectively and rolling out flexible working programmes for those businesses that did not have them. The level of economic resilience displayed throughout the pandemic simply wouldn’t have been possible without the digital services that are on offer. We envisage flexible working, as part of hybrid workplaces, being the preferred operating model of most businesses going forward, so had been offering solutions to enable this for some time. Throughout the pandemic, secure access to cloudbased business systems and the ability to route calls to softphones, mobiles and remote landlines has kept communications flowing, and most callers are unaware that they are dealing with home-based agents. Meetings have been just as effective virtually as in the office, using software like Microsoft Teams. Though technology will never entirely replace the need for face-toface meetings, and nor should it, the benefits of a blended approach using the most appropriate format for each meeting is a sensible way forward.
THE RISE AND RISE OF FLEXIBLE WORKING Flexible working has long been regarded as the future of work, and we’ve witnessed its transformation before our eyes as businesses have obtained rapid proof-of-concept thanks to the enforced remote working of the lockdown
INCREDIBLE NETWORK PERFORMANCE Supporting all of that technology, and keeping the islands connected, are the networks – and they are the building blocks of our business. 50
THE VALUE OF TELECOMS This year we’re marking 125 years of telephone services in Guernsey, a milestone that is made all the more significant by the pandemic’s impact on connectedness. Across the Channel Islands over the past year we’ve really felt our responsibility to keep islanders connected and to support our communities. We added an investment of £20,000 to our Community Foundation to support those most in need across the Channel Islands and Isle of Man, and we made specific efforts to provide mobile and wifi access for some of the most vulnerable members of our communities. Our role in bringing people together was certainly highlighted by the pandemic, and that really showed us that, while we’re passionate about technology, it’s what the technology does that makes a difference to people’s lives. People may not understand increases in capacity, or how the cloud works, or why a unified comms system is going to be the future of their business. But they do understand how quickly a Google search happens, or how Teams has enabled them to check in with colleagues when they may have been feeling the strain of the pandemic, or how a WhatsApp video call was the only way to ‘see’ family members for many months. That highlights the true power of telecoms services, and with the core network upgrade currently under way and an imminent change to our network speeds, we are confident of our ability to keep people and businesses connected long into the future. ●
Our ‘always-on’ network is recognised as critical national infrastructure for the islands and the Channel Islands’ unique geography enables connection to the world through dedicated points of presence (PoPs) in London and Paris, with links back to the Isle of Man via a PoP in Dublin. Multiple resilient networking routes between all locations ensure that customers are best connected and protected if one of the links fails, and the network is engineered to provide continuity of service through diverse international routing options. Not everyone realises that the islands, and Sure’s telecoms networks, are part of the transatlantic and global internet communications system, which is the backbone of the world’s internet. That’s something to be proud of and harks back to these islands’ legacies as early adopters of technological advancement. All of that infrastructure is incredibly complex and requires significant annual investment to maintain. Sure is currently progressing with our latest upgrade – a £3m investment programme to provide a huge increase in core network capacity, resilience and security. In technical terms, we are upgrading our existing undersea cables, which currently have a capacity of 10 Gbytes, to 100 Gbytes of capacity – that represents a ten-fold performance improvement. In reality, this is a massive step change for our network, which begins at the core but will ultimately benefit every household, family and business across Guernsey – where the cables come ashore. 51
FUTURE VIEW: TAX
A tax strategy for the road to net zero
Jo Huxtable, Partner, Tax, Deloitte
“For many organisations, climate change will have a profound impact on business operations. As with any business transformation, there will be tax consequences as a result of business model and supply chain change”
limate change is the defining issue of our time. Government policies, demand from customers, employees and consumers, investor pressure and technology are all converging to drive decarbonisation. Against this backdrop, the role of business is shifting, as society is increasingly demanding that business acts as a force for good. Corporates will play a key role in responding to climate change. Numerous organisations have made public commitments to reduce greenhouse gas emissions. Progress towards these goals needs a plan. The way any company acts today in response to climate change will almost certainly have an impact on its degree of advantage tomorrow. WHY DOES THIS MATTER FOR THE TAX STRATEGY OF A COMPANY? Organisations are increasingly focusing on purpose, with ever-greater focus on environmental, social and governance (ESG) principles. This places the response to climate change and the road to net zero at the core of business strategy, and boards need to consider how their tax strategy can contribute positively to these changing business priorities and wider social purpose. 52
For many organisations, climate change will have a profound impact on business operations. As with any business transformation, there will be tax consequences as a result of business model and supply chain change. Many of the policy levers used by governments on the road to net zero will be in the tax sphere, ranging from grants and incentives to carbon taxes. For example, the EU’s Green Deal contains an investment plan to stimulate public and private investment, as well as tax measures such as reforms to the Energy Tax Directive and a proposed Carbon Border Adjustment Mechanism. In the UK, the 2021 Budget provided funding to support the energy transition. And the OECD has recently highlighted that energy and carbon taxes have a key role to play in the transition to a socially inclusive zero-carbon economy. In addition, policymakers are starting to consider whether tax and regulatory policy are taking account of climate commitments. Boards and tax leaders need to be ready to respond and potentially contribute to the policy environment, ensure that tax is integrated into business decisionmaking, and have the right skills and resources to react to the emerging business opportunities and challenges.
ACHIEVING NET ZERO GOALS MEANS THE TAX STRATEGY NEEDS TO FIND A NEW BALANCE As the response to climate change becomes embedded in organisations, the tax strategy will evolve. We are already seeing a greater emphasis on tax policy, business advisory and risk management within tax teams in response to broader political, economic and social developments. Climate change is another driver, and accelerator, of change. Boards will need to ensure that their in-house tax teams are equipped with the right technology, skills and resource model to allow them to deliver the tax strategy for the road to net zero. So what are the questions that Channel Islands boards and business leaders should be asking? • How do we monitor and track tax policy developments – both measures expected to be introduced in the short and long term? • Are material environmental tax costs and incentive savings factored into business decisions at the outset? • What are the tax impacts of changes to the value chain, reorganisation of supply chains and business model? • How will the tax expertise within the business change in future – for example, to manage increased indirect taxes and the transfer pricing of new intellectual property? • Are executive and workforce remuneration policies and pension plans aligned with the organisation’s climate strategy? • What are the areas where the business should consider tax policy engagement? • What information is reported for tax transparency purposes? • How do we balance good corporate governance and tax efficiency with decreasing the carbon footprint? This final question is one that has been discussed at length during the past year across the Channel Islands. At a time when there has been increased focus on where companies carry on their activities and demonstrate substance, often focused on the place where the board of directors meets and makes decisions, the global pandemic has necessitated new ways of working. Many boards are realising the benefits of creating more diversity by including subject matter experts located in different jurisdictions. Video conferencing has enabled people to participate at meetings without the need to board a plane. 53
However, these new ways of working can have tax consequences that need to be carefully considered. So, what does the future hold? It is still early days as many businesses engage with their people and start to formulate the future of work. But one thing is clear: notwithstanding the benefits and efficiencies that can be obtained from remote working, when complex or strategic issues need to be discussed there is often still no substitute for face-to-face meetings. In addition, tax rules on residence, permanent establishments and transfer pricing, to name but a few, can look closely at the contribution of the relevant people and where this takes place. As a result of these new ways of working, we may see more key decision-makers based in Jersey or Guernsey remotely consulting with subject matter experts, and others, to help inform their decisions. The result could be a win-win: reduced carbon footprint through less unnecessary travel and increased diversity of thought and expertise captured in board decision-making. Deloitte is committed to playing a leading role in building trust in business, driving more inclusive and sustainable growth, and enhancing skills, education and inclusion for all. ●
For more news and views on the latest business issues in the Channel Islands, visit the Businesslife website at www.blglobal.co.uk
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Skills and talent
You’re hired: identifying the skills and workforces of tomorrow As technology continues its relentless march, the skills required of tomorrow’s workers are changing rapidly. So what abilities will businesses need 10 years from now? And how do they find them when many of the roles of tomorrow don’t even exist yet?
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Words: Sophie McCarthy
IT’S A STARTLING prediction – and
one that provides business leaders and owners with a big challenge. A staggering 85% of the job roles that will exist in 2030 – less than a decade away – haven’t yet been invented.1 The rapid advance of emerging technologies, automation and artificial intelligence are upending every aspect of business. So what does this mean for the future of the workplace? How do you recruit the staff of tomorrow when you don’t know what jobs they will do, or what skills your employees should possess? “Our lives are being transformed, the pace of change is enormous,” says Sue Fox, CEO of HSBC Channel Islands and Isle of Man. “Economies and industries are being reshaped and more sustainable practices are increasingly being embraced. So a new wave of digital, professional and enabling skills is needed to support our customers, and nurture progress and growth.”
Phil Eyre, Founder of consultancy Leaders, agrees that speed is the differentiating factor here. “Specific roles are changing, but this has always been the case,” he states. “If I cast my mind back throughout my own career in finance, some of my previous jobs don’t exist at all any more because technology has, in many ways thankfully, taken over. What’s unique today is the velocity that we’re experiencing.”
CHANGING TOOLS Eyre adds that many of the fundamental roles themselves haven’t changed – it’s just that now, the tools that we use to carry out these functions are different from 10 or 20 years ago. “If you think about support office processing, a lot of that was quite labour-intensive. There was literal paperwork, with pens being used, and Telex machines. “All of that’s gone out the window. What remains is an intense need for speed of information flow and exceptionally strong, supportive admin teams – I’d go as far to say these are
more important than ever. The change isn’t necessarily the need for the position, it’s how it’s achieved.” Similarly, Lois Madden, an Associate at Carey Olsen, believes the fourth industrial revolution will evoke a shift, as opposed to a complete overhaul, in roles. “Many people are concerned about automation resulting in job losses, but I’m more optimistic about the opportunities it might bring,” she says. “Automation has happened in the past, and it’s actually created roles. When they brought in cash machines, for example, people feared there would be huge unemployment in terms of bank clerk jobs. But what actually happened was that the people in those positions could become salespeople for the banks.” She believes employees will be able to redeploy their energy when technology takes some of the heavy lifting off their desks, which could have drastic but positive results. “My hope is that if part of people’s roles become automated, they’ve then got more time and space to undertake creative thinking – out of which might come the next big thing.”
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Skills and talent
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Skills and talent In a similar vein, BDO Guernsey Managing Director Richard Searle believes that AI will bring about greater chances for people to focus on their own interpretation, judgement and relationship skills. He gives audit as an example. “Within a typical audit, you have two elements – data analytics (are the transactions representative of what’s actually happened?) and the judgement areas (which bring estimation and uncertainty). And that’s very much human-based. “Yes, you can support it through data, but there’s always going to be an element of interpretation needed – understanding the rules and the nuances. And I think it’s going to be a long time before AI takes over on that front, if indeed it ever can.” Madden agrees that there are some limitations to tech. “We have to keep front of mind the challenges that come with automation: people have a limited amount of patience when they’re being handled by a machine; and there are risks when leaving decisions to tech. “Take HR – there’s a huge amount of concern around discrimination when CVs and applications are being filtered by algorithms. As a result, that need for human interaction isn’t going anywhere.”
