Links with Russia

RussiaLinks with

Why Jersey is at the forefront of banking, wealth management and corporate services

Jersey’s crucial role in London Stock Exchange markets

The appeal of using Jersey vehicles for succession planning and wealth preservation

Geoff Cook Chief Executive, Jersey Finance

Links with Russia is published by Jersey Finance.

The publication highlights how businesses in Jersey and Russia/CIS can work together in support of the strategic objectives of clients both in, and with links to, the region. It complements other publications in our ‘Links with’ series, on India, China and the GCC.

If you are interested in contributing to our ‘Links with’ series, please contact:

Lucy BraithwaiteT: +44 (0)1534 836009E: [email protected]

Welcome to Links with Russia

www.youtube.com/[email protected]/company/jersey-finance

Jersey has been a leading international finance centre for more than 50 years.

At the forefront of global banking, wealth management and corporate services, it has developed an offering that balances product innovation alongside high standards of regulation, world class legislation and in depth expertise from a range of experienced practitioners.

The following articles explore the ingredients that have given Jersey this competitive edge and examine the benefits to Russian intermediaries and their clients of working in partnership with practitioners in Jersey.

Contents

Jersey’s attraction 02

20 Useful contacts

18 Art as a trust investment06 Capital markets

14 Trusts and foundations

Succession planning and 12 wealth preservation

Private banking for Russian 16 clients

IPOs for Russian businesses 08

Crucial role in London Stock Exchange markets 07

Historic links 04

MOSCOW4 hour flight to Jersey

via London

Jersey, one of the world’s leading international finance centres, is a compelling choice for

Russian clients. Key factors in Jersey’s appeal are its political and economic stability, high standards of corporate governance and

regulation, and an excellent reputation.

Political and economic stabilitySituated a short distance from northern France but only a 45 minute flight from London, Jersey is the largest of the Channel Islands. With a unique constitutional position since 1204, Jersey’s allegiance is to the British Crown, but it has domestic autonomy through a democratically elected Parliament and has its own judicial system, based on common law principles.

Jersey’s Government, the States of Jersey, is a pragmatic debt-free government, which has no deficit and a policy of balanced budgets, with long-term fiscal reserves.

Based on the firm foundation of tax neutrality for over 50 years, Jersey has been attracting deposits and investments from institutions and private clients across the world. Only banks from the top 500 world-wide are licensed to operate in Jersey and the banking model is diversified and does not rely on wholesale funding. Whilst Jersey subscribes to Basel standards, the average core capital ratio across the banking sector is 14.8%, some 5% higher than the required

international standard. In these highly volatile times, and in view of recent events within the European Union, there is an even greater need for finance centres to demonstrate their banking stability.

Given an increasing requirement from high net worth individuals and families to protect and grow their assets in an appropriate environment that combines stability and sound regulation, the exceptional financial strength that underpins Jersey’s banking industry is of great reassurance.

RegulationJersey, through the Jersey Financial Services Commission, demonstrates its ongoing commitment to global standards of financial regulation thanks to international best practice and global co-operation. Jersey is fully aligned with the highest standards of the third anti-money laundering EU Directive, for example, and was the first offshore finance centre to become a full signatory to the IOSCO Multilateral Treaty, an international benchmark for cross border co-operation between regulators.

AttractionJersey’s

02 JERSEY FINANCE: LINKS WITH RUSSIA

MOSCOW4 hour flight to Jersey

via London

International recognitionFor many years, Jersey has enjoyed formal recognition for its role in global finance. Winning no fewer than three awards as the top offshore jurisdiction from leading publishing groups in 2012, it also remains the highest ranking offshore jurisdiction in the Global Financial Centres Index, which has tracked the competitiveness of financial centres around the world since 2007.

Wide-ranging expertiseIt is from this platform of stability, sound regulation and international recognition that Jersey is welcoming new business from enterprising markets such as Russia. Jersey’s role as a partner jurisdiction in wealth management business in Russia has been evident for some time. The Jersey trust vehicle, the backbone of the wealth management industry, has proved a suitable structure to meet these objectives, while also being employed in succession planning and philanthropic activities. Options for investors have widened considerably since 2009, when

Jersey introduced its Foundation onto the statute book, a wealth management vehicle that is proving attractive to Russian clients who are less familiar with the trust concept.

