Jersey, Guernsey & Isle of Man updates

Date: 29 Nov 2023

Ashleigh John

New initiatives and corporate developments have been coming out of these 3 mainstays of the wealth management and financial services industry at a rapid rate. Citywealth speaks to the island professionals to gain further insights into the updates and trends from these jurisdictions.

Jersey, Channel Islands

MONEYVAL, who are a Committee of Experts evaluating AML, has been a big topic of conversation in Jersey for the last year. Assessors were invited locally to give it a health check and test its ongoing work to combat financial crime. The work which involved businesses in the wealth sector, is now done and a report is expected Q1 2024 to show that Jersey complies with international standards for combatting financial crime.

Citywealth spoke to IQ-EQ for their download on updates in Jersey, Guernsey and Isle of Man. On future trends in Jersey, IQ-EQ COO Mirek Gruna identified significant client interest in reporting: “Family offices in particular want to see providers, like IQ-EQ, offering end-to-end, consolidated reporting which captures all or, at least, major asset classes. As a whole, Jersey remains focused on family offices, especially as we see an increase in Middle East families using Sharia-compliant Jersey private trust company (PTC) structures and Islamic finance.” IQ-EQ added: “As with recent years, the inter-generational wealth transfer and ESG are both hot topics in wealth management and will continue to be in the coming year. We’ve also seen an uptick in advisory services required for luxury assets and re-domiciliation to Jersey from other IFCs. Additionally, philanthropy is starting to be an interesting focus area and one we’re monitoring closely for our clients.”

Graham Marsh,
Business Development Business Development Director Fiduchi Group Jersey, provided a number of insights from the trusts and corporate services sector, which included: an increased awareness of the OECD Economic Substance rules applicable in offshore jurisdictions, leading to a ‘flight’ to TCBs and CSPs in deemed ‘high quality’ jurisdictions, and that non-compliance fines are being levied, which risks undue publicity. He also noted a growing number of new corporate structures including re-domiciliation into well-regulated and OECD compliant jurisdictions such as Jersey. Marsh added: “Client interest in ESG, sustainable investment continues to grow as does the need for confidentiality, tax and compliance conformity. Control and asset protection in jurisdictions such as Hong Kong, who regard Jersey as a great choice to hold family wealth. Where the day-to-day administration matters are dealt with locally in Hong Kong, by Mandarin and Cantonese speaking relationship leads.”

Joe Moynihan, CEO of Jersey Finance, emphasised the importance of Jersey’s stability and certainty against the global backdrop of a challenging year. He said: “The latest figures for the mid-point of 2023 show that funds business in the Island continues to perform well, with the total value of fund assets under management in Jersey now standing at well over £500 bn, and there are more than 200 non-EU managers using Jersey to access EU investor capital. Banking figures are resilient with deposits now standing at just under £150 bn; Jersey businesses are managing around £1.1 tn of global private wealth; and we are seeing sustained high levels of corporate activity. That success has been down to a huge amount of joined-up work on-Island between Jersey Finance, the finance industry, as well as our government and the Jersey Financial Services Commission.”

Jersey Finance represents more than 170 financial services firms in Jersey

Jersey is a key IFC for economic activity. Moynihan cited research from the Centre for Economics and Business Research (CEBR), which quantified the full extent of Jersey’s global economic footprint and its contribution to global value chains, through the metrics of GDP, employment and jobs. The report, titled ‘Jersey’s contribution to Global Value Chains’, revealed that Jersey’s financial services industry makes a significant impact on the global economy. Jersey Finance represents more than 170 financial services firms in Jersey, with a global team of experts based in Dubai, Hong Kong SAR, Johannesburg, London, New York, Shanghai and Singapore – the latter of which was the most recent part of Jersey Finance’s expansion in March 2023. On this expansion, Moynihan said: “Singapore is a key complementary finance hub that can help further extend the global reach of Jersey’s financial services industry and bring its corporate, private wealth and alternative funds proposition to growth markets across the South East Asia region.”

