Isle of Man future leaders

Date: 26 Apr 2014

Citywealth

This is the third Citywealth feature in a series on the future leaders of the private wealth industry. In this article, we have set out to identify the stars of the future from across the Isle of Man’s investment management, law, trusts and private banking sectors.

The Isle of Man is a mature offshore market which, as a British crown dependency, has spent many years driven by the economy of the United Kingdom and following in the footsteps of Guernsey and Jersey. But as the global nature of the private wealth industry intensifies, identifying and investing in leaders of tomorrow with the right skills will be critical to the island’s longevity as an international financial centre.

The individuals named in these pages already stand out as having many of the skills necessary to meet the demands of the clients of the future, but for the Isle of Man to remain competitive as new offshore centres spring up around the globe, it will need leaders that are prepared to evolve and can embrace change.

Reaching out

John Greenwood, the chief executive of investment management firm Creechurch Capital, says: “These days you are forced to travel, and travel extensively, and to offer a service based as much on client service as it is on any kind of tax advantages. If you take that view, the island is able to compete because the quality of the workforce is such that we are competitive both on price and productivity with the best centres in the world.‚Äù

The leaders of tomorrow will need to be comfortable working with clients anywhere in the world, and be more aware of the products on offer outside the island. Clients’ structures will be increasingly international, so multijurisdictional expertise will be a significant differentiator.

Greenwood says: “It’s very clear that the growing wealth in the world is from the developing economies and there is an expectation that people must travel there to engage with those markets. The leaders of the future will need to go out there and prospect, to engage with those clients. If we are prepared to do that we have the opportunity to compete with other jurisdictions, but the old battle we used to have with Guernsey and Jersey is now a global battle with countries like Mauritius and the Seychelles.‚Äù

But while experience of working overseas, an international contacts book, and diverse language skills will undoubtedly be an advantage, many of the core skills required of industry leaders will remain unchanged.

Clive Dixon, managing partner of Moore Stephens, says: “I think the environment in which these individuals are going to be operating in 15 to 20 years’ time is going to be different, but in many

ways their attributes will stay the same. The fundamental measures of success and what defines a good job will not change, and nor will the essential characteristics of the person who is going to be successful – they will need energy, the right attitude for success, and entrepreneurial spirit.”

What will change will be the ways in which services are delivered: “The way we get the job done will be different, with more automation, and the way we communicate through digital and social media, for example. The tools for client service are going to be better than those we have now, but a lot of things are overstated in terms of the fundamentals,‚Äù he says.

Certainly technology will be higher up the list of demands from clients in the future, and business leaders will need to be cognisant of the tools available to them and up to speed with making the best use of them. A key area where technology will impact to meet client demand is in transparency.

Greenwood says: “Service is key, but transparency and accessibility is also key. Continued investment in tools to facilitate accessibility and online service delivery will be very important, as there is now an expectation of access to service providers 24/7, which brings with it its own management challenges.‚Äù

Increasingly international

One of the biggest changes in the past decade in the private wealth industry has been the swathe of regulation that has been drafted in the wake of the global financial crisis, much of which has tax evasion and boosting tax revenues in its sights. The Foreign Account Tax Compliance Act (FATCA) in the United States, which requires individuals to report their financial accounts held outside the U.S. to the Internal Revenue Service, and requires foreign financial institutions to report on their clients, has had a big compliance impact, as have subsequent intergovernmental agreements.

Not only will the private wealth industry leaders of tomorrow need to be much better versed in international regulatory regimes, but they will also operate in a market heavily influenced by government decisions made elsewhere.

Many see the advent of FATCA and similar rules as a positive for the Isle of Man’s future: “We have felt that it was not a very fair playing field, because in the Isle of Man we have had very high standards of regulation and supervision,‚Äù says Dixon. “I suspect business wasn’t coming here because it was going to places where there was zero or little supervision, regulation and client due diligence, so they were less costly. It’s right that you should have people vetting other people to make sure they aren’t inadvertently assisting them in a criminal act, but that carries a cost, and at last we are all bearing that cost.‚Äù

It is another element of the internationalisation of the industry: “The world is smaller,‚Äù he says, “and in many ways it is a global village. People will need to be absolutely transparent about what they are doing in the future, particularly with regard to regulatory agencies.‚Äù

The harmonisation of legislation should, it is argued, push more business in the direction of well-established reputable centres at the expense of those with less stoic reputations.

