Staying on top

The fast pace of technological change has hit the Channel Islands and companies throughout the financial services industry are focusing ever more closely on ensuring that when it comes to offering the intermediary low-cost and rapid internet access, they are on top of technology.

Bill Scott, director of asset management at Guernsey-based Close International, explains why he is concentrating so much in this area.

He says: 'We are investing in technology for the future. In the past, the islands have had the advantage of being offshore, but have had the physical disadvantage of being in a remote area and a different time zone from the UK. The opportunity of technology removes this disadvantage.'

Close International is presently looking at improving its website. Scott says: 'We are looking at it from the point of view of the intermediary where Close International will be offering a one-stop shop for clients. Clients will be able to access all components of private banking and fiduciary services.

'It is much easier to get something done through a one-stop shop and we are investing heavily in offering one platform. It removes administration hassles for intermediaries.'

Malcolm Corrigan, senior manager group communications at Jersey-based Abbey National Offshore, says: 'The internet is a growth area for us all. You can access the latest information, look at frequently asked questions, and do telephone banking.'

Abbey National is also looking at developing its website. Corrigan says: 'We are presently developing our website to upgrade our banking capabilities to be able to provide more products and services to our clients.'

Online development

However, not all companies are at the same level of sophistication as regards their websites. Although a sensitivity to e-commerce exists, companies are still in the process of developing their onlineservices.

Chris Sherwell, managing director of Schroders in Guernsey, says: 'Most organisations have websites, however the Islands are behind on online transactions.'

Investec specifically is looking at upgrading its website to do online transactions. Mort Mirghavameddin, general manager of bank and trust at the Guernsey branch of Investec, says: 'We are currently in talks with system providers so that clients can get statements online as well as purchase stocks and bonds from the same account.'

Marketing

Companies are increasingly realising that the internet can be a useful tool to market themselves. Not that Channel Islands products are under threat. Indeed in Jersey, the total value of funds under management increased by 17.3% to £94.8bn compared to the same time last year. Bank deposits rose 11.92% to £122bn compared to the same time last year.

In Guernsey, the story is more mixed. Closed-ended funds increased by approximately £400m, but open-ended funds lost about the same value. However, the value of open-ended non-Guernsey schemes under administration rose by some £270m to £7.9bn.

Corrigan says: 'There is huge demand for personal and private banking products in the Channel Islands. The number of high net worth individuals (HNWIs) is increasing and there is more wealth in the market. People are working abroad a lot more and are moving from country to country on three to four year contracts.'

In regards to trusts, Keith Turberville, managing director of Investec Guinness Flight Trustee, says: 'There has been a move away from the formation of trusts and when they are created they are being used purely for tax purposes. People are looking for discretionary trusts to maintain assets within the family and use it for family-planning purposes.

'Most activity in Guernsey is in mutual funds and private equity, venture capital and hedge funds.'

Investec sees a lot of activity in hedge funds as well as guaranteed products. Mirghavameddin says: 'This is because both guaranteed products and hedge funds perform well when markets are in a downturn.'

Investec currently has a hedge fund, but it does not have a guaranteed product. However, it hopes to introduce guaranteed products later this year.

Jacqueline Richomme, partner responsible for international finance development at Jersey-based Mourant Group, agrees that private equity has been a growth area in the industry and is attractive to investors.

She says: 'There have been a lot of pooled investments in Jersey which has helped increase the sale of private equity products.'

However, she explains that hedge funds are only starting to get more interest in Jersey because regulators are starting to become more open to them.

There are other proposed changes in the funds industry that are hoped will increase business in Jersey. Ian Moore, spokesperson for the Jersey Fund Managers Association (JFMA), says: 'The JFMA and the Commission are working on a project to effectively package funds for authorisation process.'

Moore explains the proposed legislation hopes to establish three categories which would range from public to private products. For example, Category A would be highly regulated and recognised funds for the retail market which comply with UK regulatory standards.

Category B would again be for the retail market and these would meet Jersey's regulations of investor protection, but need not comply with UK standards (Jersey Regulated Funds).

Category C would be the product designed for institutions and sophisticated investors who are professional investors in securities markets. All the product providers involved would be regulated, unlike Categories A and B, the product itself would not be.

Streamlining

The proposed legislation hopes to streamline the institutional and professional investor and encourage more business to the island. Moore says: 'Jersey has the reputation of being a difficult place to establish funds in. This proposal would help establish new lines of business.'

He adds: 'There has been growth in private equity and the new proposal hopes to encourage more hedge funds and funds of hedge funds to the industry.'

Another new piece of regulation which is expected to increase growth in the Channel Islands is the Guernsey Regulation of Fiduciaries, Administration Businesses and Company Directors (Bailiwick of Guernsey) Law 2001 and the Financial Services (Extension) (Jersey) Law.

Both these laws were enacted early this year and have tightened up the standards of the fiduciary industry. Trust companies must demonstrate they are fit and proper in order to receive a licence. It is expected trust products will grow because of it.

Sherwell explains that as a result of the new trust laws, there has been consolidation of trust companies in the industry. Smaller companies are merging with larger companies so they comply with the new licensing laws.

Richomme says: 'Following the trust laws, a number of smaller service entities have merged. But there is still a wide range of service providers from small to large selling a number of products.'

The consolidation in the industry has been largely due to the thought that larger companies are able to offer improved service and products.

Scott expects this to continue. It is harder for smaller companies to achieve the same level of customer service as larger companies. The major players have more money to spend on service and development and it is cheaper for smaller companies to consolidate with larger players to achieve this benefit.

The trust laws give investors greater confidence in both Jersey and Guernsey that it is a well-regulated jurisdiction. The laws give investors greater protection against trust companies and more confidence in the products they buy.

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