Embracing the new world of private wealth
The agenda of this year’s Citywealth Forum was created with the unprecedented change the wealth management industry has been seeing in mind. Across a range of panels, our speakers and delegates came together to understand the unforeseen.
To view the full agenda from the day, click here.
To view the gallery, click here.
Speakers and delegates were greeted on arrival with coffee, tea and buffet breakfast before proceedings began at 9:15am with an opening speech from Forum Chairman, Joshua Rubenstein of Katten Muchin Rosenman, one of the event’s sponsors.
Rubenstein framed the Forum by discussing change. He notes that change is not new, but the breadth and unpredictability of change we are seeing is. Unprecedented change generates unprecedented controversy, and the wealth management industry must integrate plans to address this. The panels to follow are a space to understand the unforeseen.
IFC update – will safe jurisdictions rise once more?
Michael Crowe, Finance Isle of Man
Joe Moynihan, Jersey Finance
James Penny, Barclays Private Bank
Rupert Pleasant, Guernsey Finance
The first panel of the day was moderated by Penny representing the buy side, who set up the background to the conversation through his experiences with clients; geopolitics is inescapable and, in a world of ‘no free lunches’, the closest a client can come is diversification. Diversification not only of assets but also residence.
In light of this, how do the Crown Dependencies (CDs) remain relevant? Crowe, Moynihan and Pleasant utilise their panel time to discuss this. Despite the use of the word ‘dependency’ in their name, the CDs are anything but. Stability on all fronts – regulatory, judiciary, industry experience – might not be the flashiest adjective but it evidently still gets the job done as flow of capital through the CDs remains remarkably strong. Amongst a sea of change, the reputation, diversification of services, innovation and evolution offered by the financial services industry in the CDs continues to keep these jurisdictions not only competitive, but in high demand.
Questions from the floor ensue, including the inevitable query on the impact of non-dom regime changes. It is a unanimous answer: it is still very early days, but Jersey, Guernsey and the Isle of Man alike are seeing an uptick in business enquiries as a result of the proposed changes rocking the boat.
Another question mentions impact investing and whether trust rules in these jurisdictions need to be reformed for greater investment freedom around sustainability. A contribution from the floor says that there is no feeling that trustee duties need to be amended for this specifically, instead it is a bespoke duty to be discussed with each family rather than a blanket requirement. Crowe agrees, saying that things will evolve over time but the conclusion has been that they do not need active editing at this time.
Trusts – the reality of 3rd and 4th generation families
Nicola Bruce, Appleby
James Campbell, Ogier
Caroline Garnham, Garnham Family Office Services
David Kilshaw, Rothschild & Co
Stella Mitchell-Voisin, Summit Trust International SA
The second panel opens with moderator Kilshaw challenging the speakers and delegates with a bit of controversy: are trusts dead? With a caveat that he is pro-trusts, Kilshaw builds a devil’s advocate argument citing legislation changes, viability in the face of increasingly complex instructions, the drop of ‘trust’ from many company names, and reserve powers as potential poisons to the vitality of trust structures.
Kilshaw is batted back from the rest of the panel. Garnham places important on the privacy aspect of trusts and what they can offer in this sense. Bruce highlights protection: from a tax and asset perspective, but crucially from a personal perspective as well.
Campbell notes that Jersey is seeing more trusts than ever, and that their flexibility is what is serving the structure so well. Heavy taxation has not helped their case, but rules are different depending on the jurisdiction. Mitchell-Voisin speaks from the Swiss perspective and additionally notes that instability is supportive of trusts; volatility is pushing people towards stability in their long-term planning and trusts do this very well.
Comments from the floor note that things do not need to be so mutually exclusive. Dead, alive, or somewhere in between, a good advisor will advise with the context of their client in mind.
An audience question asks the panelists how confident they feel in existing rust legislation if nothing changes? Are there any risks on the horizon? Campbell says confident in Jersey remaining reliable for UHNW families, with zero plan for trust registers that would make beneficiary details publicly available. Mitchell-Voisin echoes this assurance in stability for Switzerland, joking that the slow speed of change there works in favour of this. Bruce notes that offshore jurisdictions are friendly to trusts and want to preserve that business; there is not the same negative labelling of the structures as ‘tax evasion’ vehicles that is seen in the UK press.