UNREALISTIC EXPECTATIONS? Cora Binchy, a Partner in the family office division of Stonehage Fleming, is also of the opinion that some gaps can’t be plugged by automation and AI. “The digital evolution is allowing us to analyse in a much timelier fashion, which means decisions are made extremely fast. There will, therefore, be an expectation that we can deliver to a very high standard and do so very, very quickly. “If we’re looking at, for example, buying shares, AI can step in and we can get a rapid recommendation. But if it’s a decision about how to treat a beneficiary of a trust who has an addiction problem, that requires consideration. “The element of timeliness will suit certain areas of what we do, but we will always need that thought process.” Binchy highlights the need for acquired, as opposed to innate, attributes. “There are elements in financial services that are incredibly new – such as ethical investing – and there are roles that have been around longer than I have. “Look at the role of acting as a trustee – that’s a position that has existed since the Crusades. Looking after families and beneficiaries is how the Stonehage Group started and developed. It’s a role that requires experience, empathy and wisdom, all of which one develops over time.” With all this in mind, how should businesses approach future recruitment? And what skills should organisations be actively looking for when it comes to filling these evolving roles?
Creativity will be key – we are never not going to need the people who come up with ideas
The scale of uncertainty around new proficiencies needed for the jobs of tomorrow has led HSBC to conduct research into how best to prepare for the future of financial services – as well as workplaces in general. The results point to the need for technical expertise around areas such as digital and big data, as well as professional and enabling skills such as problem-solving, creativity, resilience and adopting a growth mindset. Madden agrees with the research findings. “In terms of recruiting for the future, creativity and entrepreneurial spirit are going to be absolutely key,” she says. “We are never not going to need the people who come up with ideas. “It’s crucial that companies are open in terms of backgrounds. It’s about looking beyond degrees, certainly degrees in particular fields. The best person for a role might come from an entirely different industry and have, therefore, an entirely different perspective.” Fox echoes this sentiment. “For us, it isn’t always about having a wealth of financial services experience. In fact, we have lots of very successful people who have joined us from entirely different sectors and thrived at the bank. “We look for people who are curious and have an enquiring mind, so that when a solution isn’t obvious, they’re the type of people who will search it out or develop an entirely new approach that helps both our customers and colleagues.” Creativity and curiosity are words that emerge time and again in discussions on
the roles of the future, as is the idea of attitude over aptitude. Eyre adds another skill into the mix, too. “The ability to think critically is crucial. It’s nothing new, but it can be a struggle to find sometimes. “People who are able to interrogate what’s presented, test it, challenge it and constantly come up with better ideas and solutions, are vital to businesses, whether in technology or sales or any field. “These days, decisions can be really rushed – critical thinking requires time and effort, but it more than pays off.” Eyre emphasises the importance of relatability and communication – “You can have the best idea in the world, but if you can’t communicate it, you simply aren’t going to succeed.” She also highlights emotional intelligence, which, according to Harvard Business School, accounts for nearly 90% of what sets high performers apart from their peers with similar skills and knowledge.2 Eyre passionately agrees with this. “The best leaders relate well, they build trust, and they build healthy sustainable companies, putting this over and above quick, short-term gains. “I’m a strong proponent of the idea that the human factor is the key to success in any organisation.” n
1 https://www.delltechnologies.com/content/dam/ delltechnologies/assets/perspectives/2030/pdf/Realizing2030-A-Divided-Vision-of-the-Future-Summary.pdf 2 https://online.hbs.edu/blog/post/emotional-intelligencein-leadership
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Fintech’s role in shaping the financial services sector of the future has been well documented. But there are plenty of alternative and under-the-radar ways in which technology is changing both the customer experience and the way businesses operate – to everyone’s benefit
PICTURE THE SCENE: a gambler – we’ll call him Jim – with a long-term addiction has been trying to turn his life around and hasn’t placed a bet for six months. However, in a moment of weakness, he enters the branch of a bookmakers on the hight street. Suddenly, his mobile phone vibrates with a message from the customer relationship manager at his bank – informing him that, through the use of geolocation data (he had given consent to sharing), it has identified a risk and enacted a pre-agreed payment stop on his account. Furthermore, the action automatically triggers a follow-up call from Jim’s support counsellor and a call from the bank to confirm the reason for the payment stop, and next steps. We’ve all heard the more headlinegrabbing ways in which tech is overhauling financial services – from automated payments to real-time access to information and even ‘robo-advising’. But Jim’s intervention, says Simeon Moss, Consulting Services Lead at Deloitte in the Channel Islands, is one of a number of lesser recognised – ‘alternative’ – fintech-powered financial services changes of the future. They are being driven through ‘hyperpersonalisation’ of products, consumer data consent and new thinking about how ‘corporate purpose’ can affect how we bank. “Through open banking, data sharing and connected devices, banks
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can use digital prompts to customers in a number of ways,” says Moss. “A different example could be a customer walking around a property with an estate agent and receiving real-time information on whether they are suitable for a mortgage, alongside receiving various loan offers from multiple providers. “Another could be an SME manufacturer whose credit engine is linked to its financial and operational data, and whose machines have Internet of Things sensors that mean that if a new order comes in or a machine breaks down, an automatic bank loan is triggered.”
INSTINCTIVE BANKING Some of these types of ethical and instinctive banking are already happening. NatWest, for example, has partnered with fintech firm CoGo to offer carbon emission calculators to customers based on their spending habits. Their carbon footprint is measured, and advice is given on how best to reduce it. Such digital innovations are certainly needed in financial services, and driven by demand. According to a recent report, The Multiplier Effect, from Deloitte and the World Economic Forum, there is growing pressure on the sector to embrace digitalisation in this way. This, according to the report, is the result of rising competition from nontraditional financial players, growing demands from customers and increased flexibility from regulators. Moss says banks are leading the way, with the investment management and wealth protection sectors rapidly playing catching up. “Financial institutions are
Words: David Craik
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Financial institutions have the data, they need to start disrupting themselves
AUTOMATION OF TASKS Aside from the progress being made in banking, Moss says he is seeing more automation in financial services shift away from task-based to full end-toend processes focused on customer and employee satisfaction. “This takes in integration of digital workflow, intelligent document management, robotic automation and data and analytics, developing a complementary ‘digital workforce’,” says Moss. “An example of this in the fund management industry is the digitalisation of end-to-end payment processes. For a long time, it has been a heavily manual process, but now we can scan in documents, automatically recognise the clients and the payment required, do the necessary approvals – such as checking bank details – ensure client due diligence and authorise the transaction for automatic payment.”
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Moss says this improves fund management firms’ efficiency and reduces operational risk. “Importantly for the Channel Islands, it also frees up capacity to do higher-value activities,” he says. The use of AI and robotic automation is also increasingly being adopted at BNP Paribas, according to Sales Manager Katherine Cartwright. “AI, utilising natural language understanding and machine learning, including intelligent document processing, helps accelerate and automate repetitive processes. The robot looks for specific words or sentences within fund documentation and quickly pulls out the information required,” she says. “At BNP Paribas, we can automatically capture, extract and classify data from documents such as fund prospectuses and order confirmations. This is fed directly into our operational systems and improves efficiency – because we can quickly process documents on a large scale.” Previously, BNP Paribas staff would have had to manually download reports from each fund’s website and upload the information into the operational system. “We see a huge efficiency benefit from this for our fund of fund or secondaries fund clients, with large volumes of fund assets and a constant flow of corporate actions, such as drawdowns. There is a better turnaround time,” she explains.
REGULATORY AND COMPLIANCE GAINS Fintech solutions are also being adopted to aid regulation and compliance. “You can monitor and automatically pick up, on a real-time basis, changes in regulatory guidance. It then flags up where you need to make changes to remain compliant,” Moss says. Bosio stresses that it is still early days, however. “Regulation, compliance and onboarding remain very manual processes in private wealth management. There is a misconception that regtech solutions can be too complicated, costly and difficult to integrate,” he says. “I see growth here as speed becomes more important and the reality of potential remote client management becomes more realistic. Governance, risk and compliance are all key areas of interest for the regulators. Firms will soon rather invest in technology to reduce liability than continue using manual processes, which often fall short of compliance mandates.” Vaiie is focusing on jurisdictional and industry sector risk reporting and fraud prevention, along with automated due diligence using AI and machine learning. “It is feasible to imagine a point in industry where the technology can make the risk-based decision,” Bosio says.
still burdened somewhat by their legacy infrastructure and are trying to determine how emerging technology will shape their strategic direction,” Moss says. “It remains piecemeal and fragmented.” Lee Bosio, Managing Director of regtech business Vaiie, agrees. “Bricks and mortar financial services providers still struggle to move at the same pace as online-only providers.” However, both he and Moss see progress. “There are many areas of operation that are in their infancy and need to mature to leverage and harness the full benefits that tech can offer,” says Bosio.
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It is feasible to imagine a point where technology can make a risk-based decision
When it comes to risk, due diligence is also getting the fintech treatment. Stephane Gimenez, Founder and Chief Executive of recently launched cloudbased business MYCDD, is focused on helping firms manage their due diligence and compliance documentation remotely, automatically and digitally. “Every two or three years, financial services organisations have to redo the due diligence process – asking clients to once again send passports, and ensuring registered directors are up to date on antimoney laundering,” he says. “That’s okay if you have only 10 clients, but if you have thousands, the process becomes totally unproductive. “Plus, there are often concerns around misplacing client information sent by email, and whether all the due diligence documents are up to date.” Gimenez has created a subscriptionbased app service, where documents are uploaded to a secure site. It then automatically sends alerts to clients when documents need to be renewed. “You no longer need to pester your clients. It saves time and cost,” Gimenez
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says. “Millions of pounds are spent each year gathering client due diligence and file review in Jersey alone. “I know one company that has outsourced its file review process to Poland because it is more cost-effective. It is done manually on the telephone, chasing and chasing HNWI clients. It can’t carry on this way.” MYCDD is also looking at integrating biometrics, as well as electronic identification and signatures, into the process. “We think everything can be done, including client due diligence, from your own phone or tablet,” says Gimenez. “We can’t be stagnant.”