Listings work has been another area of significant growth for Jersey, through the use of Jersey company vehicles, proving to be an effective route for institutions seeking to list on global stock exchanges.

Finally, the funds sector remains one of Jersey’s recent success stories. Despite challenging market conditions, the number of funds and net asset value of funds continues to grow.

Without doubt Jersey’s skilled network of financial intermediaries and legal specialists, together with its track record and business environment, make it an ideal choice for Russian corporate and private clients. ■

JERSEY FINANCE: LINKS WITH RUSSIA 03

A winning combination

Jersey’s finance industry is based on a compelling combination of elements that competitor jurisdictions find hard to match.

The strong relationship between Russia and Jersey is not simply a result of financial business activity in recent decades – it is much more longstanding than that.

A look at the archives reveals some interesting historical associations.

&JERSEYRUSSIA

Historic Links


Daniel Dumaresq

Image of Daniel Dumaresq is courtesy of Jersey Heritage Collections

Karl Marx

Friedrich Engels

Jerseyman advises Catherine the Great

In the 18th Century, Jerseyman Daniel Dumaresq provided advice at the court of Catherine the Great.

Dumeresq was born in 1712 at the manor which today houses the famous Durrell Wildlife Park and was educated in Jersey and Oxford. He later took up an appointment as Chaplain at the English factory in St Petersburg and then as Chaplain to the British Ambassador.

Dumeresq’s biggest influence was on the Grand Duchess Catherine and, when she became Empress of Russia, Catherine invited him back to Russia as one of her advisers on education matters. He assisted her in her goal to introduce universal education for children of primary school age.

Russian troops take refuge in Jersey

In 1799, Russian troops fighting against the Napoleonic Empire in Holland were unable to get home when the Russian winter took hold. Since it was unlawful in England to permit foreign troops on English soil, five regiments were billeted in Jersey. During the winter of 1800, more than 6,000 Russian soldiers took refuge in buildings and homes across the Island.

Famous visitors

When Jersey developed a reputation as a health resort in Victorian times, it attracted a number of leading figures who came to take advantage of the climate and sometimes to recuperate from illness. Two notable visitors, who took time out from the UK to stay in Jersey, were Karl Marx and Friedrich Engels. Another famous visitor was Prince Youssoupoff, the wealthy Russian aristocrat said to be responsible for the murder of Rasputin, adviser to the Tsar. The Prince so admired the Jersey cow that he purchased a herd for one of his homes.

Boatbuilding with Russian timber

Jersey has been successful in developing industries to compete in larger international markets for centuries and one example of this was its move into shipbuilding in the mid-nineteenth century, a natural development from the fishing and cargo trades that had been prevalent for so long. To support boat building, a large quantity of wood was required so Russian pine was imported and this proved fundamental in the development of this booming industry.

Memorial

The most poignant link between Russia and Jersey relates to the Second World War when Jersey was occupied by the Nazi forces between 1940 and 1945. Jersey was heavily fortified by the occupiers and the concrete bunkers that skirted the coast were constructed by hundreds of prisoners of war, many from Russia, who were treated as slave labour. Some escaped and Jersey residents did their best to hide them from capture by the Nazis. Their bravery was recognised by the Russian authorities after the war. On the edge of St Helier there is a war memorial to the many prisoners who died in Jersey at the hands of the Nazis during those terrible years of occupation.


Prince Youssoupoff

Catherine the Great

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JERSEY’S

IMPRESSIVECREDENTIALS

Jersey provides a breadth and depth of services to the corporate sector and is a leading financial centre for listing vehicles. It has 82 registered companies on global stock

exchanges, with a total market capitalisation of more than £150 billion.

Having developed specialist expertise in supporting complex cross border capital markets transactions, structured by the world’s leading investment banks and

professional services firms, Jersey plays a key role in providing global companies with a gateway to the City of London capital markets. Other global stock exchanges with Jersey

companies listed include Hong Kong, NASDAQ and the New York Stock Exchange.

Mark Russon, Business Development Manager at the London Stock Exchange Group, takes a look at Jersey as a destination for listing Russian companies.

Historically London Stock Exchange Group (LSEG) has always had strong ties with Jersey, given the jurisdiction’s strong financial community and significant expertise in international markets. More recently, London has become the natural listing destination for Russian companies seeking exposure to international investment. Given this, London and Jersey together present a unique framework for Russian businesses looking to raise growth capital and for investors to participate in a transparent, diverse and highly liquid marketplace for Russian shares.