Ethical investments in a geopolitical environment
HSH Prince Michael of Liechtenstein
Rob Stewart, Melville Douglas
Stewart provides a background on where we are today with ethical investing. Things have evolved a lot, but notes the need to consider the holistic impact of the course of doing business. The sustainability of a company needs to be tracked through reporting of detailed metrics, need to provide continuous feedback loop into investment process and corporate governance is absolutely key into ethical investing. Stewart emphasizes that ethical investing does not equate to ESG and that the two should not be confused or conflated.
Stewart notes that environment just one aspect of ethical investing; there is a misconception that ethical mindset closes down options but is not necessarily the case. A key, case study pitfall is investors putting too much of their portfolios on sustainable energy, as it is an obvious option, and this can detract on returns. There is a broad investment universe and investors need to be aware of this in order to diversity accordingly
Broadening the conversation, Stewart considers how the industry can navigate the geopolitical landscape with an ethical mindset, amidst trade tensions, embargoes and conflicts. Ultimately, ethical investors need to take a nuanced view and focus on what can be controlled.
HSH Prince Michael sees ethical investing as a responsibility, and a long term one at that. He engages Stewart and the audience in a discussion on defence. He suggests that the future holds a huge discussion in Europe about becoming independent from a defence perspective. Effectively, what remains to be seen is that, if we want to have peace in Europe, we will need to show that we can defend ourselves and our supply routes. Can this be married with the purpose behind ethical investing? It’s a complex discussion but the general answer seems to be yes; it is all about education and the need to take a nuanced, holistic and long-term view.
This view echoes into responses from a question from Joshua Rubenstein about activist demands to hot topic political discussions and controversy. Divestment and ignoring certain areas is not the answer when approaching this from an investment perspective. Objectivity on impact and strong communication is needed to navigate this delicate area.
Private debt – refinancing and restructuring: commercial property in focus
Jonathan Fewster, BDB Pitmans
Joshua Matthews, HBA, MASECO Private Wealth
Fewster provides a useful background to the topic, depicting private debt against a landscape of a shift in conventional banking – economic uncertainty and banks being more stringent and risk averse as a result. The rise of fintech and information is providing a more level playing field, but a certain level of sophistication is still require to engage in the market. Private debt provides a more agile system.
Green and sustainability-linked lending are also mentioned, as we are seeing an increased market in products complying with Green Loan Principles (GLP) – green loans are any type of loan made available to finance new and/or existing eligible Green Projects and they need to be aligned to the four core components of the GLP. These are use of proceeds, process for project evaluation and selection, management of proceeds and reporting.
Matthews’ contribution discusses the leveraging of some of the concepts from some of the best private lenders in the world to convey potential for a ‘sea’ change – a complete transformation, a radical change of direction in attitude and goals. The changes happening today are not just cyclical but structural.
Karen Jones asks about higher interest rates marrying up with defaults, and another audience member queries volatility of returns and the question mark around private markets and the transference of risk. Matthews says that volatility measures may require a pinch of salt when discussing private assets and that we need to be careful when looking at volatility as a measure of risk.
A short break
After a spirited morning of discussion, we break for a leisurely lunch break. A few attendees step out to take calls, but the majority enjoy the spread of food and group together to discuss the takeaways from the morning. Three panels follow for the afternoon session.
Disputes, litigation & the silver lining
Joshua Rubenstein, Katten Muchin Rosenman
Charlotte Hill, Penningtons Manches Cooper
Timothy Collingwood KC, Serle Court
Rubenstein notes the proliferation of disputes and asks what is causing them. Hill answers that the majority of disputes arise from typical familial issues that escalate and eventually come across her desk as commercial issues: competing businesses within the same family, arguments arising from unequal input, disputes on dividends, and mental capacity being used as a warfare tactic within a family. Collingwood lists differing approaches from younger generation, issues around the control and management of family business, the effect of volatile markets leading to different approaches or visions within one company or family, new spouses, and third party claims to trust funds as key causes. He agrees with Hill regarding the rise in concerns around capacity.