ALTERNATIVE ASSETS The alternative assets space is another area of financial services where fintech is playing an increasing role. “We are looking at the use of tokens, digital assets and smart contracts on blockchain to completely transform the investment processes,” explains BNP Paribas’ Katherine Cartwright. “Tokens allow for full transaction automation, improved asset liquidity,
shorter, if not real-time, settlements and better market access for the assets. “It is still in its infancy, and more is needed around regulations, risk management and technology investment to ensure its robustness and effectiveness.” BNP Paribas has partnered with cloudbased digital asset infrastructure provider Curv to create a proof of concept to transfer security tokens on blockchain. “This opens up a whole new world in sectors such as real estate, where the purchase settlement time can be extremely long,” says Cartwright. “Making the purchase digital would reduce time and help liquidity. You also have automation and standardisation of the transaction across the blockchain. “Sometimes real estate and private equity assets are very large, with only a few market participants who can engage in them. This technology could allow people to use tokens to buy parts of the asset, not the whole. It could open up alternative asset classes to more people.” Application programme interfaces (APIs) could also, she says, help with better access and sharing of data. “Clients can get data on demand,” adds Cartwright. “That allows for new services to be offered, such as bespoke reporting, net asset value calculations and distributions.” She also sees future growth in client portals for data analytics and management information. “We have taken a strategic stake in AssetMetrix, allowing general and limited partners to receive all their fund reports in their portals,” she states. “It also allows for data analytics to be performed by the general partner – to help decision-making and risk-monitoring, as well as benchmarking against other funds.” And, following a sustained period of heightened remote access and reliance on digital solutions, the pace of digital adoption is only likely to accelerate further. “There is an understanding that business can be done remotely and there has been an acceptance by regulators that technology can be a more effective verification standard than some legacy approaches, such as certified documents,” says Bosio. Moss believes organisations need to move away from thinking about digitalisation in a siloed way. “They need to consider how it can be adopted across all processes in an organisation, with a new innovative and agile mindset,” he says. That should mean more collaboration with fintech providers. “Financial institutions have the data, understand it and have relationships with regulators,” Bosio says. “They need to start disrupting themselves by investing in fintech organisations either through partnership or acquisition.” n
It’s not easy being
Dawn Sealey, Advisory Senior Manager at BDO Guernsey, looks at the regulatory changes that are having an impact on green finance
ANYONE WITH AN interest in green and sustainable finance will not have failed to notice the flurry of regulatory changes and developments in this area recently. The Guernsey Financial Services Commission recently published the results of its Guernsey Green Fund thematic, along with a Spring Green Consultation Paper. It was pleasing to note that there is a strong appetite for green finance in Guernsey. The Commission found no evidence of greenwashing within the current population of Green Funds, although it did identify room for improvement in the approaches taken by administrators monitoring Guernsey Green Funds. At the time of writing, the Guernsey Green Fund had one set of criteria to which green funds should adhere – the Common Principles for Climate Mitigation Finance Tracking. The principles state: “An activity is classified as related to climate change mitigation under the common principles if it promotes efforts to reduce or limit greenhouse gas emissions or enhance greenhouse gas sequestration.” The thematic report provides useful clarification for fund administrators that while some funds may choose to meet this objective by measuring carbon emission savings, other measurements may be utilised so long as there is “a demonstrable
approach in the underlying assets to mitigate environmental damage and that the fund (or parties to the fund) monitors that approach on an ongoing basis with a clear exit strategy for any assets that do not meet the criteria”. The day prior to the release of the Commission’s green papers, the Sustainable Finance Disclosure Regulation came into force in the EU. The Directive requires alternative investment funds (AIFs) to disclose on their websites, in pre-contractual documentation and in periodic reports, how the product meets any environmental or sustainable objectives, the methodologies it uses to measure those and the extent to which it meets those objectives. The technical standards that underpin the Directive have not yet been endorsed but are expected to come into force on 1 January 2022. Firms to whom the Directive applies are therefore expected to adopt a best efforts approach to compliance with the Directive and the draft standards. The timing and nature of the release of the Directive and the standards could make this a challenging Directive to comply with. In its Spring Green Consultation Paper, the Guernsey Financial Services Commission fed back on the proposal to adopt the EU Taxonomy for Sustainable
Finance as an additional alternative green criterion under the Guernsey Green Fund regime. At the time of writing, the final form of the Taxonomy had yet to be agreed and the Commission has stated that it will continue to monitor this.
UK GREEN TAXONOMY In the meantime, the UK authorities have signalled their intention to introduce their own green taxonomy and it is possible that this may also be a potential candidate for a Green Fund criteria. Adding to this mix, in November 2020 the UK published a roadmap setting out an indicative path towards mandatory climaterelated disclosures across the UK economy, aligned with the recommendations of the Taskforce on Climate related Financial Disclosures. The IFRS has also proposed to create a new global Sustainability Standards Board. For Guernsey funds marketed into both the EU and the UK, it remains to be seen whether there will be some crossover in the applicable requirements. One of the key findings of the Commission’s thematic report was that green investment knowledge and expertise was not widespread within the industry and that local firms will have to ensure that staff are appropriately trained, especially with the ongoing oversight obligations on the administrator. In addition, firms will need to identify which of the various international standards and regulations may apply to them and their clients and upskill their staff appropriately. BDO is well placed to advise firms on their regulatory obligations in respect of Guernsey Green Funds and to provide training. BDO can also provide guidance on a number of different green and sustainable standards. n
If you would like to know more, contact: Dawn Sealey at email@example.com Steve Desmond at firstname.lastname@example.org
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Everybody’s talking Home tech products such as Alexa and Siri have made voice activation a part of everyday life. Financial services firms are following suit – and the benefits go far beyond looking cool
Words: James Tall THE COVID-19 PANDEMIC has shifted us
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banking, for example – but they need to consider how they can widen use cases in a secure, compliant manner that everyone in their value chain is comfortable with.”
EXPANDING THE USE CASES Many specialists agree that banks and other financial institutions are the logical next stop for the smart speaker. And the banks are reacting. In 2019, Bank of America led the way, releasing its very own AI-powered digital helper, Erica. According to the bank, Erica attracted more than six million users in its first six months, with daily client engagement doubling. Customers can interact with Erica through voice commands, making it more convenient when they’re engrossed in another task. Its current functions include helping with transactional and other financial queries,
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all much closer to digital services when it comes to managing our finances, with even the most reluctant consumers forced online due to repeated lockdowns. Amid this sustained and growing wave of change, voice-activated technology is making itself heard loud and clear across the financial services sector. Voice activation and financial services are a natural fit. The explosion of artificial intelligence (AI)-powered personal assistants such as Amazon’s Alexa and Apple’s Siri has brought voice technology into people’s homes and cars. Shouting commands at a box in your kitchen or telling your car to “call home” no longer feels strange. Meanwhile, banking and financial services organisations operate in a very
customer-centric industry – and it’s increasingly important for them to engage with consumers on their own terms, matching the experiences they are getting in adjacent industries. “Financial institutions really have to get with the times,” says Martin Keelagher, CEO of Agile Automations. “People have seen what’s possible in a world re-imagined by the likes of Netflix, Amazon and Uber, and they are demanding the same level of treatment in financial services. “Banks and other financial services providers can’t miss the opportunity to apply this innovation to their front-line services. Some have tested the water in recent years – rolling out voice ID in telephone
cloud as it looks to make its mark on the banking business. In April this year, Microsoft agreed to buy voice recognition pioneer Nuance Communications in an all-cash transaction that gives the company an equity value of $16bn. The deal, the second largest acquisition in Microsoft’s history, comes almost two years after the two companies first partnered to roll out advanced AI systems that help doctors with administrative tasks. Microsoft’s famously forward-looking CEO, Satya Nadella, is well aware that CIOs across the financial services spectrum are busy exploring the potential of voice technology. They’re looking to support everything from chatbots that help customers find answers to questions about products and services, to apps that help mitigate the effects of Covid-19 and help companies to manage the return to offices. “My reading is that the Nuance portfolio that relates to speech will become integrated with, and will enhance,
Developments in voice technology go far beyond convenience; for some, they can be life-changing
handling bill payments and unlocking new debit or credit cards. Aditya Bhasin, Bank of America’s Chief Information Officer (CIO), has been quick to point out that this is just the beginning. Over time, Erica’s learning curve will make it possible for users to not only transfer money to a friend or list their transactions at a specific merchant, but also make better financial decisions by analysing their habits and providing bespoke guidance. Other large banking organisations are beginning to follow suit. JP Morgan’s corporate and investment bank research, including specific analyst research and stock tearsheets, is now available to clients through an Alexa skill. Meanwhile, a number of other banks are teaming up with the ‘big techs’ to shift the dial on what’s possible. Amazon Web Services (AWS), for example, is working with incumbents such as Barclays and Capital One – as well as challenger brands including Starling and Monzo – supporting migrations to the
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A number of fintech start-ups are dedicated solely to combatting financial crime
Microsoft Teams and Dynamics to deliver a next-generation customer engagement experience,” Bern Elliot, Vice President and Analyst at Gartner, told the Financial Times recently. And don’t forget the emerging fintechs. Until recently, the pioneering attempts at making voice technology effective, secure and flexible were seen as the preserve of the big financial institutions with the largest pool of resources. However, with an increasing number of agile start-ups and open-source projects coming up, it’s likely the technology will become increasingly democratised. One UK fintech, a cloud payroll solution, is working with Amazon to introduce features to its app. Users will soon be able to get their pay slip, tax and pension information by asking Alexa, saving time rifling through boxes of old paperwork. Any queries that can’t be solved by smart AI chatbots will be transferred to a company-branded payroll team. It will also be possible for an employee’s earnings to
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be split between multiple bank accounts, perhaps to cover savings, bills or simply day-to-day living. Developments in voice technology go far beyond simple convenience. For some, they can be life-changing. Those living with a disability, for example, can benefit from cutting-edge voice services that greatly enhance their financial inclusion and independence when it comes to keeping control of their money. Bank of America’s Erica features an innovative ‘gesture’ command-prediction function, which has been designed to create a more seamless experience for consumers with impairments. Banks, fintechs and card companies that are adopting voice-activation technology aren’t doing so simply to boost their ‘cool’ factor – they’re preparing for voice banking’s logical place in the future financial ecosystem.
IRONING OUT SECURITY CONCERNS While the idea of being able to voice a thought and have your banking assistant take care of all your concerns is hugely appealing, there is of course the obvious question of security. What happens if a cyber criminal clips together a voice command to make illicit use of it? Or you return home after a few beers and make a bullish purchase you wouldn’t have otherwise considered?