180 events in markets from the US and Europe to Africa, the Middle East and Asia

Moynihan outlined some of the crucial work that Jersey Finance has been doing to promote the island. He said: “We have achieved a considerable amount over the past twelve months – not least in terms of our global connectivity, which really is a differentiator compared to other jurisdictions. Over 2023, we have continued to evolve our overseas engagement programme through our own channels, delivering more than 180 events in markets from the US and Europe to Africa, the Middle East and Asia, while also working collaboratively with partners such as the World Alliance of International Finance Centres and the UN’s Financial Centres for Sustainability (FC4S). We’ve also made a concerted effort to focus on key strategic areas that underpin our leading position as an IFC. Our work on sustainable finance this year saw us complete our second assessment through the FC4S which will help inform our future direction, ensuring we are aligned with the UN’s Sustainable Development Goals (SDGs).”

“With technology playing an increasingly critical role at the heart of financial services firms, our work to maintain our fintech capabilities has also been vital. The impact of generative Artificial Intelligence (AI) on the business world has been an important theme for us in 2023. We recently did some research with WealthBriefing on the digitalisation of assets within Jersey’s wealth management sector, which found that private investors are embracing a much closer relationship with the digital environment. Equally, a whitepaper we published with IFI Global on tokenisation sets out the case for digital assets and tokenisation to significantly transform the cross-border alternative funds space too. We have also hosted a number of tech-focussed events for finance firms in Jersey including our Demo Day and our collaboration with Digital Jersey to launch Jersey’s first-ever fintech match-making platform, ProMatch.”

Looking into 2024, Moynihan said that a great deal of effort and focus will be on the maintenance of the industry’s momentum as one of resilience and relevance. He said: “To that end, we will work increasingly with firms in Jersey to ensure they continue to embrace the opportunities presented by digital technologies and to help them navigate the rapidly shifting sustainable finance landscape. The fact that, in our most recent survey, more than 80% of global gatekeepers spoke highly of Jersey and Jersey Finance is a good endorsement of where we currently sit in a competitive and complex landscape. But we cannot afford to be complacent – the world is changing quickly and if we are to remain relevant and foster positive relationships, we must continue to innovate at pace throughout 2024.”

Guernsey

On recent news from Guernsey, IQ-EQ said: “The Lending, Credit and Finance Law (otherwise known as the ‘LCF Law’) came into full effect in Guernsey on 1 July 2023. The LCF Law mandates new licensing rules for lenders, virtual asset providers and financial institutions which regulate the provision of consumer credit within the finance sector, financial firms, virtual asset providers and intermediation services.” IQ-EQ also noted an increase in activity that is more on the corporate side of private wealth and the continuation of the Middle East as a hot market as key topics.

2023 saw a record turnover for TISE, the Guernsey-headquartered The International Stock Exchange, as it overcame macro-economic headwinds to post a £5.2 million turnover and after-tax profits of £2.4 million – an increase of 15.8%.

Focus on globalisation of families and succession planning

Earlier this month, We Are Guernsey hosted its annual Guernsey Private Wealth Forum in London. Entitled ‘Changing Families in a Changing World’, the discussions centred around the impact of the globalisation of families, succession planning to avoid asset erosion, the importance of jurisdictional choice amid global political uncertainty, and more.

David White, Managing Director at QB Partners, who was a panelist at the forum, concluded that Guernsey can provide political and economic stability in an uncertain world.

He cited Guernsey’s product flexibility, which can be seen in Guernsey’s recent launch of a third route to its Private Investment Fund, enabling investors with a familial connection to pool their wealth and co-invest. This recent addition to the existing regime came as a result of client feedback, showcasing Guernsey’s abilities to constantly listen to the evolving ebbs and flows in the private wealth space.

White added: “Ensuring that the structures that advisers are recommending are portable from one jurisdiction to another, is vital.”

Attendees of the Forum heard the highlights from a recently published report on the latest trends in the private wealth sector. Commissioned by Guernsey Finance, and researched by PAM Insight, examines the way in which service providers will need to adapt to ensure they are one step ahead of changing families in a changing world. The report focuses on evolving private client trends, including increasingly global families, attitudes towards sustainability, being a ‘good global citizen’, and technology and digital

assets.  

Under 35s have greater focus on sustainable and impact investments and digital assets

Primary wealth management considerations for under 35s included greater focus on sustainable and impact investments, greater interest in digital assets, and popularity of digital platforms. The notion of ‘being a good citizen’ was also a key throughline, with 86% of respondents marking it as important (35%) or very important (51%) for under 35s. 