There are currently 76 Jersey-incorporated companies traded on our markets, worth a combined £122 billion. Among these, companies with a majority of their operations in Russia and the CIS have raised over $1.2 billion from issuing shares, demonstrating the significant fundraising that London and Jersey together can facilitate for firms from the region.

London is a highly attractive listing destination for companies from many sectors and geographies, and of varying size, for the key reason that it offers a choice of markets. A Russian company with a Premium listing on the Main Market, for example, gains access to one of the deepest pools of international capital in the world, shares a marketplace with its global peers and may be eligible for inclusion in global benchmarks such as the FTSE 100. For investors, the Premium-listed standard offers protection of the highest regulatory and disclosure standards. There are currently 34 Jersey-based companies listed on the Main Market and eight Russian companies with a Premium Listing.

For companies seeking more flexibility, a Global Depositary Receipt (GDR) is an alternative listing option. Our International Order Book (IOB), on which London-listed GDRs trade, is arguably the biggest and most liquid marketplace in the world for the trading of Russian equity instruments. It sees over $15 billion worth of trading each month and hosts GDRs issued by 44 Russian companies. Obligations on companies seeking this route to market are not as prescriptive as those seeking a Premium listing, while GDRs are only marketed to a narrower set of institutional investors.

Finally, LSEG’s junior market AIM is a uniquely successful environment for small and medium sized enterprises to grow without some of the requirements of a full listing. We believe nurturing small businesses is the key to economic recovery and long-term job creation, both at home and abroad, and that AIM plays a key role in funding this critical section of the economy. Jersey-based firms make up 42 of the companies quoted on AIM, so it is great news for Jersey that moves are being made to incentivise more equity investment in small and growing businesses, such as the launch of a consultation on allowing growth market shares in Individual Savings Accounts (ISAs). Looking ahead, following a period of subdued equity market activity around the world, we are now starting to see a real resurgence in IPOs. In the first quarter of 2013, around £1.7 billion has been raised through new issues, compared to just £411m during the same period last year. The pipeline of firms looking to float both from Russia and elsewhere looks very encouraging and we see Jersey in particular playing a prominent part in future fundraisings. Its advisory community is flourishing and its international profile is stronger than ever, suggesting its relationship with LSEG is only set to strengthen in the months ahead. ■


JERSEY’S

IMPRESSIVECREDENTIALS

A CRUCIAL ROLE IN LONDON STOCK EXCHANGE MARKETS

London and Jersey together present a unique framework for Russian businesses looking to raise growth capital and for investors to participate in a transparent,

diverse and highly liquid marketplace for Russian shares

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IPOsFOR RUSSIAN BUSINESSES

Gavin Stoddart, Director and Supervisory Board Member, Moore Stephens CIS, discusses IPOs

Any business contemplating an IPO must establish a corporate structure that is tax efficient and provides investors with a sense of confidence. These issues are especially important for Russian-based businesses. Jersey meets both of these criteria, making the jurisdiction an ideal listing platform.

To ensure tax efficient international flows of capital and profits, Russian businesses usually use a jurisdiction with an appropriate double tax treaty to make transfers to and from Russia.

Traditionally a popular choice has been Cyprus, although this might not be the case going forward, after recent events. However, a jurisdiction that offers a tax efficient means of transferring cash to and from Russia might not be an ideal location for a listed holding company for other reasons. Cyprus has, for example, not shaken off a reputation for a lack of rigorously enforced anti-money laundering regulations, despite improvements noted by the IMF’s 2007 report. As a consequence, it has become standard practice to construct group structures for Russian based businesses that include companies in suitable treaty jurisdictions, but to place these under a holding company in a jurisdiction considered more appropriate for a listing vehicle.

Why Jersey?Jersey is a clear candidate for listings. Its tax neutrality is amongst the reasons for this. There are no income or capital taxes and no withholding taxes on dividends or interest on loans. There is also no stamp duty on the issue or transfer of shares in a Jersey company.

Jersey’s reputation amongst international regulators as a jurisdiction that enforces international initiatives to combat money laundering, terrorist financing and tax evasion provides a second reason for its popularity. One indicator of just how seriously Jersey


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takes the issue can be found in its inclusion on the OECD’s list of jurisdictions that meet the internationally agreed standards on the exchange of tax information.