Dixon adds: “Many of the changes that have happened recently are about making sure there’s no bolt hole where people who are engaged in unlawful activity can go underground, and that’s a good thing for the Isle of Man. We don’t want to be associated with that and wish to be seen as absolutely above board as an international financial centre.‚Äù

At the end of November the island became the first British crown dependency to join the Convention on Mutual Administrative Assistance in Tax Matters, a multilateral agreement providing for tax cooperation between its 75 signatory countries. It is expected to enter into force on 1 March 2014.

The pressures of operating on a global stage have already driven much consolidation in the private wealth sector on the island, and many expect that to continue. In 2009, Appleby, the global offshore law firm, expanded on to the island with the acquisition of 120-strong firm Dickinson Cruickshank, the largest law firm on the Isle of Man, for example. As such, the shape of the industry on the island is changing. Dixon says: “The island has experienced huge consolidation and I guess there’s every chance there will continue to be consolidation. Quite often with advanced markets that have been subject to consolidation you get very big firms dominating, and underneath there’s a void. I can’t see that is beginning to happen here.‚Äù

Greenwood says clients are looking for the one-stop shop and the island needs to deliver that: “The Isle of Man is notoriously weak on the investment management side but strong on legal, accountancy and fund administration. It’s important that all areas are cultivated, and to attract big brands that allow boutiques to grow up around those.‚Äù

Facing the future

The leaders of the future will face many pressures on their businesses as the centre itself competes on an international stage. The characteristics of the leading advisers to high-net-worth individuals will continue to revolve around a strong service ethos, innovation, entrepreneurialism and intelligence, even as the client base changes beyond recognition.

Nevertheless, Dixon argues that while clients will originate from farther afield and have different outlooks and delivery demands, client service will be no greater challenge for the leaders of the future than it is for the leaders of today.

“I can’t think of clients having much higher expectations than they have got at the moment,‚Äù he argues. “High-net-worth individuals, and ultra-high-net-worth individuals, didn’t get where they are by accepting sub-standard or even mediocre standard service, or by not looking closely at costs. Our clients expect an extremely high standard of their service providers, and it’s a very competitive market, so clients will continue to demand excellence and we will have to deliver that or we will not succeed.‚Äù

The Isle of Man’s private wealth industry faces challenges and opportunities on many fronts and the individuals listed on page 7 are those we tip to take it to the next level.

Name Role organisation

1. Tristen Bell Area Manager, Wealth and Premier HSBC

2. Voirrey CollisterManager, Marine, Aviation, Family Office GroupKnox House Trust Ltd

3. Kelly Dedman Marketing Manager Riva Financial Systems

4. Carolyn Gelling Senior Investment Manager Thomas Miller Investment

5. Sam Leigh Associate, Private Client & Trusts Department Appleby (Isle of Man) LLC

6. Robin McAuley Manager First Names Group

7. Fiona Moore Client Services ManagerMoore Stephens

8. Lauren O’Neill Business Development Executive Boston

9. Tom Richards Head of Private Investment Management (Offshore) Thomas Miller Investment

10. Amy Slee Partner, Director Crowe Morgan

11. Chris Wilson Head of Stockbroking Canaccord Genuity Wealth Management

12. Stuart Wilson Portfolio Manager Canaccord Genuity Wealth Management

About the listing

The Isle of Man Future Leaders list has been created from a mix of submissions and feedback and recommendations from the global financial services industry. The list celebrates up and coming leaders in the Isle of Man. It recognises the high profile and excellence these individuals have already achieved in helping to promote business excellence in their home jurisdiction and consolidating the reputations of the financial services industry globally.

Isle of Man: five-minute briefing

David Cameron, the UK Prime Minister, has said that the Isle of Man, which has 85,000 inhabitants, and is the biggest of the Crown Dependencies is not a tax haven and these words have taken root around the Isle of Man and become their mantra as the world has got less tolerant of tax planning.

Although, like the UK, there has been a squeeze locally, the Department of Economic Development (DED) has rallied to bring new skills and industries to the global client particularly in the aerospace

manufacturing industry. Strong brands in private wealth report continual growth and say they have not felt the recession.

The Isle of Man is famous for the TT Race which attracts 30,000 visitors each year. It has also built a reputation with e-gaming companies, the most famous being Poker Stars, which has an estimated market value of $2billion and is the largest online poker room in the world. Poker Stars has a celebrity team, with names such as Boris Becker and Rafael Nadal and female media personality Victoria Coren often involved with charity poker tournament events locally. Flybe, a major airline to the IOM, has had financial troubles and is stopping its Gatwick flights but the DED says talks with Easyjet are underway to introduce services.

