21 minute read
interview
The interview
Joe Moynihan and Rupert Pleasant
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The Channel Islands and the Middle East have been building relationships for decades. But, as Joe Moynihan, CEO of Jersey Finance, and Rupert Pleasant, Chief Executive of Guernsey Finance, explain, there is plenty of opportunity for even greater collaboration going forward
Words:
Jon Watkins
How strong is the existing relationship between the Channel Islands and the Middle East? Are the Channel Islands already a valuable and important jurisdiction for Middle East investors and how has that developed over recent years?
Joe Moynihan: Jersey has a long history and a long relationship with the region. We first went there shortly after Jersey Finance was set up in 2001. It was one of the first business trips that Jersey Finance undertook.
The industry, Jersey Finance and the government are all invested in the region, and we have been invested for 20 years now. This year, we’re marking the 10th anniversary of the opening of a representative office in the UAE. And we are the only international finance centre to be allowed to have a presence in the DIFC, which for us is a huge privilege and, for me, marks the respectability of Jersey as a jurisdiction in region.
The Middle East is an absolutely core market for Jersey. We’ve got information exchanges and regulatory agreements in place between Jersey and the UAE, Bahrain and Oman. And, as well as Jersey Finance having a presence in the region, 31 of our member firms already have a presence in the UAE, while a further 40 visit the region on a regular basis.
So we believe that we’ve established ourselves over a long period of time as a jurisdiction of choice for many in the region.
Rupert Pleasant: Guernsey is also a well-recognised and valued jurisdiction in the Middle East. It is especially well known to Saudi clients for its flexible regulation and robust legal system.
Opportunities have developed over the years for clients being able to use new and innovative structures that provide an element of control over their assets, such as the Guernsey Foundation, which has in many circumstances been used for philanthropic purposes. This is increasingly important to families in the Middle East as wealth passes between generations.
In Guernsey, we also have a real commitment to green and sustainable finance, with the launch of our Guernsey Green Finance initiative back in 2018.
We have been having regular conversations with practitioners in the Middle East working in the green and sustainable finance space, including podcasts with KPMG in Turkey’s Sustainability Director, Richard Betts, where we discussed the developments in ESG and sustainable finance in the Middle East.
There are strong links between the two jurisdictions, but are there greater opportunities ahead?
JM: I think the next generation, with the way the world has moved, wants to do things properly. They want to deal with a reputable jurisdiction, with professional individuals who understand their requirements, and with people who can protect their family reputation.
So high-quality regulation is extremely important and all of that is what we as a jurisdiction can deliver. And that means greater opportunities.
Shutterstock/Rasto SK Dubai International Finance Centre
If you look at a couple of the big recent high-profile wins involving Jersey, the Vision Fund is a Jersey fund structured through the Jersey Private Fund that has significant Middle Eastern investment.
The Ethos Financial Services and Technologies Fund, which is a £1bn fund focused on Shariah-compliant investments, is also structured here. These are funds that would have undergone global research in terms of where the best location was for them, and the fact that this jurisdiction was chosen resonates with our view that there are greater opportunities ahead.
RP: Here in Guernsey, we absolutely see the region as having great potential, with substantial capital flows ▼
coming from the GCC region in recent years. There’s particular interest in responsible investing in ESG strategies for bespoke structures.
At Guernsey Finance, we also recognise the changing demographics within the Middle East. We have recently released research with Family Capital Publishing, which looks at women in family offices, with a specific focus on the role of women in Middle Eastern family offices.
Our research found that women in the Middle East are playing an increasingly important role in wealth management and decision-making, managing more than $800m in assets in the Gulf region.
In Guernsey, women make up more than 25% of directors and senior managers of Guernsey fiduciaries, which is much higher than the global average.
The diversity of services providers makes Guernsey appealing to Middle Eastern investors and managers, and the growing demand from women investors and managers offers a great opportunity for Guernsey and the Middle East to strengthen our existing ties.
What is it that makes Jersey and Guernsey so appealing to Middle Eastern investors, wealth holders and managers?
JM: For me, the reputation, the high-quality regulation and the expertise across the board are the most important factors.
If you look at Jersey as a jurisdiction, the vast majority of people working in the industry are professionally qualified. There’s a strength you get right across the sector – good-quality law firms, goodquality accounting firms, world-class banks, worldclass service providers on the family office and the corporate wealth side.
The financial services ecosystem – the infrastructure – we have is second to none. And we also have a supportive, strong regulator.