Jersey also cherishes a reputation as a good environment in which to do business. It has political and economic stability, underpinned by an absence of state debt. It also has a strong banking sector and there are no exchange controls or restrictions on buying or selling foreign securities. In addition, Jersey is well-endowed with lawyers, fund administrators and, of course, accountants. As the local language is English, this community is readily able to work on an international basis.

Jersey has its own legal system, which is similar to that of the UK. Given that investors around the world tend to be familiar with UK legislation, this is a significant advantage. In addition to legal similarities, geographic proximity (a day trip to and from Jersey is logistically easy) makes it particularly popular for companies contemplating a London listing.

Tried and tested Moore Stephens clients Rambler Media and other CIS organisations including Highland Gold Mining, Polymetal International, Polyus Gold International and Ukrproduct Group have all used Jersey companies to list in London. But Jersey’s popularity truly becomes apparent from the statistics. In February 2013 there were 31 Russian companies listed on the London Stock Exchange and Jersey boasted 76, ahead of offshore locations such as Cyprus (14), the British Virgin Islands (38) and the Isle of Man (53). Although its geographic proximity to the UK means that Jersey is often used as a suitable listing platform for London, Jersey companies have also been listed on other exchanges including New York, NASDAQ, Euronext and Toronto.

Jersey has a strong relationship with Russian businesses and this looks set to continue into the future. ■

• Highland Gold Mining• Polymetal International• Polyus Gold International • Rambler Media• United Company Rusal• Ukrproduct Group


CIS businesses using Jersey companies to list

Cyprus 17

Isle of Man 53

Jersey

76British Virgin Islands 38

Listings on the London Stock Exchange

Many multinational firms seeking listings have chosen Jersey. Here are three examples...

Jersey Holding Companiesas listing vehicles

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Polymetal International Limited Polymetal International Limited is the largest Russian silver producer, and fifth largest in the world, and one of the largest gold producers in Russia and Kazakhstan. It has built a focused portfolio of assets by developing new mines, restarting inactive operations and acquiring an operating mine. The company is a member of the FTSE 100 index and employs in the region of 8,000 people.


Date of incorporation

Stock Exchange

Market

Market Capitalisation atMarch 2013 (£m)

Advised by

December 2011

London Stock Exchange

Main Market

3,327.20

Corporate Partner Mike Jeffrey and team, Carey Olsen

United Company Rusal plcUnited Company Rusal plc is the world’s largest aluminium producer, with 9% of global aluminium production, and one of the world’s major producers of alumina, with 8% of global alumina production. RUSAL has aluminium smelters, alumina refineries, foil mills, eauxite and nepheline ore mines. It has representative offices in 13 regions of Russia and in 19 countries on five continents, and employs over 71,000 people.


Stock Exchange

Market


Advised by

October 2006

Hong Kong Stock Exchange

Hong Kong

5,154.09

Corporate Partner Marc Yates and team, Ogier

Jersey Holding Companiesas listing vehicles 10

Advantages of using Jersey Holding Companies

1 0% corporation tax

2Free of withholding tax on dividends, interest and royalties

6Mind and management can be based in Jersey

9Incorporated and Protected Cell Companies

7Efficient management of share capital via treasury shares

8A Jersey Public Holding Company is comparable to a UK PLC

5Ability to trade shares directly through CREST (the UK share settlement system)

3Shares in Jersey incorporated Holding Companies are free of stamp duty in Jersey

10Recognised as an approved jurisdiction for listing on the Hong Kong Stock Exchange

4Three CREST enabled share registrars


Polyus Gold International LimitedPolyus Gold International Limited is the largest gold producer in Russia and one of the top 10 gold miners globally by ounces produced. Its principal operations are located in Eastern Siberia and the Far East. The company has a premium listing on the London Stock Exchange and is the largest London-listed gold producer by market capitalisation, gold output and reserves.


Stock Exchange

Market


Advised by

September 2005

London Stock Exchange

Main Market

6,708.63

Corporate Partner James Hill and team, Mourant Ozannes

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Succession Planning & Wealth Preservationusing Jersey Structures

Zillah Howard and James CampbellBedell Cristin Jersey Partnership

For Russian clients wishing to establish a structure for the preservation of private wealth, Jersey is a very attractive choice.

