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| Looking after the local market
| HANS BAERLOCHER
Managing director, UBS Bank |
JERSEY is typically defined as an offshore centre. Whether you speak to a lawyer in London, a financier in Frankfurt or a stockbroker in Singapore, this will be the view most generally held – which is perhaps hardly surprising, when even our own financial services community tends to see our role in a similar light.
This rather narrow view of the Island’s position and resources has in turn led many industry professionals to focus on catering for the needs of non-resident wealthy individuals. In doing this, however, there is a tendency to overlook the needs of many affluent Island residents. Indeed, local residents are typically offered either a stockbroking service by an established brokerage house or a premium banking service for the core-affluent by a local branch of a high street clearing bank. In my experience, nowhere can you find a truly comprehensive, locally based, wealth management advisory service for the many affluent individuals resident in the Channel Islands.
While, given the perception of Jersey as an offshore centre, it is perhaps unsurprising that this oversight has developed, it is important that this gap in local services is addressed. The first step towards achieving this is to identify the requirements of these residents, and it is logical that many of the beneficial services for wealthy individuals around the globe would not be too wrong for our friends and neighbours in these isles. Having reached this conclusion, it has to be recognised that local clients fall into one of two camps. On the one hand, you have the affluent individual and on the other hand, the locally based intermediary.
While there are inevitably some variations in the needs of these two groups of investors, in both cases the client needs to have a nominated client adviser available to them, who will be able to respond intelligently to the information they gain about the client.
Information is key to successful investing. The adviser will start by asking straightforward questions such as why are you investing and what are your goals? Investment goals differ widely and there is no such thing as a ‘one size fits all’ solution. It is also imperative for the adviser to gain an overall view of the client’s financial situation, based on liquid and illiquid assets as well as liabilities. An adviser needs to take an approach that looks at the total wealth picture of a client, and not just the banked assets held within a particular institution. This approach will include considering everything from the mortgage to the client’s capacity to earn income in the future. When you adopt this kind of approach you may well end up with quite different solutions from those at which you would arrive if the focus was just on the money available for investment. This, in my view, is what distinguishes modern wealth management from traditional private banking. Jersey residents seeking wealth management services should also consider the advantages of using an adviser from an organisation with a worldwide presence. This enables the adviser to draw on the entire global expertise and capabilities of his firm. Therefore, a Jersey resident who has sold his family business for a substantial sum could agree with his adviser a strategic asset allocation and access some of the very best alternative investment fund managers in the world for the portion of his wealth set aside for this asset class.
He can also access services to help manage the more traditional elements of the portfolio, and take advantage of the organisation’s real estate and private equity expertise. In other words, the client calls the shots, decides how much involvement he wants to have in the day-to-day investment decision process, and thus maximises his opportunity for wealth preservation and growth.
The local intermediary market – accountants, lawyers, stockbrokers, trustees and insurance professionals – has historically demanded mostly rudimentary services of deposits, payments and some packaged or plain vanilla investment products. These investment services have centred on the trading and taking into custody of bonds, equities and some investment funds. In the long term, however, a trustee will not be able to maintain such a traditional and conservative stance as low risk usually correlates with low returns and beneficiaries will demand more. Investment returns and strategies will have to shift a gear to keep pace with market trends. This is another instance where the strategy of local advisers from a global financial powerhouse making investment solutions available to local intermediary clients, in a way that complement those provided by the intermediary, is particularly advantageous.
You may well ask why this area of wealth management services is so important to me and to the Jersey branch of UBS. The answer is simple, traditional offshore banks have traditional non-resident clients, which means the bank could in fact be anywhere.
This accentuates the importance of the environment’s business conditions to the banks operating within that location. If this environment changes in any way, then the banks may be compelled to move to a more favourable location. Only when a bank is intimately connected through business with the environment in which it operates, can it achieve long-term stability and self-determination in that location. Sustainability – a word bandied about by so many these days in Jersey – is only possible when local businesses connect and secure each other’s futures. Without this, the offshore bank will always be a pawn on a strategic chessboard, dependent on outside influences and factors such as the UK/EU policy, the EU tax directive, tax and regulatory changes in the home jurisdiction … I think you get the point. I hope that enough local businesses and wealthy individuals appreciate that sustainability does not just happen by accident. We certainly plan to stay.
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