There are agreements in place that also make working together attractive. We’ve got a double taxation agreement with the UAE, which again is a mark of the relationship that we’ve developed at intergovernmental level and the esteem in which Jersey as a jurisdiction is held within the UAE.
The other important point is the independent judiciary – and because we’ve been in financial services or international financial services for 60 years, we have a strong body of case law, which means that when families, corporate businesses or institutional investors are seeking to place assets, there are strong precedents that give them comfort.
RP: Investors and holders of wealth in the Middle East like Guernsey for a host of reasons, including confidentially, stability and asset protection.
Trust is hugely important – Guernsey is a wellrespected jurisdiction and has a highly regarded reputation, built up over many decades.
That is an important aspect of doing business in the region. Guernsey is also seen as a centre of excellence for fiduciary and funds work.
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There has been a big move towards family office services in Guernsey from the Middle East, and an increase in the use of Private Investment Funds
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Since the launch of Guernsey Green Finance in 2018, we have been working hard to develop green and sustainable finance offerings in all our core financial services offerings in Guernsey. These include the development of the world’s first regulated green fund regime – the Guernsey Green Fund; the release of an ESG framework for insurers, which was another world first; and a suite of educational materials that focus on key trends within sustainable finance and ESG for private wealth practitioners and family offices.
Guernsey is also a member of several United Nations initiatives, including the Financial Centres for Sustainability (UN FC4S) network, along with several Middle Eastern jurisdictions such as Abu Dhabi.
As part of this relationship, we were pleased to support Abu Dhabi’s Sustainable Finance Forum with a pre-launch podcast with Mercedes Vela Monserrate from the Abu Dhabi Global Market, where we discussed green finance developments in the Middle East and the importance of diversity and gender equality in the UAE and Middle East.
What can the Channel Islands offer Middle East players that their own market doesn’t give them?
JM: We did some work a number of years ago, Jersey’s Value to Britain, which highlighted the amount of investment that is funnelled through Jersey into the UK – and that gateway to the UK is very appealing to Middle East investors.
But we also have a significant amount of investments through Jersey that end up in Europe and, increasingly, we’re seeing Jersey being used as a gateway.
Increasingly, there is also an understanding that we specialise in family office work, real estate investments, succession planning and philanthropy here, and that we have considerable experience in Islamic finance.
In recent years, that has diversified further into alternative investments and corporate activity. We’ve done quite a bit of work in-region on ESG, which sits quite nicely alongside Islamic finance in many ways.
And our industry is investing heavily in technology, which resonates with the next generation in the Middle East as much as it does everywhere else.
RP: I would add that Guernsey has a well-respected legal system that has more than 50 years of case law available to clients, and a robust but proportionate regulator. This gives clients the comfort of establishing a structure in a tried and tested jurisdiction that also has the expertise to manage complex multijurisdictional structures.
We are definitely seeing a strong desire for succession and asset protection structures, also. Some of these vehicles will be set up as non-Shariahcompliant structures to hold assets that are located outside the Middle East region – in some circumstances to benefit female members of the family.
Which Channel Islands services and offerings are gaining particular traction with the Middle Eastern market right now – what are the big growth areas?
JM: In the private client area, it’s very much about structuring the assets properly. Historically, assets would have been acquired in all sorts of different ways, depending on the advice that families would have been given at that time.
Now, the next generation wants things structured properly. They don’t want to have anything that’s going to reflect badly on them or on their family, and we’re increasingly seeing that type of work going on here. And part of that work is succession planning.
Increasingly, next gen are also much more internationally focused than their parents, much better travelled, often western-educated, and they have strong views and values that they want to see supported. That leads into the ESG piece.
We talk about sustainable finance from a Jersey point of view right across the spectrum, but not just about environmental – it’s environmental, social and governance.
Earlier this year, we launched our sustainability plan, which was a result of a lot of hard work with an independent consultancy as to how we should position ourselves.
It’s a long-term strategy and we’re working on the roadmap to it, but it’s not just necessarily about financial services.
It’s also about government, the regulator and the broader island – to ensure we take this seriously and we become a centre that is not necessarily looked at for sustainable finance but is a sustainable finance centre.
RP: There has been a big move towards family office services in Guernsey from the Middle East. There has also been an increase in the use of Private Investment Funds (PIFs) in Guernsey, with a recent cutting edge refinement of the PIF regulations to better accommodate family office business, as well as asset protection and succession planning structures.
Furthermore, there has been considerable interest in our expertise in sustainable finance and ESG, in which we are a world leader.