An international finance centre for more than 50 years, Jersey offers:

• stability (politically, economically and geographically)• a robust regulatory regime• a well-respected judicial system • depth and breadth of experience amongst its

professional advisers • legislation which places a strong emphasis on the

importance of flexibility, allowing for the creation of structures tailored to individual client requirements

Added to this list is the fact that Jersey is readily accessible from the UK so that, for those Russian clients with business interests or family connections in the UK, Jersey also makes logistical and practical sense.

Trusts and foundations are the two principal private wealth structures used in Jersey and both can be established for an unlimited period. There is no public registration of trusts, although foundations are registered.

Individual clients have their own reasons for establishing a trust or foundation, such as:

• to preserve family wealth and pass it on to future generations

• to protect younger family members from exposure to extreme wealth so that they can forge their own careers

• to guard against fragmentation of a family business • to allow for philanthropy• to address concerns relating to political instability

Whichever objectives a client might have, Jersey trusts and foundations can be used and tailored appropriately. For many clients, a discretionary structure will be preferred, recognising that it can be helpful to preserve flexibility for the future to accommodate circumstances as they evolve. For others, a more restricted regime is required, to address particular concerns that have already been identified.

For Russian clients coming to Jersey for the first time, there can be concerns at the prospect of transferring wealth to a professional service provider in a new jurisdiction. It may therefore be helpful to consider opportunities for the client, or a trusted adviser, to have a measure of influence or control.



With a wide range of robust structures available to meet varying objectives and to allow for a measure of control and influence, the highly respected and well-regulated jurisdiction of Jersey is an ideal choice for the wealth preservation and succession planning priorities of Russian clients. ■

Trusts

To structure the trust so that certain powers are retained by the settlor or given to someone else, such as a protector, for example giving directions in connection with the purchase, retention or sale of trust property, or in terms of appointing or removing trustees, protectors, beneficiaries or investment advisers.

2

To establish a private trust company (a PTC) to act as a dedicated trustee to the trust being established, as an alternative to using a professional service provider’s corporate trustee. Chosen individuals, with knowledge of the family and/or family business being transferred into trust, can become board members of the PTC alongside professional service provider personnel.

3

To use a discretionary trust with a professional service provider as trustee, together with a letter of wishes from the settlor. This offers simplicity and flexibility and is a very popular choice with Russian clients.

1Foundations

Options for control or influence

The client (as founder) might wish to have certain rights in relation to the foundation in his or her own capacity. 1Alternatively, he or she might prefer to become a member of the council (akin to a company’s board of directors) or to appoint trusted advisers to that role and/or to become the foundation’s guardian, ensuring that the council carries out its functions.

2

Q Are Russian investors familiar with the concept of the trust vehicle?

GC: Sophisticated Russian clients have an international outlook and knowledge base and certainly know, trust and use Jersey private client trust structuring. They are often assisted by leading firms of English lawyers who are extremely familiar with Jersey’s offerings. Some Russian families approach Jersey lawyers directly to have trusts drafted to meet their dynastic wealth preservation objectives.

FD: Russian and CIS clients who have been drawn to spend time in the UK, either for business or personal reasons, have as a consequence had dealings with London-based advisers and this in turn has provided them with exposure to the trust concept and its uses.

MB: On the whole, Russian clients are becoming more familiar with the variety of wealth structuring vehicles available through Jersey, including trusts. Discretionary trusts with settlor reserved powers have proved popular, giving the trustees flexibility in disposing of and administering trust assets but balanced with a degree of oversight by the client.

GC: Trusts are the most commonly used Jersey vehicle but Russian clients also use Jersey companies, which may be listed on various exchanges, and Jersey foundations.


QA&ROUNDTABLE

JERSEY - TRUSTS AND FOUNDATIONS

MASON BIRBECK PARTNER, COLLAS CRILL

FREDERICK DEACON DIRECTOR, WHITMILL TRUST

GILES CORBIN JOINT HEAD OF INTERNATIONAL TRUSTS & PRIVATE CLIENT, MOURANT OZANNES

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Q So Jersey foundations do have a place in the wealth management strategies of Russian clients?

