The perennial question in the offshore world has reared its head once again: are we seeing the begin...
The perennial question in the offshore world has reared its head once again: are we seeing the beginning of the end of the traditional offshore finance centre?
But this time the threat is not from international bodies trying to stamp out corruption, money laundering and tax evasion, but direct competition from mainstream onshore financial centres.
In Europe, the threat looks pretty serious - the effect of the Insurance Mediation Directive on intermediary sales of offshore life products could be severe. The slightly murky legal environment in which European advisers have worked is set to be given a spring clean as every sale will now have to be justified - and justifying the sale of unauthorised products, while often perfectly possible on portfolio construction grounds, is sometimes more difficult when the flag of 'reputation' is fluttering in its inimitably vague style.
A second problem has emerged from fund managers themselves. The announcement this month by Gartmore that it will be moving nine of its funds from its Jersey base to Luxembourg is indicative of a general trend - that for international fund managers who wish to distribute their products on a pan-European basis, an EU base is becoming increasingly necessary. And after years of internal wrangling, initiatives such as Ucits III are having an impact in easing cross-border European sales. Having said that, the offshore centres who have tried to attract fund business have typically aimed for niche products like hedge funds, which can generally not be sold into Europe in any case.
A more serious problem could be the attitude of investors themselves. The research released by Internaxx this month throws up a worrying possibility that the eagerness of offshore centres to appease the worries of mainstream jurisdictions by tightening regulation could have frightened away international investors looking for a safe, predictable and private location for their wealth management needs.
The continuous regulatory and legislative turmoil that we have seen over the past five years, while probably good for the long-term health of the international financial services industry, has at least in the short term undermined the trust that investors have had in the consistency of their offshore locations of choice. And at this time of uncertainty, who happens to be in place eager to pick up new business? The mainstream financial centres, of course.
Just at a time when a general agreement has emerged among the international financial centres of the world to leap aboard the 'international best practice' bandwagon, it would be ironic if the next threat to the industry comes directly from, as it were, the other passengers. And passengers, as we are often reminded, who themselves do not always follow the rules of the road as strictly as they might...
Despite improved risk appetite
FOS award limit increase
Relates to 136 million transaction reports
Ceremony will take place 13 November