The CEO of Jersey Finance discusses how diversification puts Jersey ahead in a post-Brexit era.

Since June’s historic Brexit vote, there has been much debate about how the UK’s exit from the European Union will affect international financial centres. In this article, Geoff Cook, the chief executive of Jersey Finance, gives his view on where the island, a self-governing dependency of the UK, stands. The editors are pleased to share these insights and invite readers to respond.

Despite the general economic uncertainty which has surrounded Brexit, Jersey is in a strong position. This is largely due to the forward-thinking policies of the jurisdiction’s government, the quality of its product and its robust regulatory environment.

With the announcement that Article 50 will be triggered by March 2017 the path forward may now be a little clearer, but the UK Government’s plans for leaving the EU are still far from defined. As a jurisdiction outside the UK, Jersey was uninvolved in the referendum result and, four months after the vote, the island continues to be unaffected directly by its outcome. There was initial turbulence as expected, but the predicted economic collapse has not materialised and global markets have remained relatively steady. 

Jersey’s constitutional relationship with the UK and EU in terms of financial services was never going to be affected by Brexit. Investors have been reassured that it is business as usual: as Jersey is outside the EU, the finance industry has been able to maintain access to European and global markets through a range of existing third party agreements which were going to be unaffected by the UK vote.

The island’s stable foundations are evidenced by recent figures, with Jersey’s 2015 Survey of Financial Institutions showing some positive performance figures for the trust and company (up 3 per cent), legal (up 5 per cent), and accountancy (up 13 per cent) sectors. The funds industry is also buoyant; as at March 2016, the net asset value of funds under administration in Jersey increased to £228.4 billion, the second highest level since 2008. These results paint a picture of stability, and we fully expect this to persist in a post-Brexit environment.

This stability, however, is complemented by an ongoing strategy of growth through diversification right across the industry’s range of private wealth, funds, corporate and banking sectors, and a concerted focus on widening and embedding links with other regions around the world, such as the Middle and Far East.

One way the island is looking to diversify is in the area of philanthropy. Though traditionally perceived as an activity belonging to entrepreneurs and UHNWIs, structured social impact investing has in recent years become increasingly important for individuals and families at all levels of wealth who are also looking for planning strategies to be self-financing and sustainable. With the World Wealth Report 2016 highlighting that, globally, 31 per cent of HNWI investment portfolios are now based on the concept of achieving social gain. The industry’s skilled workforce and regulatory framework make the Island highly competitive for global philanthropic activity and the phasing in of Jersey’s new Charities Law will ensure that continues.

Meanwhile, Jersey businesses continue to see real growth in an increasingly broad range of overseas markets. Jersey’s relationship with the Far East is becoming increasingly important in particular, and for this reason it was pleasing to see the first ever managed trust company recently being established in Jersey for a mainland Chinese institution, through JTC. The new licence was issued to Ark Trust (Jersey) Limited, a subsidiary of major Chinese firm Noah Wealth Management, in July.

Developments like this help make it easier for Chinese clients to access Jersey’s reliable, robust trust structures and satisfies the needs of Chinese HNWIs to harness support from good quality international service providers. These are precisely the kind of positive messages Jersey Finance will be highlighting at its annual Asia Roadshow later this month in both Shanghai and Hong Kong.

Meanwhile, from a regulatory perspective, whilst the Panama Papers leak earlier this year provoked some furore in the mass media, Jersey has taken this as an opportunity to dispel the myths surrounding international finance centres by drawing on its solid track record, and is benefiting from a flight to quality as a result. 

Jersey is recognised, for instance, as one of the best regulated IFCs globally with a model for capturing and managing beneficial ownership information endorsed by international authorities. A recently published report from the Council of Europe’s MONEYVAL group, for instance, highlighted that Jersey is compliant or largely compliant with 48 of the 49 Financial Action Task Force Recommendations, placing it in the top tier of jurisdictions assessed under those criteria. It concluded that Jersey is “a well-established international financial centre, with a mature and sophisticated AML/CFT regime”.

The island’s reputation for transparency was further underlined by Professor Jason Sharman’s academic report on beneficial ownership, within which Jersey was described as ‘one of the leading pioneers’ of the tried and tested licensed corporate service providers model of beneficial ownership, meaning that investors can take comfort in knowing that Jersey’s framework is compliant and secure. 

As the international financial services landscape continues to evolve, against the backdrop of complex political developments in the UK, US and the EU, Jersey is in a strong place as an IFC.

Indeed, these developments may well create opportunities for Jersey. Within the private client sector, for example, the stability and security offered by high quality Jersey trusts for estate and wealth planning will become increasingly desirable. Moreover, where investment funds are concerned, the flexibility, speed to market and global dynamic Jersey offers will be an attractive prospect as volatile markets evolve.

From the tangible results Jersey continues to see, it is clear that the diversity of innovative products it has to offer together with its commitment to forging strong relationships in growth markets such as the Far East and its focus on high quality rather than high volume business is keeping it ahead of the game.