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We live in uncertain times and family offices are currently facing material challenges. The COVID-19 pandemic has created immediate problems for many wealthy families, particularly those related to tax residency and immigration. On the other hand, it has given wealthy families the opportunity to take stock and consider how they want to be structured and where they want their family office to be.
The extended period of inactivity has also given families the opportunity to consider difficult questions related to family management. Outside of COVID-19, concerns about political instability are mounting in many parts of the world and driving the structuring of private wealth further. Customers want a safe haven for their assets in a reputable jurisdiction with security in terms of asset protection.
As a result of these factors, we’ve seen a significant increase in inquiries from both existing family offices looking to relocate to Jersey or establish offices in Jersey (which may play a more important role in the future if concerns about political instability materialize) and inquiries from the wealthy Families who want to set up a family office in Jersey for the first time.
It should be noted that Jersey is already home to a significant number of family offices, ranging from single family offices managing investments for a single family to multi family offices managing multiple family investments.
This article aims to examine what makes Jersey really attractive to family offices.
Properly regulated jurisdictions attract family offices
There is little doubt that properly regulated jurisdictions like Jersey will attract family offices as the global landscape continues to shift in favor of transparency. This is inevitable, as we saw with the introduction of FATCA, CRS, economic substance rules and other anti-money laundering initiatives. Jersey has always been at the forefront and implemented these initiatives early and has the expertise and professional services to meet the needs below. Family offices want to be in a jurisdiction that is properly regulated and has a good reputation. Jersey is not an easy regime, it is well regulated and this is something that wealthy individual clients are looking for.
Jersey as a safe haven
The current turbulent political climate would suggest that deep-seated fears about radical politics, asset confiscation by political means, and threats to nation-state sovereignty will persist. It is inevitable that these concerns will be a key factor in determining the location of a family office.
This is a global phenomenon. It affects customers from around the world to varying degrees, including customers in East Asia and the Middle East.
For a number of reasons, wealthy families choose Jersey as the jurisdiction of their choice to locate their family office. Jersey is politically stable and has close ties with the UK and Europe, as well as strong legal bases.
There are also several structuring options in Jersey that are well proven and offer clear asset protection.
Jersey and access to major professional services
Jersey is also particularly attractive because of the high quality of professional services in the investment, accounting and legal sectors. A family office is only as good as those who run it, and the right mix is crucial, both in terms of delivering the key professional services required by a family office (such as accounting, legal and financial services) Investment services), as well as the softer skills required for diffusing family affairs and ensuring that individual family members join the family’s vision of the future.
The importance of governance in family offices
Every family office is different and reflects the needs and interests of the family or families it serves. However, research is clear that investing early in an effective governance structure will pay off for the family in the long run. Family governance is not as simple as an off-the-peg legal solution that works on paper from a structural point of view without taking into account the specific dynamics or culture of the family.
To be effective, family governance must consider all interested family members in the planning process and be consistent with the existing family culture, which has likely evolved over several generations. Jersey and its professional service and trust companies have built up expertise in family governance over many years.
The Effects of Economic Substance Rules
It is also likely that the recently passed regulations on economic substances will affect where very wealthy individuals locate their family offices. Jersey was at the forefront of ensuring that it was reaffirmed by the European Union as a cooperative jurisdiction on good tax practices and transparency.
In our experience, local family offices are sophisticated structures whose companies based in Jersey already meet the substance criteria. With regard to overseas companies within these structures, we see an increase in inward corporate immigration as family offices seek to capitalize on Jersey’s excellent reputation and attractive supply of private wealth.
Where do the inquiries come from?
We have helped a number of wealthy families from different parts of the world, including Southeast Asia (particularly Hong Kong) and the Middle East, set up family offices in Jersey. Founders from these countries are increasingly trying to benefit from everything a family office has to offer, and especially to protect prosperity in the face of political instability.
What is required on site to set up a family office?
It is important to have a dedicated family office team who can help high net worth individuals set up or relocate family offices in Jersey, preferably with experts from private wealth, funds and local legal advisory teams.
Recently, many mandates have been linked to asset management, so that a fund structure can definitely be integrated into the family office platform. These structures inevitably require funding and advice from the authorities. Private wealth advisors can also advise on the holding structure for the family office, the form of which is often determined by succession planning, control and taxation.
It is also possible to coordinate all of the local legal services required to set up a family office, from assistance with finding space, to real estate advice, to employment advice and obtaining the necessary business license.
The establishment of a family office in Jersey consists of several components. However, the main focus is on providing seamless service to the customer from start to finish. With such a focused approach, complemented by the various factors highlighted in this article, we would argue that Jersey – perhaps now more than ever – offers the ideal location for a family office.
The content of this article is intended to provide general guidance on the subject. A professional should be consulted about your particular circumstances.