Unplugged: Certainly Uncertain

Monday 25 March 2019

There’s an old saying about March, that it comes in like a lion, and goes out like a lamb. Theresa May might be forgiven for hoping that rather than being about the weather, that piece of homespun wisdom holds true for the word that has dominated her life for past three years, and which will define her whole political career: Brexit.

As yet, it is still impossible, to know exactly how events will play out for Jersey, and its key financial services sector after Brexit hits.

But it is certainly true to say that the island’s bigger finance firms are global operators with a presence in multiple jurisdictions, and clients from across the world – so major political shifts are consistently inconsistent.

One of those is Vistra, who will have to contend with redefined relationships between Jersey and the UK, and Jersey and EU. Express spoke to Jane Pearce, UK, Ireland and Channel Islands Managing Director for Vistra, and asked her which sectors were currently performing strongly...

Pictured: Jane Pearce says Jersey will always be "a great place for private clients and ultra-high-net-worth individuals."

Jane Pearce:  Our private wealth business is doing very well. We're seeing a lot of ultra-high-net-worth individuals who are doing more, they're setting up more structures. They're investing more widely. So, the certain originating markets that clients are from, they're really looking beyond where their traditional investments have been to the emerging markets. To help them to do that, they need a global player who's got sophistication in providing the type of services in the countries that they want to invest in. So, we've got originating markets, and then they either go through a regional hub or an IFC to then deploy their capital in the market that they want to invest in.

Jersey will always be a great place for private clients and ultra-high-net-worth individuals. Our alternative investment services are doing extremely well, the private funds are something that have been incredibly useful for people to structure their investments in a way that is efficient and effective for them, so that's an incredibly interesting development for Jersey. We've seen that assets under administration have grown tremendously, and you can see that in other fund jurisdictions as well, like Luxembourg.

Pictured: Jane Pearce is the UK, Ireland and Channel Islands Managing Director for Vistra.

What are the surprises for you?

JP:  So, I think there's a definite trend in the market. There's been what I'd refer to as an electoral politicisation of regulation. So, from my point of view, there's been a lot of emphasis on ‘offshore’ and not so much on ‘nearshore’ or ‘midshore’ and that's been difficult for the industry. I think it's just the distortion that political sentiment is having on regulation that is affecting us.

One of the things that we do, is some primary research and this year it's been our biggest ever survey of credible individuals within the industry and our own clients, so this year we've had over 800 people.

What's come back is, sort of, a wisdom of the crowd. So, there are no extreme opinions developed within there, but really, people are worried about the political effect on regulation, they're worried about geopolitics, they're worried about the unprecedented levels of disruption and the uncertainty that we're facing as a result of that.  

I think key trends within the document give us an idea of how people are investing their money, and whether they're using IFCs to do that and where, actually, that investment is going.  So, we've got jurisdictional rankings within there, we've got a look at how technology is affecting our industry, and quite a lot of trends are coming out of that.

I think the biggest one for our industry, really, is that when there's increasing complexity, when there's increasing regulation, then clients need a service provider to actually help them navigate those complexities. Therefore, there's a greater amount of work for corporate service providers. So, I think that there are a number of opportunities; but you've got to do what you do well and deliver well to your clients to be able to make good on those. 

Pictured: Ms Pearce says Brexit and trade wars between the US and China are causing the most uncertainty she's seen.

Do you think this is the most uncertain time you've seen?

JP: Absolutely.  It's partly Brexit, you know, the UK government is really struggling to get a cohesive proposition together. But it's not only the UK government, you know, it's the simmering trade wars between the US and China. I mean, all of these things lead to great uncertainty for business and one thing that business doesn't like is uncertainty; but with uncertainty comes opportunity and I think the best players who are able to be agile, and adapt to that quickly within our market will find those growth areas, and work well to achieve their own growth.

With Brexit, it's like any other monumental event that's going to happen, we just need to keep calm and carry on.  

At the moment, my view on this is that the UK government, the Conservatives are really struggling to understand what their proposition is and how they're going to continue to carry on those very important trade relationships.  

I think, for clients, there is a worry in their minds that, actually, they're not only going to have to comply with some sort of regulation within the UK, but then they're going to have to comply with a double helping of regulation elsewhere.  

This is where it becomes quite difficult, because I don't think the European Union has really got its act together either.