“There are some questions over API integration and where the voice data is stored,” says Keelagher. “Then there are considerations around affordability controls. Perhaps the best way forward is to introduce payment limits, like we see with contactless technology. You could certainly argue that the ultimate success of a voice purchase feature is dependent on a sensible limit function or cap.” These are valid questions and relevant concerns, and banks and their partners are busily collaborating on them. One of the big strengths of AI and machine learning is that they can significantly help financial institutions to protect their consumers and reduce the risk of fraudulent behaviour. There are a number of fintech start-ups dedicated solely to combatting financial crime. The banks are working closely with the likes of compliance expert Pelican to help improve the security behind their AI helpers, and this is where AI security and voice banking innovations go hand-in-hand. “As we recover from the pandemic and re-engineer financial services, biometrics and technology will dictate the way forward,” adds Keelagher. “Voice-activated technology has a major role to play in this new ecosystem and the numerous partnerships that we’re seeing across the financial landscape will accelerate adoption.” n
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ESG: future or fad? Everybody’s talking about ESG – environmental, social and governance – but is it just a passing fad or is it really ready to enter the mainstream arena? “MANAGING CLIMATE CHANGE risk is Words: Gill Wadsworth
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not about bunny hugging.” Those were the words of UK Prime Minister Boris Johnson, addressing a virtual summit in April that also saw many of the world’s leaders commit to new carbon emission targets. While Johnson’s remarks may have been met with some derision, they reflect a deeper and growing commitment by the world’s decision-makers to protect the environment. This pressure from the top is also driving a renewed focus on sustainable finance, with a deluge of regulations filtering down from on high – particularly in Europe – aimed at improving disclosure and transparency. In addition to compliance with EU rules, the Task Force on
Climate-Related Financial Disclosures (TCFD) has provided a framework to help companies be more transparent on their environmental risk. Bradley Davidson, ESG Manager at RBS International, says: “Disclosure frameworks such as TCFD or SFDR [the EU’s Sustainable Finance Disclosure Regulation] are becoming regulatory requirements and will ensure these impacts will continue to be accounted for.”
MOVING TO THE MAINSTREAM Rules aside, it can also make good business sense to capitalise on the growing appetite for environmental, social and governance (ESG) investment strategies. During the Covid-19 pandemic, ESGdriven investment strategies outperformed
in ESG and sustainability is a fad or an extravagance for when markets are doing well – and that people will move away when there are market and/or economic downturns. Instead it indicates a structural shift.”
Jersey Finance is committed to recognising, and where possible eliminating, greenwash
CHECK THE LABEL So, the spoils are there for providers offering truly genuine funds. But what about those who see the trend to sustainable investing as an opportunity to asset grab? Greenwashing – labelling bog-standard funds as sustainable – is the bugbear of those committed to ESG investment; and it is on the increase. As Mourant points out: “The rise of many new niche ESG-type funds poses a greater challenge on both how to spot and avoid strategies that over-promise and under-deliver on ESG and sustainability characteristics.”
their traditional peers. Index provider S&P Global analysed the returns from 26 ESG exchange-traded and mutual funds covering $250m in assets. In the year to 5 March 2021, 19 of these funds saw increases of between 27.3% and 55% compared with 27.1% from the S&P 500. Jamie Mourant, Investment Manager at Brooks Macdonald International, says that while there will always be investors who shun ESG investing as potentially damaging to returns, there is a notable shift towards those who believe that incorporating sustainable investment principles will enhance performance. Mourant says: “In the midst of a global pandemic, when global markets were experiencing one of their worst quarters on record, there were still net inflows into ESG and sustainable funds of over $40bn – compared with around $385bn net outflows from the wider fund market. This counters the theory that the interest
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Sustainable investing Research from Morningstar found that 505 sustainable funds were launched in Europe in 2020, as providers sought to cash in on a market accelerated by investor interest in climate change. In response, Jersey Finance is committed to recognising and, where possible, eliminating greenwash. Charlotte Brambilla, Associate Director, Financial Services, at the Government of Jersey, says: “The regulator is obviously taking greenwashing seriously. We are taking a deliberate approach to sustainable finance, which has got to deliver against the ESG objectives Jersey has tied itself to. “The last thing we want to do is enable a whole load of businesses to come to the islands using sustainable finance as a marketing wheeze, and not delivering against objectives.”
STANDARDISATION ISSUES Managing greenwashing is not the only challenge for ESG advocates. There also remains a stubborn lack of standardisation when it comes to terms – and even what it means to be sustainable. Craig Cordle, Partner at Ogier, says: “Different regulatory bodies and industry players have their own understanding of what sustainable finance means. “Add this to the absence of any global, standardised regulation for sustainable finance, and what you have is a complex landscape that can frequently be confusing for investors.” However, as part of its European Green Deal, the EU is creating green taxonomy
that will provide more clarity and more universal definitions around all things ESG. For RBSI’s Davidson, acceptance of ESG into the mainstream is welcome, but it has been a long time coming. While there may be a spotlight on sustainable finance now, he says, it is not a passing fad.
“Even after the spotlight is gone, we should be left with a robust set of requirements that ask all market participants to consider wider impacts, such as environmental or social, which ensure their investment decisions are well informed,” he says. n
Sustainable Finance Disclosure Requirements (SFDR): Putting the Green into black and white In March 2021, the EU imposed mandatory disclosure requirements for financial organisations offering ESG products. There are two levels of disclosure: level one gives the firm’s approach to sustainability risk; level two drills down into ESG products and gives more granular detail. Sophie Reguengo, Partner at Ogier, says there is no official guidance on the applicability of SFDR in the Channel Islands, but investment funds consider this regulation will apply to non-EU alternative investment fund managers that market their alternative investment funds into the EU. Providers hoping to have a market in the EU will need to comply. For those still grappling with the requirements, Shaun Robert, Director at alternative fund manager PraxisIFM, suggests firms prioritise getting their ESG policies and
documentation in order. “Make sure that information is available on the website,” he says. “Prospectuses need to be clear and should cover how sustainable risks are included in investment decisionmaking processes. “Firms also need to look at how they integrate sustainable risk into their internal policies.” Part of the motivation for SFDR is to drive out the greenwashers, and Robert is confident that the requirements will achieve this goal. “Before SFDR, providers could claim to have a green fund and it was difficult to challenge them. Now, they must provide more detail in black and white, making it easier for investors to know what they are buying,” he says.
Channel Islands’ green commitment In March 2021, Jersey Finance published its commitment to sustainable finance. While the document is new, the commitment isn’t; the island has long been developing a presence in the field of ESG investing. The latest approach aligns with the UN’s Sustainable Development Goals (SDGs), and sets out the plan to establish Jersey as ‘the leading sustainable international finance centre in the markets it serves’ by 2030. Charlotte Brambilla, Associate Director, Financial Services for the Government of Jersey, says: “We are pleased that we have completed the roadmap and we have all the agencies working together with a clear framework.” To achieve this ambitious target, the impetus cannot just come from government and industry, she adds. It is a challenge for “everyone on the islands”. The four main areas of focus include: • Building strong stakeholder partnerships – to give all sectors within the industry the
tools to integrate sustainability within a joined-up policy framework • Nurturing green finance on a green island – with greater collaboration between the finance industry, Jersey’s financial regulator the Jersey Financial Services Commission, the Government of Jersey and – crucially – the people of Jersey • Improving perception and credibility – by measuring performance against independent frameworks to reinforce Jersey’s reputation as a good global actor • Increasing capacity to upskill across the board – to prepare for and take advantage of the global trends in ESG and sustainable finance. Guernsey Green Finance Nearly two-thirds of asset managers operating out of Guernsey have seen an increase in interest for ESG strategies from clients in the past 12 months. This was a central finding from an ESG survey published by Guernsey Finance last
September and reinforces the need for the island to promote green investment through its Green Finance initiative. The Guernsey Green Fund, which was established in 2018, is the world’s first such regulated product and boasted a total net asset value of £3.5bn at the end of 2020. Andy Sloan, who chairs Guernsey Green Finance, says the island will continue to pursue the sustainable investing agenda this year. “We spent much of 2020 evangelising the sustainability agenda and we look forward to discussing the progress made and the work still to be done at our 2021 Sustainable Finance Week to be held in early June,” he says.
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Tomorrow’s world Financial services leaders from across the Channel Islands on the issues at the top of their transformation agendas Words: Alexander Garrett
financial services organisations is not only how to adapt to meet the rapid pace of change happening before them – but exactly which disruptions to prioritise and the extent of investment they should make in them. Often, these businesses will call on the abilities of futurists, who make their living from forecasting the important trends bubbling over the horizon and teasing out their implications. Of course, the exact extent to which some disruptors will impact the industry is often unpredictable and hard to gauge. Many have heard the famous case of Kodak, a business that knew digital cameras were coming – not least because digital cameras were developed by one of its own people – but underestimated the impact it would have and the threat it posed to its business model. The pandemic is another good example of the unpredictability of disruption: pandemics in general were on the radar of many futurists; the type of pandemic and the impact, for many, were not. So, what are the big issues that will shape the financial services sector over the coming years? And what will their
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impact be? We asked a selection of Channel Islands business leaders about their main areas of focus right now.
RISE OF THE ROBOTS Few topics are seen as being more synonymous with the future than the growing influence of technology in our lives – whether that be under the heading of artificial intelligence (AI), robotics, machine learning or automation. The financial sector already uses automation in multiple guises – from chatbots that can answer questions from the customer, to algorithms that make lending decisions. And the scope of what automation delivers to the sector is expected to step up sharply in coming years. Martin Keelagher, CEO of Agile Automations and an Ambassador at Digital Jersey, predicts: “As we go forward, all the evidence suggests that how businesses automate everyday business processes within their organisations is going to be one of the biggest growth areas.” In the financial sector, increased adoption will come as much from traditional players as it does from fintech start-ups and challenger banks built on a
ONE OF THE major challenges facing
it’s only a matter of time before financial services firms have to consider accepting Bitcoin and other crypto currencies
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There’ll be much less focus on pure profit or money-making than there has been
tech platform, Keelagher believes. “We’ve already seen a prime example of that with how traditional banks dealt with business bounce-back loans and other government initiatives that had to be put out very quickly,” he says. “A lot of that was actually built around automating due diligence and other checks.” Automation will also free up people in the sector to do more valuable work, says Keelagher. “Over the past 10 years, an increasing amount of time has been taken up with questions around compliance, risk and governance. But automation can remove that from your workflow – and that time could be spent working with a client to understand their needs better and to form a more personal relationship with them.” In wealth management particularly, says Keelagher, automation in the form of bots will be used to routinely value portfolios across a much wider range of assets than is done at present. Jersey Finance has identified five distinct areas in which it believes technology and automation will furnish opportunities: digital assets and distributed ledger
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technology; fintech to solve problems through innovation; regtech, using technology to help with regulatory challenges and reporting; wealth tech, catering for the private wealth industry; and cyber security. Amy Bryant, Deputy CEO at Jersey Finance, sees the change as somewhat generational. “Generations growing up now have always had this technology and aren’t prepared to put up with getting a paper statement once a year. So they have completely different expectations,” she says.