Hill and Collingwood also report an uptick in shareholder disputes. These quietened over the pandemic but are picking up again now; Collingwood notes that there is a perfect storm for this thanks to the current economy, as people seek to improve their financial positions after playing it safe during the pandemic.
Hill highlights that people are becoming more savvy to disputes, as they look for different types of claims or breaches they can utilise to put on the pressure. Litigation can be at the very least a game of chess, if not full blown warfare.
Collingwood cites certainty and resolution as the silver lining of litigation. Hill notes that dispute resolution is not all about court litigation; arbitration is particularly useful for high-profile clients thanks to its confidentiality and mediation can be an effective approach to break stalemates. For Rubenstein, the silver lining lies in the creativity. He offers sage advice: there are benefits you can get from settling that you can’t get from winning.
Taxation and politics
Joshua Rubenstein, Katten Muchin Rosenman
James Quarmby, Stephenson Harwood
In our penultimate panel, delegates are treated to a jovial and highly stimulating discussion on taxation and politics. It may sound like an oxymoron, but Rubenstein and Quarmby make it possible as they draw parallels and distinctions between the current tax regimes in the UK and US. The significant incoming elections for both countries also play a part.
Quarmby queries why non-dom changes now and asks what is left in Labour’s toolkit regarding taxation. Discussion between the panelists on the technicalities around IHT in their respective jurisdictions ensue.
Questions from the floor involve carried interest, tax being about efficacy as opposed to moral equality, and the need to increase awareness for the mobile US-passport holder cohort and the issues they face abroad.
Artificial intelligence
Alex Barr, Sarasin Bread Street
Philip Higson, Carlyon Services
Derek Southall, Hyperscale Group
Southall sets up the panel by noting how hot topic the issue of AI is, and that their purpose as panelists today will be to try and cut through the hype. He anticipates a bumpy 5 years ahead in this area, if not longer. We are entering the age of the avatar, with the ease of generative AI and rise in voice fraud. Financial clients are focusing on fraud procedures and businesses need to develop new strategies on this, with supply and due diligence being key. There is lots of legislation in this area trying to get ahead of the issues, but tech giants are often too massive to police effectively. Southall notes that we are undergoing one of the most profound period of changes ever for humanity and, as a result, the industry must read, listen and engage as much as possible, as it may not stand a chance if not.
Barr echoes that education in this area is key. He also discusses the issue of cumulative use of AI and how it will be used to invest. He anticipates use in public market analysis, but the interesting piece is how it can be used in private markets, for valuation analysis, etc. Barr highlights that the key danger is that we are overestimating the issues caused by AI in the short term and underestimating it in the long term.
Higson queries how the cards will fall for the bigger picture names in AI: Sam Altman, Elon Musk, etc. He provides the market perspective, noting that the gold rush in this area is running out of steam for many, but the only constraint for the big players is how much electricity they can get to keep going. He says we are on day 1 of a long journey, and echoes Barr on misalignment of concern regarding short vs long term views.
In the face of AI, Southall asks which sectors will go through the biggest evolutions? Barr answers legal advisory businesses and Higson says wargaming, specifically dynamic pricing.
Racheal Muldoon, Charles Russell Speechlys asks to what extent should next gen expect AI advisors and how does the industry stay strong against this? Southall emphasises again importance of education to find the answers and Higson suggests that ‘robo advisors’ can work better for mass market before it works well for private markets.
Closing speech – Rt Hon Sir Graham Brady MP of the 1922 committee
Finally, the day wraps up with a candid closing speech from the Rt Hon Sir Graham Brady. Playing to his audience, he sprinkles personal anecdotes from this career amongst election date speculation and analysis of the Conservative party’s options against looming Labour. He notes that, whilst opinion polls are important to pay regard to, Labour still require a significant swing – one even bigger than in 1997. There is a feeling that this election does not feel as electric as 1997, but agrees time will tell.
Following a full day of panels, delegates, speakers and special attendees for the next evening’s Magic Circle Awards mingled and discussed the day’s events during the drinks reception, kindly sponsored by Melville Douglas.
A huge thank you from the team at Citywealth to our speakers and delegates for their part in registering another successful Forum.
