by Naomi Rive & Emma Furzer
It is no coincidence that over the past 20 years the profile of a client utilising a Jersey based trust and company services business has changed markedly. Jersey has long since recognised the need to diversify its private wealth industry away from the UK market and to promote its fiduciary services to a more international client base. To its credit Jersey has not undertaken this diversification in a scatter gun way but has proactively sought out markets where clients have legitimate but often complex wealth structuring needs. There has been considerable investment by the States of Jersey Government and the financial services industry in spending time in these jurisdictions; building relationships with intermediary advisory communities and educating potential clients. There is no doubt also that a combination of Jersey’s stable political, legal, regulatory and fiscal environment increasingly speaks for itself and these factors mean that Jersey has been highly successful in attracting business from this more diverse range of markets.
One such market is the Middle East where forced heirship requirements imposed under Sharia Law mean that an individual often has relatively little flexibility in relation to the inter-generational transfer of his or her wealth unless they utilise a trust or foundation during their lifetime. Whilst many families will wish to respect Sharia law, in part at least, many also wish to take advantage of a more flexible and inclusive mechanism for transferring their wealth. This is driven by a variety of considerations including the number of Muslim families living outside of their home countries and marrying into non-Muslim families. Another major factor is the growing trend for female members of the family to be educated to the highest level and to be major contributors in influencing and co-ordinating family wealth planning and the management of family businesses. The Jersey legal environment and the extensive experience of our fiduciary practitioners means that Jersey is an ideal jurisdiction for these families to structure their wealth in safe in the knowledge that their religious and specific family circumstances can be accommodated in a sensitive yet robust way.
South-East Asia is another market that has yielded many clients for Jersey’s private wealth market and will continue to do so as high-net-worth clients prepare for an unprecedented transfer of wealth to the millennial generation over the next 30 years. For Asian clients the need to partner with a Jersey based fiduciary stems from the demand for sophisticated wealth structuring utilising tried and tested legal entities that can accommodate multiple assets classes and support family governance requirements. The maturity of Jersey’s private client industry means that it has the ability to add value to those clients whose structuring needs are often triggered by an imperative to preserve value within family businesses, ensuring that there is continuity of ownership following the death of the patriarch. Historically there has been an unfortunate but understandable trend for this planning to take place somewhat later than it ideally would and this means that as well as the crucial issue of transfer of ownership, many families will simultaneously need support with wider family governance issues. This is an area where, working in unison, the London private client advisory market complemented by the Jersey fiduciary sector, has led the way and is now able to counsel families in the various options available to them depending on their specific needs and tolerances; private trust companies, family investment companies and foundations being just some of the options available.
Political instability has always been a driver for Jersey, attracting international clients and in the past couple of years the worrying spread of such instability to hitherto stable jurisdictions has only fuelled this further. From the Arab Spring to Brexit, to entrepreneurial clients resident in unstable emerging markets and the current turmoil being witnessed in Hong Kong, there is undoubtedly a real demand from clients to put in place structures that can help them to secure their wealth against future political uncertainty. It is not just Jersey that is witnessing opportunities arising out of this macro issue, however. Jurisdictions that can afford clients dual nationality or alternative tax residence are also seeing a boom in business as families become increasingly international and prioritise their ability to move freely from one jurisdiction to another. When it comes to wealth structuring, however, few jurisdictions have the expertise, integrity, substance and court system to truly deliver in the most challenging of circumstances.
Over the past decade, not only has Jersey witnessed a diversification of its client base but it has also seen a shift towards engaging with professional, rather than lay, clients in the form of single-family offices seeking out outsourced structuring, governance and other complimentary services. This is a consequence of the ultra-high-net worth market professionalising itself in recent years and has undoubtedly helped to enhance the quality of the relationships that we are fortunate to have on the Island. Many family offices will employ highly experienced professionals who will not need persuading of the benefit of face-to-face meetings or the need for up-to-date tax and legal advice. Customer Due Diligence, the Common Reporting Standard and, most recently, the move to demonstrate economic substance will not be unfamiliar concepts to single-family offices and, as such, working with family offices can prove a mutually beneficial arrangement where all professionals speak the same language of heightened regulation and transparency.
The nature of the private client work that we are seeing in Jersey is also being shaped and developed by the emergence of increasing numbers of such family office clients. Not only are families concerned to protect the wealth that they have accumulated but many are now putting in place structures to take advantage of opportunities to put their family capital to good use in private equity and venture capital for example. There is clearly a growing demand for the patient capital that families control and the volume of family office investors into private funds and other collective funding arrangements is bringing a new dimension to the private wealth industry in Jersey. Bearing in mind that, increasingly, this investment is driven by a generation focused on social impact investing, technology and the environment, this is an exciting trend for Jersey and has the potential to provide a welcome platform for Jersey to show all that is good about the use of reputable international financial centres. It is early days, however, and Jersey must continue to make itself an attractive place for these families to set up their family offices or at least to structure their wealth and investments. There is no doubt that mid-shore markets such as Singapore are also positioning themselves to benefit from this business and that is a real threat as we look to the future. It is essential then that Jersey continues to develop its proposition. This is not only a challenge to the financial services industry but also to the education, immigration and employment systems in the Island. Language skills, a diverse workforce and technology will all be key differentiators going forward and cannot be manufactured overnight.