THE DEATH OF CASH One of the most significant trends financial services companies will have to deal with over the coming years is a giant leap forward in the volume and pervasiveness of electronic payments. Keelagher sees this as part of a bigger picture – the integration of money with other services. “Financial services and products have tended to be a standalone proposition, whereas there’s an opportunity that they could be integrated into much more of an everyday role.” That’s already happening with the way
Apple Pay and other electronic payments are built into other services. Keelagher says: “I think in the next five to 10 years, it will be unusual to carry a credit card or a piece of plastic at all.” The increasing adoption of contactless during the pandemic has made people more comfortable with this approach. And financial institutions will also see that not issuing plastic is much greener, he adds.
CRYPTO AND DIGITAL ASSETS Richard Field, Partner at Appleby in Guernsey, sees the acceptance of digital currencies as increasingly likely as we move forward. “Humans have had mechanisms of value exchange since time began – whether that was a stone you could exchange for a goat or physical money.” Use of physical cash has diminished rapidly, he points out, and it’s only a matter of time before financial services businesses have to consider accepting Bitcoin, Ether and other crypto currencies. One of the biggest issues they will have to face in doing so, he says, is risk-based: finding a way to become assured of the value of instruments that can be extremely
volatile in pricing, and for which there is no long trail of historic data. Another is regulatory. “Who is sitting behind these currencies and who is buying them and selling them?” he asks. Despite those concerns, Field says the rise of crypto currencies is part of an even bigger picture: the growing acceptance of the value residing in digital assets more generally. “You can buy a digital token that represents a share in a house in Los Angeles, for example,” he says. “And Jack Dorsey, founder of Twitter, recently sold off the first tweet that was ever sent, for more than $2.9m, in the form of an NFT [non-fungible token]. With these kinds of assets now on the market, who is going to provide the expert valuation that would say: we can lend against that?”
the Guernsey Financial Services Commission adopting a thorough green approach and stating its own aim to become one of the first carbon-neutral regulators in the world.” At Jersey Finance, Amy Bryant expresses similar sentiments. “Sustainable finance is not a trend, it’s here to stay. It’s not something you have a separate conversation on, it’s part and parcel of running a business.” What this means in practice, she says, is that the financial sector will have to focus on developing products and services that support the transition to a greener
CLIMATE CHANGE AND ETHICS Climate change is arguably the biggest single challenge the world faces, and ESG (environmental, social and governance) considerations have become a key factor driving investment across business. So how will these issues affect financial services going forward? “Previously, an ESG policy might have been a nice-to-have, but it’s now a core component of business objectives and strategies,” says Helen Wyatt, Corporate Partner at law firm Mourant. “Society expects it, and regulators are focused on it. In Guernsey, the spotlight has been on environmental issues, with
Sustainable finance is not a trend, it’s here to stay, it’s part and parcel of running a business
future. That’s partly a question of meeting the needs of investors, and partly one of ensuring from a corporate point of view that the Jersey finance community has an ethos and approach that is aligned with the principles of ESG. The impetus for sustainable finance will continue to come from a range of directions – civil society’s climate awareness, global political initiatives and investors, to name but three. But one significant change will be the transfer of wealth to the next generation, believes Bryant. “We’re at a stage where we are seeing a massive transfer from the founder generation to millennials and gen-X-ers,” she says, “and that’s linked to a change in investor preference around their values.” As for another part of this picture, Field says that putting purpose before profit will be a hallmark of business going forward, and financial services firms will have to accommodate that. This will particularly be a hallmark of innovation in the sector and new businesses coming through, he says. “I think there’ll be much less of a focus on pure profit or money-making than there has been in the past.”
POST-PANDEMIC EXPECTATIONS It’s early days when it comes to talking about the post-pandemic world, but it seems inevitable that Covid-19 will have longlasting repercussions for financial services businesses. The most obvious of these, perhaps, is how banks and other institutions will expect their people to work, with an increased focus on work-life balance. “The Covid-19 pandemic has changed the way we interact, forcing many financial services businesses to equip their workforces for working from home,” says Helen Wyatt at Mourant. “The pandemic has also – quite rightly – refocused the corporate lens, and wellbeing is far higher up the agenda.” The fact that you can do the work from anywhere could have an unexpected consequence in the shape of a more diverse workforce, adds Bryant. “If workplaces are more accommodating in terms of where people can do their work and the hours they work, that might attract talent that couldn’t previously participate in the workforce because it couldn’t do a nine-tofive day in the office,” she says. From a customer perspective, Field believes the pandemic has accelerated a trend towards virtual engagement. Customers will be less expectant of having personal relationships with their financial institutions, and those institutions will have to increasingly cultivate those relationships – and find new customers – by harnessing technology. n
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Who cares about inflation?
One of the great unanswered questions in the markets right now is whether inflation will return to previous levels – and, amid greater controls and alternative investment opportunities to work around its impact, whether inflation even matters any more Words: David Burrows THE WORLD HAS got used to low inflation. In the past 25 years, inflation has been incredibly low compared with prior decades, and not just in economies that have struggled, such as Japan, but also in economies that have experienced episodes of high growth. The fact is that for many, it has become the norm – ‘just the way it is’. But is that attitude complacent? As ESSEC Business School professors Radu Vranceanu and Marc Guyot point out in their paper Why the return of high inflation can no longer be excluded: “The US inflation rate exceeded 4% only briefly in 2005 and in the wake of the global financial crisis of 2008. And, since the creation of the European Monetary Union (EMU) in 1999, the [European Union] inflation rate exceeded 4% only for a few months in 2008.” Inflation sceptics point out that inflation has been low
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despite central banks engaging in massive asset-purchase programmes that multiplied their balance sheets by a factor of four. But, as Vranceanu and Guyot argue, these sceptics attach less emphasis to the fact that the monetary base did not increase much, with many commercial banks holding huge amounts of reserves with the central banks.
RISE OF THE SLEEPING GIANT? Some economists predict inflation’s return with considerable confidence, citing the amount of cash that has been printed by central banks, such as the Federal Reserve.
In the US, Harvard economist Lawrence Summers has asserted that adding President Joe Biden’s $1.9trn stimulus package to the $3.1trn deficit that the Trump administration ran up in 2020 has the potential to revive inflation “of a kind we have not seen in a generation”. In the eurozone,
meanwhile, Philip Lane, Chief Economist at the European Central Bank, has said that the bank is “closely monitoring” bond yields. In early March, the Australian Central Bank decided to steer its bond purchase programme to unravel the increase in long-term yields. Continued support to the bond market is the wrong signal to send if the original selling movement in bonds is determined by raising inflation expectations. Vranceanu and Guyot suggest that, with a supply shock on the one hand, and governments engaged in massive spending plans – and central banks ready to support them by monetising debts – on the other, there is little left to keep inflation expectations under control.
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CONTRASTING VIEWS While many economists have underplayed both the threat and impact of inflation, since the beginning of the year some investment fund managers have been actively hedging against inflation. In his annual letter to investors, delivered at the end of February, Warren Buffet recommended avoiding the bond market, where rising inflation fear could entail big losses. As Vranceanu and Guyot point out, his predictions were correct in 2001 and 2008 – so what’s to say he is not correct now? These fears of out-of-control inflation are in contrast with the views of US economist Joseph Stiglitz, Professor at Columbia University, who in February this year referred to inflation as a “bogeyman that is more fantasy than real threat nowadays”. Stiglitz argues that if inflation rises, the Federal Reserve will simply increase the short-term interest rate, as it did in the past. Furthermore, as echoed by advocates of modern monetary theory (MMT), should inflation return, the government can simply increase taxes on those with higher incomes. So, given all the contrasting views and divided opinions, can anyone accurately predict which is the most likely outcome on inflation? It depends what timeframe you are talking about, argues James Cook, Head of Global Equity at Jersey-based Ashburton Investments. “In the short term, we can predict where inflation will be – that it will peak at 3% and then lower for the second part of this year. But the longer term is far harder to predict and largely depends on how central banks interpret stable pricing.” The problem with only being able to accurately predict short-term inflation scenarios is that most investors are advised to invest for the long term – typically five to 10 years or more. As Cook points out, if you are invested in a 10-year gilt offering 0.75%, you are locking into losses if inflation is rising.
DOES INFLATION REALLY MATTER? In a world where millennials and other emerging investor groups and wealth holders are increasingly the decisionmakers – and increasingly driven by other motivations – does inflation really enter the equation as it once did? Are we getting too hung up over the issue? Cook concedes that the pandemic has meant people have not been spending to the same degree as normal and are now looking to invest this surplus cash. Alternative options are catching the eye – notably speculative vehicles such as commodities (gold), REITs and cryptocurrencies. These investments are not at the mercy of rising inflation. However, he does not subscribe to the
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Inflation is a bogeyman that is more fantasy than real threat nowadays
argument that inflation doesn’t matter any more. “If – and it is a big if – inflation were stubbornly high, then interest rates would rise significantly, and this would have huge ramifications for investments. “Inflation erodes purchasing power over time – essentially it is the reverse of compound interest. It has huge implications for asset classes, with fixed income hit particularly hard,” he says. Cook also concedes that, with equities, there is the greater opportunity to shield from the impact of inflation. “The benefit of equities is that they can adjust their pricing in an inflationary or deflationary environment,” he says. Fund managers are also able to reposition equity portfolios to sectors that are more resistant to inflation. Cook explains: “As an equity fund manager, you have to ask what you want to own in a super-inflationary environment. You want to be in companies that produce goods and services that people want and need – sectors such as consumer staples and healthcare.” He adds that as and when inflation subsides, the shift in preference is for consumer discretionary stocks.
When the views of eminent economists on inflation contrast so sharply, it makes it even harder to make investment calls. It is true that 35% of all US dollars ever printed were produced in 2020. On the face of it, this is alarming, but at the same time, advances in IT have had a deflationary effect. Technology reduces the number of people needed to create a product or provide a service and this, in turn, reduces costs. And we know that the Covid-19 pandemic has massively boosted adoption of technology. According to a McKinsey Global Survey of executives, carried out in October 2020, companies have accelerated the digitalisation of their customer and supply-chain interactions, and of their internal operations, by three to four years. So can we really make an assumption on inflation and its impact when the landscape has changed so massively? Are the actions of governments – notably the new age of ‘Bidenomics’ – largely dismissive of inflation? Adam Tooze, an English economic historian at Columbia University, writing in The New Statesman, suggests there has been a “fundamental revaluation of the risk of too much spending leading to the economy overheating and inflation”. Tooze also notes that there is a realisation that “the greatest threat to liberal democracy in the US is not macroeconomic instability, but social polarisation and Republican politics”. Perhaps inflation is not the dark spectre it once was – that there is greater flexibility to control it when necessary and more investment options available to avoid its impact. Former US President Ronald Reagan once compared inflation to a “violent mugger”. Whether it really has lost its menace in the years since then is yet to become apparent. n
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After more than a year of remote working, the world is starting to open up once more. But will the office return – and will we recognise it if and when it does?