The report provides vital guidance to private wealth service providers and demonstrates that the desire for the industry to change is there. Sustainable product offerings become ever more important, as does technology and digital assets as under 35s become the primary wealth holders.   

Fintech is shaping the future of finance

The rapidly evolving technological landscape is affecting the world of finance in real terms. The ways in which fintech is shaping the future of finance and the cutting-edge solutions that are being utilised to make for a more efficient way of working are increasing every day. Guernsey prioritises staying abreast of these trends and takes a long-term view of innovation and the adoption of new technologies and digital assets.

Rupert Pleasant, Chief Executive of Guernsey Finance, said: “Guernsey’s strengths and excellent reputation are rooted within our experienced and expert professional service providers, enabling individuals and families to easily manage their wealth in a safe, secure and stable environment. Our robust legal system and regulatory environment enables innovation, which is why we’re ready to embrace the next generation of wealth owners and their changing needs. “As an international finance centre constantly striving towards innovation, Guernsey looks ahead to 2024 confident that we can continue to provide excellent, personalised services to private clients and their families.”

Looking outside of its borders, Guernsey is developing its international investment policies with South Africa. Guernsey has a long history of business relations with South Africa, including supporting South African asset managers with their global distribution needs, and in providing South African families with asset protection, investments and succession planning.   

One key strength Guernsey has, both in the context of this relationship and in general, is its Policyholder Protection requirements. These call for at least 90% of the policyholders’ liabilities to be held in a separate trust account, supported by a Guernsey-based trustee. All long-term insurers are subjected to a Standard Condition, and this layer of protection is enforced by Guernsey’s “up to date, robust and pragmatic” regulator, the Guernsey Financial Services Commission.  

Cobus Kruger, Co-Author of The Practical Guide to Offshore Investments, said: “South African’s number one priority when diversifying globally for the benefit of future generations is safety. Guernsey as a jurisdiction has earned trust over many decades and offers political stability, an independent judiciary, world-class legal framework and high-quality services providers … [T]here are open communication channels between both jurisdictions’ regulators. Service providers on island are well versed in the needs of South African clients and in many cases have appointed South Africans to manage operations and relationships. The regulatory framework and laws offer specific options that make setting up a fit for purpose operation in Guernsey relatively easy.”

Isle of Man

Fintech seems to be the topic of the day over on the Isle of Man. Michael Crowe, CEO, Finance Isle of Man provided a comprehensive summary of where the island is currently: “Over the past five decades, the Isle of Man has built up a formidable financial infrastructure that now accounts for 48% of its GDP, specialising in insurance, banking, pensions, employee benefits, fiduciaries and FinTech. Whilst we are an International Finance Centre, we also offer businesses and employees a unique working environment. The Isle of Man is the world’s only entire nation to be awarded a UNESCO Biosphere status, and also offers access to a stunning 100-mile coastline and historic Viking castles.  Looking ahead, we are focused on investing in the future of the financial services industry through digital and technical innovation including InsurTech, recognising that the insurance sector is the largest component of our economy at 22.4% of GDP. With the long-term ambition of creating an internationally recognised InsurTech Centre of Excellence on the Isle of Man, we launched the InsurTech Accelerator Programme in late 2022.”

“This was the first ever program of its type launched on the Island and offered scale-ups the chance to receive coaching on open innovation and collaboration best-practices, personalised mentoring, as well as the opportunity to work with leading insurers, such as Zurich. The Program concluded with our demo-day event at the end of January where scale-ups were able to showcase their innovations to the business community.  Building on this success, we also launched our first FinTech Innovation Challenge earlier this year, attracting bright minds from around the world, with ideas to advance the Island’s digital economy – including in the areas of blockchain, cryptography protections and AI-based business. The finalists, from the Netherlands, to Switzerland, to the USA, were selected for their ambition and potential, and over the last six months worked with on-Island partners, to develop new products to meet these key challenges.”

Carolyn Gelling, Client Services Director at Equiom, expanded further on the Innovation Challenge: “Earlier this week, the Isle of Man launched its 2024 Innovation Challenge which has three distinct themes: FinTech, Cleantech, and Artificial Intelligence. It is an exciting opportunity which invites visionaries and disruptors from around the world to participate and provide pioneering solutions to address challenges faced by companies in the Island and globally. Equiom has been proud to support growing businesses that establish in the Isle of Man and the addition of the Regulatory sandbox in recent years, working closely with the island’s financial services Regulator, has been a significant addition to the island’s capability and overall offering.”