The promotion of green finance and investment in sustainable projects is a key growth sector globally and this trend isn’t bypassing the Middle East. In Guernsey, we have proven expertise and passion for green and sustainable finance.
Our research in the role of women in Middle East families and family offices also showed the growing importance of governance in private wealth structures. Guernsey not only has an above global average of female representation in financial services but also a reputation for advising on, achieving and maintaining good governance.
International firms are also tailoring mandates for specific requirements for ethical investments and are tailoring the portfolios around religions and beliefs.
A scholar is not required for a foreign Islamic investment portfolio, as long as the principles and the restrictions are agreed.
Do the islands have particular strength and expertise when it comes to compliance with Shariah law – and is that helping the flow of business?
JM: Very much so. One of our business development team in Dubai, Fazel Bhana, is a specialist in Shariah finance. And then within the industry here we have a number of firms that have specialised in and worked with Shariah products for a number of years, so there’s plenty of expertise.
We have also done some work on Shariah products and Shariah law, to see what changes we need to make to our legislation to facilitate it.
And, as it turns out, we didn’t have a huge amount of change to facilitate Shariah compliance. The legislation as it currently stands allows us to facilitate what needs to be done.
RP: Guernsey offers Shariah-compliant trusts and foundations, which can be approved by Shariah scholars in the Middle East. These have the flexibility to meet the client’s Shariah-compliant needs. Guernsey lawyers and fiduciary practitioners have the expertise to establish and manage such structures on behalf of Middle Eastern clients and have done for years.
Jersey
How do you see the market trajectory from here – and what are you doing specifically to further enhance the relationships between the Channel Islands and the Middle East?
JM: Because of the pandemic, most of the work we have been doing has been virtual, but we will be starting to get back out on the road again soon – running events in-region. And I’m aiming to be in Dubai twice before the year is out.
We’re also doing some fact-based research on Shariah-compliant products this year. Plus, we’re sponsoring STEP Arabia, the development event, this year and we will be running another of our leadership events for females in-region. We’re also in discussions to strengthen the government relationships in-region.
RP: Middle Eastern clients will always appreciate trust and confidentiality from those they do business with, especially when discussing succession planning and asset protection.
Guernsey
Guernsey is a well-known jurisdiction for providing family office services to Middle Eastern clients, and we foresee a continuing flow of business. Guernsey’s increasing reputation for the provision of expertise and flexibility is well known to clients and their trusted advisers in the Middle East.
Guernsey Finance, under the brand We Are Guernsey, hosts private wealth roadshows to the Middle East to promote our private wealth and pension sectors.
We take professional firms that represent those sectors to promote Guernsey as a leading global financial centre, enabling clients to meet one-on-one with our delegates and get a better understanding of the structures and expertise that are available here.
We Are Guernsey is also in the process of recruiting a dedicated Middle East representative who has extensive knowledge of the region, with a focus of promoting Guernsey and introducing Guernsey industry to key Middle East contacts.
Moving into the future, is it vital that the Channel Islands continue to attract the best talent, with the best knowledge to meet these demands from the Middle East?
JM: I would say that’s critically important. This business is a people business. It’s all about the expertise and it’s a people business at whatever level.
It’s about having the knowledge to be able to interpret complex opportunities and scenarios, as well as having the ability within the industry to understand the trends – so we are able to adapt quickly to meet those trends. So, yes, attracting talent is really important.
In addition, we work very closely here in Jersey with Skills Jersey. In fact, one of our team is chair of one of the groups there and we work through that with the schools.
One of the things we have done is to launch a Rising Stars Awards, because it’s really important that we identify and recognise the future of leaders of this industry and highlight them. That also helps us build pride in the industry.
I spoke to somebody the other day about trust, and this individual said to me that if you speak to kids now about where they think they can do the most good, there has been a switch in mindset.
A lot of kids now feel they can do more good in the private sector than they could in the past. They no longer feel the only place they can do good is in the NGOs or as politicians.
There is a view that a lot of the private sector has turned a corner – and is a lot more responsible as a business. If you are responsible as a business, you will attract the right people both in terms of employees and in terms of customers.
That means we have a great opportunity to attract the best talent. But we have to work hard at it. The best talent want to know a lot about a business now before they will work with it. What are your values? What are you doing to help the community? What are you doing on the environment? And that’s almost like forcing the mindset change, which is great.
RP: Guernsey already has a strong talent base that knows the region extremely well, either from having an office in the region or from frequent visits.