The Office 2.0 82 may-july 2021
THE OFFICE IS dead – long live homeworking. At least, that’s what the headlines would have us believe. After more than a year of enforced and unprecedented change in the way almost every organisation works, the slow relaxation of lockdown rules is now raising questions about the future of the office as we know it – and how businesses will weather these changes. So what does The Office 2.0 look like? And what will financial services companies – and landlords – need to do to tempt employees back? More importantly, how will the Channel Islands fare in comparison with the UK? To get a clear understanding of where things stand, it’s helpful to understand where the office market was before Covid-19 changed the world view. Back then, as serviced office spaces such as WeWork and Second Home multiplied in London and across Europe, demand for premium office space in the Channel Islands was at an all-time high. “In 2019, there was a significant amount of new office space being created,” says Chris Philpott, Partner at Carey Olsen and leader of its Jersey property team. “Lots of financial services companies were looking to move out of older, secondary office space and into the International Finance Centre in the middle of St Helier.
LIFE AFTER COVID As life begins tentatively to return to normal, does the same happen to offices? Over the past 14 months, companies have been forced to adapt to a remote way of working, virtually overnight, and many have reported a rise in staff productivity.
In February, HSBC announced that it was going to reduce its global workplace footprint by 40%. Technologically, even those companies historically resistant to change were forced to adapt, as working from home replaced daily commutes and business travel. Julie Melia, who leads Mourant’s Jersey property team, says the office is far from dead – offices will still exist, just in a different guise. “Offices still offer some elements of work life that can’t be replicated remotely,” she says. “Businesses still need a central hub for all sorts of reasons – for client-facing meetings, to enable collaborative working and to help train up the younger workforce. “So, it could be that companies offer greater flexibility to their workforce in terms of working from home part of the time, although the office space will still be key. And even if the space is smaller, it will probably be higher spec in order to attract workers back.” That enhanced spec is likely to be the responsibility of companies and landlords. For companies, creating an environment that attracts the top talent, impresses clients and is fit for purpose in a post-pandemic world will be key. For landlords, keeping their properties in cutting edge condition will be a key differentiator. O’Boyle says: “One of the key conversations taking place right now is what businesses want from the office. “In the past, we probably all focused on the office as a place just to work. But the pandemic has demonstrated how important the social aspects of the office are to people. Communication is easier and more natural in an office environment and, unlike video calls, you don’t need to unmute yourself before speaking.
Words: Imogen Rowland
“At the same time, there was a significant number of property investments, so the market was strong for landlords.” Nick Terry, Executive Director of Alternative Investments at Ocorian, agrees. “At the back end of 2019 we were seeing an awful lot of demand for desk space in central business districts, and as a result office rents were generally increasing.” The same was true across Europe: increased demand was pushing up rents and making transactions more landlordfriendly, with lower rent-free periods, fewer lease incentives and, typically, lease lengths increasing. Elsewhere in the UK, the growth of serviced offices was also being buoyed by interest from major firms such as Deloitte taking up large swathes of flexible spaces. Consequently, the property investment market was also strong. “Pre-Covid-19, prime grade A offices were seen as an attractive investment, with the best assets attracting great interest and competition from overseas, as well as local investors,” explains Jeff O’Boyle, Partner and Head of Property at Bedell Cristin. “In particular, Gaspé House and IFC 1 were sold at very impressive yields. In Jersey, we saw some of the largest office sales in the British Isles in recent years. “Understandably, the pandemic took the heat out of the local investment market last year,” he adds. Things – inevitably – slowed down considerably.
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Businesses will need to look after all employees, not just the ones that they can see
“We are seeing that local office workers are very keen to come back to the office, albeit with more flexibility.” There are also long-term implications of remote working to consider. Unless companies make a concerted effort to connect with staff, “there is a risk that employees who choose to work from home permanently could be neglected and fall between the cracks”, says O’Boyle. “Businesses will need to be on the front foot in seeking to look after the wellbeing of all their employees, not just the ones that they can see.” His concerns are shared by Ocorian’s Nick Terry, who points out that managing HR issues is far more challenging in remote working scenarios.
ISLANDS PROTECTION The Channel Islands have felt the brunt of the office shutdown far less than the rest of the UK. Jersey-based D2 Real Estate conducted its annual Channel Islands Office Market Review earlier this year and the results are promising, according to MD Phil Dawes. “The Channel Islands’ office market is quite unique, because there’s never been a huge amount of supply,” he says. “In 2018/19, take-up of new office space hit record levels, and because there’s finite space, we always knew that 2020 would be a quiet year.” However, survey respondents are also keen to return to the office, with more than 30% reporting already being back at full occupancy and more than 40% intending to be full within six months. ‘Relevance of the office to business’ scored 4.31 out of 5 in the survey, proving that, for Jersey and Guernsey, a return to the office is not in doubt. Moreover, 46% of respondents expected their occupational requirements to remain the same, with 25% anticipating requirements to rise. Just 12% expected their requirements to fall. In the near future, terms may well switch in favour of tenants, but Terry sees no
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immediate ramifications for the islands’ property market. “Real estate should always be seen as a long-term investment,” he says. “It’s an expensive and slow transaction, so generally people don’t flip in and out. “Landlords and investors will be looking at their portfolios to see how potential tenants might use their spaces, and considering how they can be most attractive to occupiers. They will be looking to both the usability and the sustainability of the buildings.” Carey Olsen’s Chris Philpott agrees. “Despite Covid-19, we have still been able to relocate clients to new premises,” he says. “The only difference has been that a lot of the developers had to extend times on contracts due to inevitable delays with the fit-out. “But we’ve been able to secure some very good deals for premises during the pandemic, and tenants have been able to explore opportunities, thanks to the shift in demand giving more power to occupiers.” The other impact that will only become truly apparent as the world begins to open up is the wider effect that the pandemic, and changes in work routines, have had on the businesses that have traditionally supported offices. Cafés, shops and restaurants in business districts will have felt the force of the lockdowns hardest – but again, this is likely to affect the Channel Islands less than bigger cities, where commuting times may make working from home a more permanent prospect. The pandemic could also have an impact on the pension funds that have traditionally owned the British high street – which was struggling long before March 2020. But, once again, this is less of an issue in Jersey and Guernsey, where such premises aren’t closely linked to pension funds, explains Melia. The Channel Islands are unique within the British Isles, believes O’Boyle – and in a unique position. “We have an abundant supply of highly skilled financial
services experts and all of the necessary infrastructure to support our finance industry,” he says. “Therefore, we would expect interest in establishing offices from new entrants to remain high and for growth from established businesses to continue. Inevitably, that will lead to continued demand for offices.” And those rumours about the demise of the office? Paraphrasing Mark Twain’s quip about reports of his death, O’Boyle concludes: “Reports of the death of the office have been highly exaggerated.” n
What the market says D2 Real Estate’s Channel Islands Office Market Review surveyed 115 companies in Jersey and Guernsey between December 2020 and January 2021. Key findings included: ● Office environment and cost were considered the most important future occupational priorities, Covid-19 resilience the least. ● Cost was a key consideration for respondents – but a high proportion considered the office environment more important. ● The importance of lease flexibility was neutral – another key differentiator between the islands and the UK mainland. ● Maintaining staff wellbeing was a concern for 40% of respondents – something not easily achieved working remotely. ● More than 45% of respondents anticipated future operational requirements will stay the same, while more people anticipated a rise (25%) than a fall (12%).
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MORE PEOPLE H AV E B E E N I N TO S PAC E THAN H AV E PA S S E D THE MASTER OF WINE EXAM
Meet Pierpaolo, he’s one of three Masters of Wine here at Waitrose & Partners. He and his team spend their lives searching the planet to find the best wines for our customers. Think of them as your very own sommeliers. Because every single wine we sell has been hand-picked by them.
FOR US, IT’S PERSONAL
Pierpaolo, Partner & Head of Wine Buying
Knowledge Brain food for the busy business professional
The Knowledge is compiled by Alexander Garrett The force be with you
Physicists believe they may have discovered a new fundamental force of nature. The Muon g-2 experiment, carried out at a laboratory near Chicago, revealed evidence of a new force which would govern how objects and particles interact with each other. It involved sending particles around a 14-metre ring and then applying a magnetic field. Under the current laws of physics, the particles were expected to wobble at a certain rate, but the rate observed was faster, causing excited speculation that a new force of nature was responsible. The UK’s Science and Technology Facilities Council (STFC) said the result “provides strong evidence for the existence of an undiscovered sub-atomic particle or new force”. Further work will be required to prove that this effect is real.
People are more likely to enjoy wine if they are told it is expensive. That’s the finding of new research carried out at the University of Basel in Switzerland, which showed that when wine was given a higher price tag, consumers thought it tasted better. The study was based on a wine tasting at the university, in which psychologists gave 140 blind tasters three different samples of 2013 Italian red wine, with each labelled as low, mid or high-price at prices ranging from $10 to $70 per bottle. Some of the wine had the correct price tag, some had a higher price tag, and some had no price tag at all. The more expensive the price given, the better the wine was perceived. “The cheapest wine was rated as more pleasant when presented as fourfold its actual retail price,” researchers noted. “No effect was found when decreasing the price label of the expensive wine fourfold,” they added.
Take a break
People need breaks between meetings to avoid getting stressed. That’s the conclusion of new research by Microsoft’s Human Factors Lab, which set out to find a solution for meeting fatigue, described as a pressing concern in the new era of remote and hybrid work. Researchers asked 14 people to take part in video meetings while wearing electroencephalogram (EEG) equipment in order to monitor the electrical activity in their brains. The experiment found that a break between meetings allowed the brain to reset, reducing the stress accumulated between meetings. It also demonstrated that jumping from one meeting to another does produce spikes of stress. Resetting Outlook to build in breaks between meetings is one solution, says Microsoft.
Most drivers think electric vehicles are still too expensive and they are unaware of government grants. That’s the conclusion of research by the Automobile Association, carried out as the UK government prepares to ban the sale of new petrol and diesel cars by 2030. The study of more than 15,500 drivers found that 81% said they thought electric vehicles (EVs) were still too expensive. And almost two-thirds (63%) of respondents said that they had never heard of the government’s Plug-In Car Grant, which takes £2,500 off the cost of a new EV with a list price of less than £35,000. Some 50% of study participants had never heard of the Electric Vehicle Home Charging Scheme either, which contributes up to 75% of the cost of buying and installing a home charging point.