Gelling added: “Fintech is a key theme for many clients, whether that be in respect of the industries in which they are transacting, have grown their wealth or the way in which they transact.  The next generation of wealthy family ownerships are creating new demands in the way in which they interact and their expectations around how their accumulated wealth might be invested, with ESG topics being forefront of many conversations.”

Yachting, aviation, and real estate are hot topic areas of investment on the Isle of Man currently. IQ-EQ noted an increased interest from clients regarding yachting and aviation: “Over the last 12 months, waiting lists have extended to up to two years at certain shipyards and for in-demand aircraft types. Inflationary price rises have not deterred potential buyers. Since Brexit, the Isle of Man has become one of the leading jurisdictions for yacht and aircraft ownership which is supported by world-class ship and aircraft registries.”

Gelling, Client Services Director at Equiom, echoed this interest and said: “Equiom continues to see steady activity in its Yachting and Aviation service provision, where the Isle of Man’s British Red Ensign flag state, highly prestigious superyacht registers and the largest European based registry for private and corporate aircraft is supported by a prompt and efficient service delivery both on initial registration and for the ongoing corporate service delivery by its highly experienced team.”

Real estate investment is also a key area to be aware of on the Isle of Man, but for different reasons. IQ-EQ said: “On the other hand, the real estate market is depressed due to, amongst other things, increased cost of borrowing; sector-specific issues, such as utility cost inflation and increased staff costs impacting hospitality assets; decline in office values, because of the prevalence of work from home; and impact on retail resulting from the move to online shopping.”

However, not all hope is lost. IQ-EQ added: “Looking forward to 2024, it’s predicted that the commercial property market will recover next year. The move towards sustainable buildings and the reopening of the economy in China will support the property sector, despite working habits changing because of the pandemic.”

For those not working directly with the Isle of Man, IQ-EQ provided the following insight: “Nearly all companies holding UK Commercial Real Estate have opted to tax in respect of the property and are registered for VAT. The Isle of Man is part of the UK VAT system under what is called the Common Purse Agreement. Registering a foreign company registered for VAT with HMRC and getting a transfer of a going concern (TOGC) can take months. However, this can be done within a week in the Isle of Man.” Both IQ-EQ and Equiom are listing agents on the International Stock Exchange, allowing them to provide the service of listing intercompany debt structured by way of a listed Eurobond for real estate clients, for withholding tax relief.

The scope of economic substance legislation, which was recently extended to include partnerships, was another development that IQ-EQ highlighted: “Failure to determine income from a relevant sector can result in financial penalties and potentially a strike-off.”

Gelling commented on the International Pensions space: “an ongoing and steady stream of new schemes being created, in terms of End of Service Benefit Plans, International Pension Plans, Employee Benefit Trusts and Employee Ownership Trusts.” She added: “Isle of Man IPPs in particular, remain highly flexible in terms of contributions, investments and retirement benefits and can be structured to meet almost any pension and savings needs, including group retirement plans, group savings and end of service gratuity arrangement.  According to the Willis Towers Watson 2022 IPP survey, the Isle of Man was home to 65% of the trust-based IPPs established in the previous 5 years, approximately three times that of the nearest competitor jurisdiction.”

In addition to his fintech download, Crowe commented on the work the Isle of Man is doing to build out its expertise in global employee benefits: “This has included creating an Isle of Man branch of the International Employee Benefits Association (IEBA) – the Isle of Man is the very first International Finance Centre to have a branch – and establishing a first of its kind economic cluster “Employee Benefits Isle of Man”. This collaborative association brings together industry stakeholders in a one stop shop that is capable of meeting the diverse requirements of multinational companies and their employees when it comes to benefits including Pensions, Payroll solutions, Captives, Group Life, HR, and other essential professional services.”

Additionally, the Isle of Man is expanding and strengthening its relationship with the South African business community. Crowe said: “Following the success of last year’s Isle of Man INDABA event, representatives from the Isle of Man Government joined another delegation to South Africa this Autumn to strengthen our business and finance connections. The INDABA event involved a series of high-profile conferences aimed at building business relationships, identifying opportunities, and enhancing connections between the two countries’ business communities and finance industries, with events held across Durban, Johannesburg, George and Cape Town.”