Service providers

Highlighting the different offerings and organisations in the Isle of Man, Thomas Miller, where Tom Richards is Head of Private Investment Management (Offshore), is an asset manager for private clients with a history in the mutual industry managing mutual clubs and their insurance money. Thomas Miller was formed in 1885, but the private client division is relatively new at just five years. It has an entry level of £250,000 for bespoke clients and a relatively new model portfolio-based offering can be given to clients with £50,000. It has a few hundred clients from the charity world, family offices, institutional, private and government clients with a good pipeline coming from the IFA sector. It favours collective investment funds and offers fund aggregation with currency mandates which a performance analyst team monitors on a daily basis. AUM is £2.6billion.

The Fedelta Group, which is Italian for ‚Äòloyalty’, has approximately 28 staff. It first opened its doors in 1992. The pension business manages the money of some of the wealthiest people in the Isle of Man. Michael Shimmin, Frank Perry, Philip Whittam and William Laughlin are the founding shareholders and have worked together as a team since 1982. They specialise in trusts and pensions, with property ownership structures being a big proportion of their business. Fedelta is one of the largest privately owned trust companies on the island. Stephen Colderwood, who is Executive Assistant to the Board, says of the Isle of Man, “The UK is still the biggest source of our clients but the introductions involve us in global planning.‚Äù

An interesting part of its work is in “trading structures‚Äù where Fedelta takes over the running of a trading company. “The owner doesn’t have to live in the Isle of Man,‚Äù says Colderwood, “as we fully manage the company and control the board for a monthly fee.‚Äù According to Colderwood, this service has been of interest to the strong e-gaming community present in the Isle of Man.

Richard Slee, Marketing Manager at the Isle of Man Government, says aerospace manufacture is developing rapidly although it has been a feature on the island for more than 70 years: “We have 22 companies who work in the aerospace industry and we’ve brought them together to offer a cluster of relevant services to global clients.‚Äù According to Slee, the aim is to offer specialist services to become a go-to destination for global aviation contracts. Companies include Ronaldsway Aircraft, which makes ejector seats for the military. Additionally, e-gaming recruitment is also flourishing as this industry has grown.

Dermot Hamill, Head of Wealth Management at Canaccord Genuity Wealth Management in the Isle of Man has 12 front-office staff based in the island with their booking office in Guernsey. Canaccord Genuity, a Canadian company which took over Collins Stewart locally, has 250 professionals in the group with 65 based offshore. They currently manage and administer ¬£10.6bn of assets on behalf of over 12,000 clients from offices in the Isle of Man, London, Jersey, Guernsey and Geneva and they are currently upgrading their software to allow them to expand their business further. The Isle of Man office continues to grow strongly and currently looks after over ¬£1bn. Their entry level is ¬£400,000 but average portfolios are ¬£1million. Hamill, who is a keen cyclist, says that the Isle Of Man has been very successful in recent years in diversifying its economy and attracting a wide range of businesses including e-gaming. He says: “Exceptional service levels delivered directly to clients from highly qualified investment professionals are the key to our model.‚Äù Hamill and his team have a 7.30am group conference call daily to talk about stocks and have staff up to date. With around 40% of its business from fiduciaries and the rest from private individuals and companies, Hamill says mandates are getting bigger and the firm is increasingly being invited to pitch for higher value accounts.

Ahead of budgets

John Spellman, Director of Financial Services at DED, says the Isle of Man is ahead of budgets and that concerns locally are focusing on the effects of deposit protection issues cross border and banking ring fencing following the Vickers Report which aims to put retail into separate legal entities from investment banking arms. The Isle of Man and Channel Islands have an estimated ¬£200 billion in banks which is upstreamed and sent to the UK. Spellman says, “Early rules were biased against the IOM and Channel Islands. It’s how we protect assets to prevent reputational damage like Cyprus experienced. The USA has a strong depositor protection scheme of 100%, so if we have something less in place then potentially Europeans could find themselves compensating USA depositors if something goes wrong.‚Äù He believes the enormity of regulation is starting to sink in: “There is a lot of collating of documents to pass over to authorities and working out who in the food chain will be responsible for reporting.‚Äù And, he adds, “It is the country that holds the cash who will report but then it might fall to the custodian, fund manager or investment manager. Just one will report.‚Äù

On public disclosure, Spellman says this crosses over onto data protection issues and adds sensibly that wrong doers should be dealt with but that there isn’t any reason why we should all know exactly what each other has in our pension pot.

He mentions the clustering of local companies, picking up Richard Slee’s comments, and points out that China has entire cities with single specialities like making trainers: “It is good to find a niche and excel.‚Äù