Just four UK fund managers have outperformed investment guru Warren Buffet over the last 20 years, according to investment platform AJ Bell. The four are James Anderson, of Scottish Mortgage Investment Trust; Nick Train and Michael Lindsell, who run Lindsell Train Investment Trust as well as Finsbury Growth & Income Trust; and Alexander Darwall, who manages the Devon Equity Management European Opportunities fund. AJ Bell financial analyst Laith Khalaf said: “These managers don’t have the US focus that Buffett does, but that makes their outperformance more impressive, as the S&P 500 has been the best performing major index of the last two decades.”
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Best of… BOOKS
Reimagining Capitalism in a World on Fire by Rebecca Henderson (Penguin, £9.99, paperback) Henderson, currently the John and Natty McArthur University Professor at Harvard, explores the ideas she teaches in her Reimagining Capitalism course at the university. It surveys the spectrum of unprecedented challenges facing the world’s dominant economic model – from climate change to social and economic inequality, and draws on examples of companies that have found responsible solutions for these problems. In one example, she looks at how Unilever attempted to use self-regulation to solve the problem of unsustainable palm oil production – though well-intentioned, the initiative soon came up against many unexpected obstacles. The overall conclusion, however, is that capitalism needs to re-invent itself. It’s too important to fail.
Empire of Pain: The Secret History of the Sackler Dynasty by Patrick Radden Keeffe (Pan Macmillan, £20, hardback) America’s opioid crisis is one of the most shocking episodes in pharmaceutical history, having led to premature death and addictive misery for hundreds of thousands of victims. This book tells the story of the family and the company – Purdue Pharma – at the centre of the controversy. Beginning with a drug to help terminally ill people die with dignity at home, they went on to develop OxyContin, a drug given to millions after an aggressive marketing campaign targeted at doctors. Many patients overdosed on OxyContin while the Sacklers were giving millions to art galleries around the world. Radden Keeffe raises troubling questions about how a major western healthcare system could be so susceptible.
Ask Iwata: Words of Wisdom from Satoru Iwata, Nintendo’s Legendary CEO by Hobonichi, from the original words of Satoru Iwata (VIZ Media, £16.64, hardback) This book will primarily be of interest to fans of Nintendo, the Japanese game company that its subject led until his untimely death in 2015. Yet it should perhaps have a wider audience, not least because Iwata showed a different way of being a company leader, one in which kindness, inspiration and humility are most often mentioned. Iwata was originally a programmer with Japan’s HAL Labs, before joining Nintendo, where he soon became President and led the company during a golden period. Most importantly, he always put Nintendo fans first, building a close relationship through the online Iwata Asks interviews. He’s since become something of a legend, revered as much for his personality as the gaming he brought to millions.
Come Fly the World: The Women of Pan Am at War and Peace by Julia Cooke (Icon Books, £16.99, hardback) This hugely engaging story looks at the women who were stewardesses on Pan Am during its 1960s and 1970s heyday. While the title refers to a different airline’s demeaning ‘Fly me’ ad campaign, the women of Pan Am were, according to Julia Cooke, both the victims of sexism and at the same time powerful diplomats for US national interests around the world. Like all air hostesses of the day, they were chosen for their looks and often fired by their mid-thirties; but many were college graduates who chose this career as a way out of the straitjacket of motherhood and apple pie. With its combination of personal memoirs and sharp commentary, this is a piece of social history about an era when flying was still a great adventure and the passengers were largely men.
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In numbers: Coffee PODCASTS
2 billion Estimated number of cups of coffee consumed worldwide every day Source: British Coffee Association
How’s Work? In this podcast from Belgian psychotherapist Esther Perel, the subjects – couples, co-workers or co-founders – seek answers to professional problems, often exposing their vulnerabilities in the process. One couple discuss how they would both like to give up work, but only one can due to financial pressure. It fastens on how much of our identity is tied up with work. https://open.spotify.com/show/0P13JasQfVZ1RiDCMZMYNU
Weight in kilos of coffee consumed per person annually in the world’s biggest coffee consuming country, Finland. That’s four cups each per day Source: World Population Review
Cryptocurrency indexes S&P Dow Jones Indices has launched a series of crypto currency indexes that will allow investors to keep on top of the performance of currencies. The new indices – S&P Bitcoin Index, S&P Ethereum Index and S&P Crypto Mega Cap Index – will use data from New York virtual currency company Lukka, and later this year, the new index series will expand to include additional coins. tinyurl.com/2xsvpsy5
Percentage share of world’s coffee production that is Arabica strain. Remaining 40% is Robusta Source: International Coffee Organization, Coffee Development Report
Advanced Research and Invention Agency The UK government is to launch an agency to fund high-risk, high-reward scientific research. The Advanced Research and Invention Agency (ARIA) will aim to start in 2022 with an £800m budget. It will fund inventors to turn transformational ideas into technologies, discoveries, products and services. tinyurl.com/3dbhxt4v
2,592,000 Metric tons of coffee produced in 2016 by Brazil, the world’s biggest producer Source: World Atlas
Cboe Europe Derivatives Cboe – originally the Chicago Board Options Exchange – is launching a derivatives exchange in Amsterdam in September. Supported by Goldman Sachs and Morgan Stanley, it will offer trades in futures and options on six European equities indices. It will usher in a US-style system, where bids and offers can be seen by traders on a computer screen on a central order book. www.cboe.com/europe/derivatives/overview
210,000 Number of jobs created in the UK by the coffee industry Source: British Coffee Association
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…Delegate IT’s one of the cornerstones of all management – getting the people who report to you to carry out the work that needs to be done. Yet many people have a problem with delegation and either make a hash of it, or end up buried in work because they are unable to share out what lands on their own desk. So what are the key ingredients in learning to delegate effectively?
Recognise what’s causing the problem “Understand how your actions and feelings may be hindering effective delegation,” advises Nelson Phillips, Associate Dean of External Relations at Imperial College Business School. You may be shielding your reports from work that is boring or repetitive because you want to be liked, says Phillips. Or you may be reluctant to delegate because you’re convinced that you will do the best job. You may want to be seen as the expert – particularly if you’ve been promoted from a role where expertise was important. Whatever the case, it’s important to understand that delegation is about making the most efficient use of your time as a more senior member of the team.
Know what to delegate “Fight the urge to hand a task to the person who will give least resistance and pass it to the person who will do it justice”
Not every task can be delegated, points out Lauren Landry, Associate Director of Marketing and Communications for Harvard Business School Online. “For example, performance reviews or any personnel matters should be handled by you.” Look for day-today activities you take on yourself that don’t require your direct oversight. Assigning such tasks to other employees can help bolster
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their careers, Landry points out. “If there’s someone who could do the work better, or you think this could be a teachable moment, delegate. It will show you trust and value your team, while also giving you time to focus on more strategic projects.”
Choose carefully Take a strategic look at your team when delegating a particular task, says Rob Bartlett, Consultant at coaching and development organisation Emerge UK. “Fight the urge to hand it to the person who will give least resistance and pass it to the person who will do it justice.” That could be the individual whose role is most closely matched to the task in hand, or someone whose own development, goals and challenges will improve as a result – even if they don’t see it like that to begin with.
Create a structure It may be helpful to develop a framework for delegation conversations, says Phillips. Think about the individual who is being delegated and the help and support they may need. “Clearly express to the staff member why this piece of work is necessary and why they are being asked to do it.” And spell out what success will look like. “Clearly define what outcomes you are looking for and make sure the person you are delegating to has a clear idea of practicalities such as deadlines and approvals required.”
Hand over power When you delegate, it’s necessary to understand the difference between responsibility and authority, according to The Management Centre, a management consultancy working with charities and other ethical
Business leaders on making it to the top
Getting ahead organisations. “Responsibility is an individual’s commitment to act on something that they accept they should deal with; authority is the power to do something without first obtaining permission from another person,” TMC explains. “Where new managers are more likely to fall down is in being clear about what authority they are handing over with the responsibility.” The individual being delegated to needs to know whether they have authority to pull in other members of the team, to change deadlines and to sign off plans – to give a few examples.
let people innovate – and fail If you’re a perfectionist, it’s particularly important to allow the possibility of failure, because it encourages experimentation and empowers individuals to try out ideas, according to Landry. “If you’re open to new ideas and approaches to the work, you’ll have an easier time delegating when able.”
Give credit where it’s due Once you’ve delegated work successfully, make sure that those who carried it out get the credit they deserve, adds Landry. And that’s not just about being fair – it will make the people around you more engaged and more likely to want to help you on other projects in future.
Jordan Docherty Senior Wealth Product Manager, HSBC How did you get into wealth management? I started in HSBC’s wealth operations team in 2009 after taking a year out to travel the world. The wealth operations background helped me to build and develop my understanding before I moved onto a role in HSBC Asset Management. From there, I moved into the wealth products and proposition team, where I still am today.
What are the key qualities needed to get on in your job? The customer is at the heart of everything we do. We have to build, adapt and manage wealth solutions to meet their needs, so a passion for providing the best outcome for the customer is key. Also with an ever-changing external environment, we need to be flexible in how we manage the impact on our products and services, adapting to change.
What’s it like to work for one of the world’s biggest banks? With HSBC a world-leader in wealth services, we’re able to bring world-class products, technology and experts to our island customers. On a personal level, HSBC offers excellent training and development and a great culture that allows individuals to flourish and be themselves.
What’s the best advice you’ve been given in your career? There is no ‘one’ career model to follow as everyone has their own story. Create your own path.
What’s great about Jersey as a place to work? All too often we overlook the benefits of living in Jersey. The sand and sea are never far away from my working day – there are not many places in the world where we can finish a day in the office (or at home!) and travel a few minutes to find the sea air. After taking it all for granted for too long and now having a young family, I’m starting to fall in love again with the island we call home and what it has to offer.
What are your main interests outside work, and why do you think it’s important to have other things you’re passionate about? Football has always been a big part of my life either as a player, a manager or a supporter. As well as being a great way for me to switch off, it’s also given me many experiences and opportunities that have benefited my professional career.