Pictured: "I really do hope that, in terms of Jersey itself, they will see the really significant amount of regulatory change that's been put in place."

What have you been able to do to prepare for some of that?  

JP:  So, as a firm, we do a lot of knowledge management, and we've had webinars for clients on Brexit, we've produced checklists, documents. We're trying to get them to think about the contracts they've entered into, how they are going to be affected by Brexit, whether that's soft, hard or no deal at all. So, I think there's a lot of information out there from a lot of the service providers, but we've been very specific in terms of tax, transfer pricing, looking at the contracts they've got, especially with regard to employees who are in the UK, and how they might be affected by that.

We’ve seen registers of beneficial ownership coming in, you've seen transparency, you've seen substance requirements coming in. I just wonder how much more we can do. The playing field has well and truly been levelled, if not actually, you know, we're at a disadvantage now. So, my fear is that that could continue.  

My hope is that, actually, they understand the role that IFCs play, the very important role that we play in terms of the flow of capital around the world. We see that especially in terms of international expansion in services businesses, where we've got outbound work coming out of the US going into our UK business; our UK business then advises locally on tax and transfer pricing, setting up their offices, but also, if they then want to go to other jurisdictions, they'll manage that relationship for them.

So, I really do hope that, in terms of Jersey itself, they will see the really significant amount of regulatory change that's been put in place to make sure that we're a really well-managed, well-regulated island.  

Pictured: Ms Pearce is "generally optimistic" about her business future development.

How do you see business developing?

JP:  So, I'm generally optimistic about it, and I think there are two or three things that really come into play in thinking about why I'm optimistic.  The first is that, as a TCSP, our addressable markets are growing. So, that's the first thing, there's more work out there. 

I think the second thing is that the press has been very vocal about the anti-globalisation of trade, and that hasn't been borne out in our 2020 magazine, people are still very optimistic about promoting and developing a global platform for their businesses and I think there are a couple of examples of that.  

The first one is that, you know, we see in the Middle East that they are structuring different investments because of the price of oil, and the uncertainty and the variance in that price. We're seeing a lot more activity coming out of India as well, as they move to a more global platform. Then, of course, you have a lot of activity coming out of one of the biggest originating markets, which is China. So, in terms of China, you've got the Belt and Road Initiative and the investment by the Chinese government in infrastructure across the world. So, all of these are driving really interesting trends within our market and opportunities for work.

Pictured: "It's an interesting time to work with a different section of clients."

Are the types of clients changing?

JP: I think that's an interesting question. The types of clients are changing, so I think we're having more corporate-style clients. When I use the word corporate, I mean that they behave and act in a corporate manner.

There may be, sort of, an individual sitting behind that or there may be a very big foundation, but certainly, the types of clients we're getting tend to be bigger, they tend to be better informed, they tend to know what they want when they come to see you, so you have a greater feel for what delivery is required from them and how they view their business.

I mean, they have a very global view of how their business should be run and managed and be operated.  So, I think it's an interesting time to work with a different section of clients.

Pictured: "There needs to be less complacency and a little bit more innovation."

Any particular icebergs you think Jersey needs to avoid?

JP:  I think, for the community, the industry that we're in, we need to avoid being a little bit complacent. We need to be innovative, we need to watch the competitors in our fields, we need to look at technology and how that will disrupt. We haven't really had any, sort of, major disruption and I think the next ten years are going to be very interesting in terms of disruption, because we just haven't seen it.  

The business models that we've all had are changing now and we're changing because we need to be more efficient, we need to be more effective and we need to have a better reach for our clients to be able to provide the services that they truly want. I mean, my comment regarding being a little bit complacent is, I think we all just think it's just going to keep going.

We have to innovate and we have to offer something different, because there's a lot of competition out there and we see that with the attitude to investment in technology. One of the particular illustrations within the 2020 magazines shows that most of us, 50% of those who responded to the survey are only really looking at technology from a mobile app perspective, something your client can do on your phone. 

There's a lot of work that could be done on FinTech, which would truly make us technology-led firms and really benefit our clients as a result of that and, therefore, benefit Jersey.  So, I think there needs to be less complacency and a little bit more innovation.

This interview first appeared in Connect magazine, which you can read online here.

Pictured top: Jane Pearce, Managing Director of Vistra, as captured by photographer Gary Grimshaw.