Investors around the world are looking for areas that can provide experience and stability without regulatory, legal or economic surprises. Research conducted by Jersey Finance in recent years has shown that clients in the Middle East gradually shift their views on investment structures, and that 75% of clients are now testing their current wealth structures while 42% see reputation as a critical factor when choosing an area that supports their requirements. International investment.
The ongoing Covid-19 pandemic has provided many shareholders, especially in the investment funds sector, the opportunity to assess considerations for localization and integration. Private investors and family offices receive always negative news from their financial advisors and there is a lot of contradictory advice regarding the most appropriate course of action and the best risk reduction strategy. During this difficult phase it is important to be pragmatic when considering all available information. Timely advice about investors and proposed investments that takes into account all major factors, remains important to avoid costly mistakes that may become very complex to correct in the future.
Interestingly, the views of shareholders, including family investors in the GCC countries, reveal that resorting to financial centers abroad is reinforced by the geopolitical climate and fears of instability (25%) and succession planning (25%), followed by secrecy and asset protection (17%). This appears to add further impetus to clients’ initiative to diversify and structure global assets and wealth.
Investors at such a stage of instability must be able to rely on strong corporate governance standards. The recent high-profile bankruptcies in the region resulted from companies ’lack of strong internal and external management and led to significant losses in stocks. Consequently, managers and investors now attach more importance than ever to external oversight and the effective ability of regulators to provide the required oversight in accordance with internationally accepted standards. Moreover, high net worth individuals and wealth managers are encouraged to test and analyze structures’ quality as well as the level of professionalism of their international financial centers.
The recent research into money localization conducted by the Institute of International Funds in cooperation with Jersey Finance showed that the most important factor in choosing a location for resettlement is whether the financial position or region is well known and receives the respect of the investors that the fund manager targets, especially when a number of these investors are: Family offices. Also, there was a desire from investors to allocate localized funds in areas with good infrastructure, great local experience, in-depth knowledge of the relevant asset class and well-established regulations.
The research also revealed investor dissatisfaction with recent cost increases in the international fund areas, especially in the European Union. However, some of these investors attributed the high costs they ultimately had to pay to the increase in recent regulations.
As investors in the Gulf Cooperation Council (GCC) look to benefit from lower asset values and the devaluation of the British pound and other major currencies, it is best to look for a robust, internationally recognized platform to structure these diverse investments internationally. As we move towards greater global transparency and more effective regulatory standards, integrating information and establishing appropriate reporting and management protocols will also become more important.
Based on this reality, there is a great opportunity for the financial advisory sector to expand and educate its client base, and thus enhance asset and wealth management on a wider scale in the region and the Arabian Gulf in particular. With a number of reputable Gulf family businesses considered to be an important factor when choosing an International Finance Center, overseas areas such as Jersey that can demonstrate their commitment to transparency, regulation and quality will ensure their business continuity and thrive in this changing environment.
This article was originally published in Akhbar Al Khaleej.