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e’s a man with a lively way with words. In January, Seth Klarman, in case you haven’t guessed it, is one of the world’s Klarman, founder of hedge fund Baupost, wrote: “With so best-known value investors, looking for under-valued assets much stimulus being deployed, trying to figure out if the and benefiting when they rise in price. Over the course of the economy is in recession is like trying to assess if you had a fever pandemic, it’s a style of investing that has not performed well, after you just took a large dose of aspirin. But as with frogs in which explains why he is keen to see a reversion to stocks being water that is slowly being heated to a boil, investors are being fairly valued and distortion being taken out of the market. conditioned not to recognise the danger.” His philosophy of looking for bargains and sitting What the 63-year-old billionaire was getting at is on cash if the conditions aren’t right has earned him “As with frogs in that central banks – notably the US Federal Reserve – comparisons with Warren Buffett and the tag of ‘the boiling water, risk convincing investors that there is no longer risk sage of Boston’. He’s quietly made Baupost one of investors are being the world’s biggest hedge funds, with some $30bn of out there through their policy of slashing interest rates and flooding the market with stimulus. assets under management, through shrewd investment conditioned not Klarman, who founded Baupost in 1982, is a in a range of distressed assets, from real estate to to recognise the leading critic of the latest wave of central bank energy shares. Along the way, the low-profile Klarman danger” interventions, describing the Fed as “an 800lb gorilla” has bought racehorses, co-founded the Times of Israel whose support mechanisms have squeezed out the investors newspaper and become an important philanthropist. who would normally provide liquidity at times of distress. He has And his one book, Margin of Safety, Risk Averse Investing also bemoaned the soaring value of car-maker Tesla, in spite of Strategies for the Thoughtful Investor has become a cult item, at its tiny profit, and said the search for yields is driving investors up to $4,000 a copy since going out of print. With value investing towards the riskier parts of the market, including junk bonds. back in favour, a lot more investors might be searching for a copy.
No it’s not an item you put in your training shoe to protect you from athlete’s foot. Non-fungible tokens or NFTs hit the headlines in March when US digital artist Beeple smashed all records for virtual artworks when he sold a collage of images called Everydays for $69m – the third most expensive artwork by a living artist. But the most remarkable aspect of the sale was that what the buyer got was the NFT, a unit of data stored on the blockchain. In the world of digital art, an NFT is effectively the provenance of an artwork; it certifies ownership by indicating that the digital files to which it is linked represent the original artwork, not a copy. The non-fungible bit means it is not mutually interchangeable with other tokens, as many data units on the blockchain might be. NFTs have other uses: they’ve been used to represent in-game assets, such as digital plots of land; rock band Kings of Leon is planning to launch an album as an NFT; and professional tennis player Oleksandra Oliynykova has offered fans to buy shares in her right arm via an NFT. It’s even been used to sell the original rights to works of porn. And various cat avatars have been marketed in the same way. If you’re still struggling to hide the search bar in Windows, maybe steer clear.
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Data lakehouse A hybrid of a data lake and a data warehouse. Obviously
SPAC A special purpose acquisition company – a shell set up to buy an existing company
ALSO NEW IN THE WORLD OF
Top tech WHAT’S
BUY BUY... SELL SELL... TIME TO CATCH UP WITH THE NEW KIDS IN TOWN
When millennial investors ganged up to buy shares in US gaming retailer Gamestop in January – to teach a lesson to hedge funds that had shorted the stock – they inadvertently shone a light on a quite different trend: the growth of commissionfree trading apps. The pandemic and consequent lockdowns saw millions of young people buying shares and derivatives for the first time, and a rapid growth for online platforms that were offering them the chance to trade free of charge. Free trading arrived in 2015 with the launch of US platform Robinhood, and that company has since been joined by a host of competitors, pushing many of the more established players – in the US at least – into following suit. While big players in the UK such as Hargreaves Lansdown and AJ Bell still charge up to £10 per trade, their no-commission peers allow you to buy and sell paying only the difference between bid and offer price.
HOW DO THEY DO IT? One simple ingredient is technology, which has reduced the true cost of all trades through automating the transaction and eliminating any human involvement. Beyond that, companies rely upon a range of sometimes murky strategies to claw back their costs and remain profitable. One of the best known of these is receiving payment for order flow. In this scenario, market makers – large firms that make their money on the spread between buying and selling – offer a small cashback to brokers that divert trades to them. And while that payment is tiny, when a large number of trades takes place, it all adds up. Some platforms charge an upfront subscription or look to upsell customers to premium services; while others look to make money from lending customers’ cash deposits at short-term interest rates. Another method is for the broker to use customers’ shares or derivatives as collateral to carry out their own profitable trading activities. The snag with the payment for order flow method is that trade – buying or selling a share – may be slightly delayed, or even take place at a slightly different price than expected. There is a
conflict of interest, in other words, if the broker is weighing up their own remuneration rather than achieving the best trade on behalf of their client. Nevertheless, free trading looks as though it’s here to stay and it will be increasingly difficult for brokers who do charge commission to hold to that position. Some of the biggest names in US share dealing, including Charles Schwab, Ameritrade, E-Trade and JP Morgan, have already capitulated. On this side of the Atlantic, Robinhood has delayed its expected entry to the market, which was planned for 2020. “Although our global expansion plans are on hold for now, we remain committed to opening access to financial markets for more people around the world,” it said. “We look forward to the day when we can bring this mission to the UK.”
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KEY OPERATORS A number of other companies have launched commission-free services. London-based Freetrade, a mobile app launched in 2018, allows users free trades on both large and mid-cap UK and US shares in the FTSE 350 and the MSCI US Prime Market, as well as popular iShares and ETFs. It has more than 500,000 users and has already expanded into Ireland and the Netherlands. Trading 212 is a fintech that began life in Bulgaria and launched its free trading service in the UK and Germany in September 2018. It has had more than 14 million downloads of its mobile app, which offers commission-free access to more than 10,000 stocks and ETFs from the UK, US including Nasdaq, and European stockmarkets including Deutsche Borse, Euronext and Bolsa de Madrid. Revolut, the UK-based online bank launched its free trading platform in 2019 with a mission to ‘democratise’ trading. Its customers on the free plan get three free trades per month. There’s access to over 750 global stocks, and an innovation is that users can buy fractions of expensive shares such as Amazon.com. And eToro also offers free trading in a number of countries including the UK. You can buy shares from 17 stock exchanges free of commission, and the company says this applies to “most” stocks on its platform.
RIDE ON The Angell/S is a smart e-bike designed in France that is fitted with touchscreen, GPS tracking, automatic locking and many other features. £2,490, angell.bike/en-gb/ smartbike/angell-s/ presentation
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Directory To advertise in the directory in print or online contact Carl Methven on email@example.com
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.
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:
To find out how Agile Automations could automate your business, please do not hesitate to contact our CEO Martin Keelagher Email: firstname.lastname@example.org Website: www.agileautomations.co.uk Twitter: twitter.com/AAutomations LinkedIn: www.linkedin.com/company/ agile-automations/ Facebook: www.facebook.com/ AgileAutomations/
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 email@example.com Jo Huxtable Partner, Guernsey D: +44 1481 703 308 firstname.lastname@example.org
Dispute resolution Criminal l Business law l Commercial l Commercial property l Employment l Family law l Residential property l Wills and probate
Alex Adam Partner, Guernsey D: +44 1481 703 214 email@example.com
For more information on how we can be of service to you, please visit our website www.bcrlawjersey.com or contact us on:
Siobhan Durcan Partner, Jersey D: +44 1534 82 4274 firstname.lastname@example.org
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.
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.
Tel: 01534 760860 Email: email@example.com
Martin Rowley Partner | Jersey D: +44 20 7007 7665 firstname.lastname@example.org
Theo Brennand Partner, Jersey D: +44 20 7303 0035 email@example.com 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:-
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.
Corporate Services Fund Services l Real Estate Services l Capital Markets l Private Wealth l Performance & Reward Management Services
Stephen Burt Branch Manager firstname.lastname@example.org
We pride ourselves on providing professional, personal and cross-border services to our clients across the globe, enabling businesses to grow sustainably.
Craig Allen Head of Investment Management email@example.com
For further information, please contact Jacob Smed Managing Director, Jersey +44 (0) 1534 504000 firstname.lastname@example.org Marie McNeela Managing Director, Guernsey +44 (0) 1481 211275 email@example.com
Jean-Luc Le Tocq Head of Private Banking firstname.lastname@example.org
Shaun Kelling Head of External Asset Management email@example.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.
Intertrust Jersey is regulated by the Jersey Financial Services Commission and Intertrust Guernsey is regulated by the Guernsey Financial Services Commission.
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KPMG in the Crown Dependencies is a leading professional firm that delivers audit, tax and advisory services. Operating across the islands of Guernsey, Jersey and the Isle of Man, it is a standalone, locally led partnership with over 450 members of staff. The combined practice forms a core part of the KPMG Islands Group, made up of International Financial Centres and Overseas Territories spanning a sub-region which extends from Malta to the Caribbean. This grouping works closely with other KPMG practices in major global financial centres such as London and New York, ensuring that clients can benefit from an optimal blend of local and global expertise from KPMG’s network. KPMG is a global organisation of independent professional services firms providing Audit, Tax and Advisory services. It operates in 146 countries and territories with over 220,000 people working in member firms around the world. Find out more at www.kpmg.com/channelislands Contact details: Neale Jehan Senior Partner KPMG in the Crown Dependencies E: firstname.lastname@example.org T: +44 (0) 1481 721000
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.
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 email@example.com
For further information, please contact:
Jersey 44 Esplanade St Helier Jersey Channel Islands JE4 9WG T +44 (0)1534 514000 E firstname.lastname@example.org
Follow us: @PwC_CI
John Roche, Partner, Guernsey Phone: +44 1481 752040 Email: email@example.com Karl Hairon, Partner, Jersey Phone: +44 1534 838276 Email: firstname.lastname@example.org
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www.blglobal.co.uk To advertise in the directory in print or online contact Carl Methven on email@example.com
Software designed to automate your JFSC registry reporting
Redcoin – Your Cyber Security is our Priority.
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 firstname.lastname@example.org +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 email@example.com 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 firstname.lastname@example.org
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Megatrend shifts in 2021 How Covid-19 is affecting global megatrends in banking and capital markets
Acceleration and deceleration of trends (research from Deloitte) Accelerated
ACCELERATION AND DECELERATION OF MEGATRENDS
Research from Deloitte into how the pandemic is impacting several megatrends in banking and capital markets reveals the crisis has thwarted the focus in some key areas. Until the pandemic hit, many believed certain societal forces were here to stay, such as the sharing economy, urbanisation and globalisation. However, according to Deloitte, the pandemic seems to have slowed these global megatrends. According to the research, government restrictions have had a significant impact on the focus on the movement of people and goods across borders, while remote working has reduced the growth of people living and working in major cities. As we have seen in a number of the pieces in this issue of BL, the shift to homeworking and the growing reliance on digital technologies have fuelled a renewed focus on digitisation, virtual tools and digital security. Source: Deloitte analysis, deloitte.com/insights
FUNDS edition PUBLISHING IN August FOR EDITORIAL QUERIES, CONTACT email@example.com FOR ADVERTISING, EMAIL CARL.METHVEN@BLGLOBAL.CO.UK
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 Guernsey and Jersey 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
How is the pace of change accelerating across the financial services sector? What are FS leaders’ transformational priorities? Is voice real...
Published on May 21, 2021
How is the pace of change accelerating across the financial services sector? What are FS leaders’ transformational priorities? Is voice real...