Our mantra is safety, security and stability – all of which Guernsey demonstrated during the Covid-19 pandemic. We had two short, sharp lockdowns but other than this Guernsey had no social distancing, no face masks, all shops, restaurants and bars fully open for business, without restriction.
How we dealt with Covid-19 has attracted recognition and praise from around the globe, so Guernsey is considered a very attractive place to live and do business.
Not only does this enhance Guernsey’s reputation as a robust jurisdiction for clients to place their business, it has also helped us attract and retain the best talent possible, which includes many experts and practitioners who focus on the Middle East.
With more opportunity coming to Guernsey from the Middle East, this will bring even greater expertise to the island to manage these clients.
It is also common for firms that have an office in Guernsey and the Middle East to second staff between each jurisdiction, thereby providing them with valuable experience in each market. n
Mark Leale, Head of Quilter Cheviot Dubai Office and Senior Executive Officer, explores the impact of the changing Middle East demographic
WHILE THE TRANSFER of wealth to
the next generation is nothing new, the level of assets making this transition is quite staggering, with the Middle East being no exception.
Now, it is up to wealth managers and other professional advisers to establish what matters to this younger generation of investors, their drivers and the way in which they wish to interact with providers.
The Middle East is steeped in a fascinating history. Those who take time to understand the culture will learn that while technology and other advances may alter the way in which solutions are delivered, and the areas in which investment is focused, it is very much traditional values that will stay the course.
Quilter Cheviot has its own long history, recently celebrating our 250th year. We are no strangers to the transition of wealth between generations. We ensure our service remains relevant, embracing efficiencies driven through innovation, while staying true to our belief that a personalised service builds the most meaningful and longstanding relationships.
The concentration of wealth among the local and expatriation population in the region has not gone unnoticed by international financial services providers. A broad mix of these firms have moved from an approach of making trips into the Middle East to one where they have established a permanent presence in order to better serve their clients.
The development of centres of expertise, such as the Dubai International Financial Centre and Abu Dhabi Global Market, with forward-thinking regulatory environments, has really supported and encouraged the expansion of this sector.
Wider changes in regulation further serve to better protect consumers, ensuring that financial services businesses in the region have robust processes in place and are held accountable for the advice that they offer.
This accountability, and the assured suitability of our portfolios, runs through our operation and is a welcome approach for many clients across the region.
Where their parents may have been inclined to look at individual investment opportunities, our experience is that the younger generation values the ability to discuss markets and holdings within their portfolios. They prefer to leave the day-today management and asset selection to our investment managers.
The ability to tailor these portfolios, however, gives them the scope to shape the direction and allocation of the capital, choosing sectors that resonate with them.
Making sure our portfolios are adapted to meet the needs and objectives of our clients is paramount, and responsible investment is an important example of this.
Younger generations who, among other issues, hope to focus on making a better and more sustainable world, are more and more likely to wish to reflect this through their investments.
As such, propositions such as our Positive Change strategy have been designed for clients who would like a pragmatic approach that combines funds that invest with a sustainability focus or for impact, with funds managed by leading ESG practitioners.
Meaningful engagement by fund houses with company management is prioritised
over formal exclusions on the basis that engagement can encourage change where it is needed most. This is relevant to those who will inherit wealth.
Shariah principles can often dictate portfolio decisions and, with a closer look at these Islamic investment considerations, it is understandable why responsible investment has really caught the imagination of people living in the region, and indeed has become a must-have within the investment world.
To that end, our analysts integrate ESG factors within their research. Additionally, we have a strong active ownership agenda, which focuses on voting and engagement with primarily the companies we invest in.
Looking at individual sectors, technology has featured heavily within the asset allocations of many clients and has driven some great performance over recent years.
One theme we see running through many portfolios in the region, particularly appealing to the younger generation, is fintech. Within our asset allocation we have added a degree of exposure through private equity vehicles, allowing our clients to have access to exciting opportunities, while maintaining diversification and liquidity.
Detailed research by our teams into such opportunities allows for sound forward-looking investment decisions, providing clients with an interest and understanding of the investment choices without needing to be responsible for the trading decisions.
It is through these considerations that investors can benefit from growth opportunities, while not losing sight of the importance of a risk-weighted approach.
Just as our clients acquire knowledge from their parents, we have learned much from our 250 years in business. Together, we take the value of this experience and work in partnership to continue to build and preserve wealth for generations to come, in a way that embraces what is important to our clients today. n
FURTHER INFORMATION
For more information, contact Mark Leale. Tel: +971 4 568 2361 Email: mark.leale@quiltercheviot.com
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