This publication interviewed a managing director of First Names Group and a director at Barclays to discuss the latest issues for the Isle of Man's financial sector.
Industry professionals in the Isle of Man say that the jurisdiction's new financial industry has not made a big impact so far, but seem willing to give it time.
The Department of Enterprise on the Isle of Man has created the Finance Isle of Man, a public and private partnership that takes decisions and feeds ideas into how to make the jurisdiction more prosperous. The agency, which is made up of banking, fiduciary, pensions, insurance, funds and wealth and professional services, is not a separate legal entity but will instead operate using delegated powers from the Minister for Enterprise.
With international finance centres (IFCs) in Europe such as the Isle of Man, Jersey, Guernsey, Malta, Gibraltar and Switzerland eyeing the impact of Brexit and other international shifts, the stakes for getting the right infrastructure in place are arguably as high as they have ever been. IFCs are often seen touting their jurisdictions' wares across the globe, such as in Asia and the Middle East.
This publication recently interviewed managing director Craig Brown at First Names Group in the Isle of Man about the firm being based on the island, the island's financial sector and how it can grow as an IFC, including the new finance agency.
“In terms of the changes that have been put in place, I don’t think the government will say this, as they will say changes have been made for a reason, but to be perfectly honest from somebody on the outside looking in – we haven’t seen a substantial change,” Brown said. “It is all about the relationships you have with government not with the department that exists there. We are still dealing with those who were there before, and that’s not saying that the change is pointless, the dealings with the department are still seamless and we have a good relationship with them. We try and work with government with its initiatives, and the result of that you benefit is Isle of Man plc. We don’t think the changes will make a huge difference, and I like to think that it is a means of them organising things, perhaps managing the external industries a bit clearer, and painting a more obvious picture of who they should talk to.”
This publication also spoke to Stuart Nelson, director of Barclays in the Isle of Man, about developments.
“The financial sector is diverse on the island,” said Nelson. “I think each sub-sector has had their own strategy, and I think the finance agency is looking to pull together what are the needs and plan for the sector for the next five to ten years. With the right strategy, the island can become great competition as an IFC.”
In May, this publication reported that the Isle of Man Department for Enterprise had appointed Aidan Doherty as non-executive chair and Michael Crowe as chief executive to lead the Finance Isle of Man Executive Agency. Doherty has over 40 years' experience in the sector. Crowe is director at Grant Thornton. He has spent 27 years working on the Island.
The Isle of Man competes with IFCs such as fellow UK Crown dependencies Jersey and Guernsey. In some repects it appears that Jersey has pulled out in front of the other IFCs. the Isle of Man needs to raise its game and close a gap. In December 2017, Jersey Finance reported that the net asset value of regulated funds under administration increased by £26 billion ($35 billion) to £291.1 billion during Q4 2017. Also, it logged that the total value of banking deposits held in Jersey increased by £6.5 billion to £118 billion. In 2012, EY reported that the Isle of Man’s financial sector was worth £1.1 billion.
This publication asked Brown about the rivalry and competition with other operations within First Names Group.
“There’s a friendly rivalry between the other Channel Islands’ businesses within First Names, there’s an internal rivalry and competition on what we do,” First Names' Brown said. “But that’s more at a superficial level, where you are trying to do a bit better than your colleagues. Actually, in reality most of the time we work in cooperation with them, and this is because there are different reasons why someone will want to be in Jersey, Guernsey and the Isle of Man. It is all about using the jurisdiction for what the client might need. We have a lot of client relationships and a lot of business that work across the company, where we will have part of a fund structuring here, and some elsewhere.”
In June, this publication reported that the Isle of Man is aiming to use the UK's departure from the European Union as a catalyst to promote its financial services sector after Brexit. The The UK's decision to leave the bloc has prompted several European cities to put themselves forward to grab elements of the UK’s financial services operation, while claims and counter-claims swirl about whether Brexit will be a net harm to the financial services sector. Firms have have talked about moving European headquarters to Dublin, Frankfurt and Paris.
And according to Brown, there are opportunities to be had from Brexit for the Isle of Man, but it will not all be plain sailing for the jurisdiction.
“It is both a challenge and an opportunity. As soon as you have change, there will be casualties,” said Brown. “It will be interesting to see where the UK makes its changes - for example, its trading relationship with Europe. A lot of what we do in the IoM is to assist international business that trade into Europe from the UK. It has a huge impact into inward investment into the UK because a substantial proportion of the investment comes through the IoM. We don’t know what is going to happen – we haven’t seen a slowdown of investment. People have taken opportunities from the weak pound. It is uncertainty but it does present opportunities. We start to see trading outside of the EU with the UK; we can see that as an opportunity. It gives us a chance to talk to countries like Ireland, US or other European countries, and it helps us say to people about how stable the IoM economy is as a jurisdiction.”
Over the last few years, the island has tried to battle with the reputation of a tax haven, especially after the comments made over several years by officials during speeches in the UK parliament about closing down lucrative tax loopholes which cost HMRC millions of pounds.
Brown spoke about the greatest challenges to the island, and what the government needs to do combat this.
“The biggest challenge to us in the Isle of Man is perception and the potential instability that this causes,” said Brown. “What I mean by that is the rhetoric that is the press – and that is being spouted by governments that really should know better. There are people in the UK that like to point the finger to distract people from the where the problem genuinely lies. And that means generally that can result in instability with international tax laws that have a very negative effect on clients themselves. But more importantly [they] have an effect on the economy, not just here, but the impact on the UK. This instability and uncertainty has already started to have an effect on the UK property market, and we are starting to see a slowdown in commercial developments which is absolutely vital for the growth of the UK economy," he said.
"But because of the capital gains tax and other changes that the UK might make, it has resulted a real hiatus of activity, and as a result of that it has been a real challenge to us. It is starting to turn around for us thankfully – what we need is a bit of clarity from the UK and elsewhere – to give businesses and people investing into the UK who actually understand what the future holds for them,” he said.
This publication also asked Nelson about the island and what it has to offer, alongside the challenges it currently has.
“I think one of the key differences for me, who has lived on the island for 25 years, is that the Isle of Man is an international business centre with a diverse economy,” said Nelson. “Being asked about being a tax haven is one of our biggest challenges and we hope to educate people about the transparent and highly regulated and controlled environment under which we operate here. The positives of the sector on the island – such as being at the forefront of compliance and using English law – is that it has many similarities to the UK. As far as challenges - I think continuing to attract the right skills to the island and nurturing them is something we continue to look at."