James Campbell of Ogiers discusses trends within the international private client space.
James Campbell was recently appointed as a partner in Ogier's Jersey private client and trusts team, having practised at Bedell Cristin for 17 years. He discusses trends within the international private client space and the future for bespoke, complex structures.
Why is bespoke structuring on the rise?
According to a 2016 report on ultra-high net worth individuals there are 212,615 individuals in the world who hold a total of over $30 trillion in wealth. To put it a slightly different way, 12 per cent of the world's wealth is controlled by just 0.0004 per cent of the planet's adult population. By 2020 the number of ultra-high net worth individuals is anticipated to reach 318,000 with compound annual growth of nine per cent. In short the rich are getting richer, and more numerous. These numbers are consistent with what we are seeing at Ogier in terms of an increase in instructions from ultra-high net worth individuals and those advising them and fundamentally a drive towards more bespoke and complex structuring.
Where are these ultra-high net worth clients coming from and why are they structuring now?
In Jersey and Guernsey we have seen in recent times a marked increase in instructions from ultra-high net worth individuals from the Middle East and those advising them. The motivation to structure and restructure family assets is being driven by a number of factors not least concerns with regard to political instability and nation state sovereignty following the Arab Spring and the continuing turmoil in Syria, Iraq and Libya. These factors have prompted ultra-high net worth families from the region to scrutinise where and how they want to structure their assets. Furthermore, the continued growth of London both as a home for Middle East families or simply as a safe refuge or as a location for investment continues and is another factor as to why clients are choosing Jersey and Guernsey structures. In addition we continue to see an increase in instructions from ultra-high net worth individuals from the Far East. Indeed many of the factors which are driving structuring for Middle East clients apply equally for Far East clients.
Are Sharia compliant structures important?
Inheritance and the investment of assets are usually two key areas which require careful consideration on the structuring of assets for Middle East families. Private wealth structuring compliant with Sharia law is a growing area – research forecasts that Islamic finance products are set to grow not just in the Middle East region, but also at a corporate level where access to Islamic capital markets is being sought.
What are the trends in terms of structuring options?
We are seeing an increasing demand from Middle East and Far East clients for trust instruments drafted with reserved powers. Understandably settlors from these jurisdictions want control (in varying degrees) over key aspects of the trust, and the absence of sophisticated anti-avoidance legislation in many of the jurisdictions in the Middle East and the Far East means that from a fiscal perspective the settlor may not need to be wholly disconnected from key aspects of the trust. However, trustees should consider the application of reserved powers carefully and on a case by case basis rather than adopting a one size fits all approach to their use. We are also seeing an increase in the use of private trust companies (PTC) - rather than transferring assets to a service provider's trustee some clients may prefer to establish their own trustee and for the PTC to act as trustee of one or more of the family trusts. Founders increasingly want more control and family participation. Another noticeable trend is that the scope of our legal instructions is becoming wider and more involved – we are increasingly advising families on long term strategy to preserve and enhance family wealth and to ensure an orderly transfer of wealth from one generation to the next.
Are you seeing a demand from clients for other legal services?
Many of these families and the underlying businesses which they own are operated like international corporates. We see this in the increasing demand from ultra-high net worth families for other legal services, notably corporate, banking, funds and private equity. This advice may be needed from one or multiple offices.
How likely is it that the trend towards bespoke, complex structures will be sustained?
It seems clear that clients will continue to want structuring in stable and established jurisdictions which provide for both preservation of wealth from one generation to the next and which provide for a high degree of participation by the family. This means that both Jersey and Guernsey remain a very attractive proposition for Middle and Far East ultra-high net worth individuals looking to structure assets.