MB: The ability to establish a wealth planning vehicle which is not required to account to its beneficiaries or give those beneficiaries rights in relation to the property which it owns, or rights to information, has made the foundation a very attractive choice.

FD: Yes, the foundation provides clients with greater certainty and greater control as it is a legal entity in its own right, unlike the trust. The ability of the founder to retain an element of control, either directly or indirectly, through the appointment of family members or close advisers to the role of guardian or to the foundation council, is seen as highly appealing.

GC: The Jersey foundation certainly has a role to play in the wealth management of Russian clients but it’s worth noting that its use is dependent on questions of residence and domicile for the founder and beneficiaries. Foundations are popular for the Russian market where there are limited UK connections.

Q What do you think is the key driver among Russians when considering wealth preservation?

FD: Most wealthy Russian and CIS investors are self-made, having built their fortunes since the fall of Communism, and for the most part they are still relatively young. Their main focus is driven by their political and economic history, so confidentiality and wealth/asset protection are without doubt the main drivers.

MB: Establishing a structure in a finance centre which has international legitimacy (for example, in terms of financial services regulation and AML compliance) is attractive to clients from a jurisdiction perceived as “high risk”. Confidentiality (for security reasons) and retention of control over the structure to one degree or another are indeed key aspects.

GC: Jersey’s appeal to Russian clients is that it is a top drawer quality jurisdiction. By this I mean that Jersey is a safe harbour in terms of impartial, quality court judgments free from bias and prejudice, has a statutory framework which gives a high degree of certainty and yet allows for flexibility should circumstances change for the family, a robust regulator who has weeded out operations not meeting very high standards of responsible internal governance and a government without debt, which has a stable fiscal track record in relation to bank deposits made by foreign residents amongst other things. The concentration of trust industry skill level in Jersey is also a critical ingredient. For properly disciplined private wealth administration, Jersey is arguably unparalleled in this respect.

Q What are key aspects of Jersey legislation which appeal to the Russian community?

FD: When explaining the trust concept and the separation of legal and beneficial ownership, the provisions within the Jersey Trust Law which enable powers to be reserved to either the settlor or a protector are always of interest when discussed with clients and their advisers. The ability to require trustees only to dispose of certain key assets with the prior written directions of the settlor or protector is highly attractive as it goes some way to alleviating concerns about loss of control.

GC: UHNWI Russians, like many wealthy individuals, can have complex family backgrounds, occasionally former spouses and children by former spouses. Jersey has robust anti-forced heirship provisions in its trusts legislation, which resist the application of foreign laws, including foreign inheritance laws, to the ownership of assets of Jersey trusts.

FD: A key feature which has proved attractive is the ability under Jersey law to establish a Private Trust Company. For Russian and CIS clients the idea of creating a company over which they have some control, which will act as their own personal trustee vehicle, managing and controlling their family trusts, is very appealing. The flexibility and portability is always of interest, as is the ability to appoint their own people to the board or to sit alongside the licensed and regulated service provider.

MB: Overall, the stability and strong rule of law offered by Jersey’s legislative and common law framework are key drivers of considerable value to clients from jurisdictions where those aspects cannot be taken for granted.

Q Are there any developments in the pipeline which will add to Jersey’s appeal as a location for wealth protection?

GC: Efforts are being made to adopt a new Jersey law to introduce a new, clear and up-to-date definition of what constitutes “charitable purposes”. I think this will significantly assist the promotion of Jersey as a world class centre of philanthropic trust administration. The proposed law will also benefit the Jersey foundation industry as foundations lend themselves very well to charitable structuring. The combination of a clear law with a top quality administration service and a good regulatory system will be potent in the global marketplace. Many UHNWI Russian clients have philanthropic objectives and if we are well placed to serve those needs alongside the private family wealth services, it could make Jersey an even more powerful “go to” destination for financial services. ■


The stability and strong rule of law offered by Jersey’s legislative and common law framework are key drivers of considerable value to clients

from jurisdictions where those aspects cannot be taken for granted

Duncan Prince

Title goes here

PrivateBanking

for Russian clients

We spoke to Duncan Prince from SG Hambros Bank about the world of Private Banking for Russian clients


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Private Bankers look after HNW clients and family offices, not just on the banking side of things but with all aspects of their financial affairs. This can include, amongst other things, investment management, financial planning, lending, property acquisition and trust services.

What does a Private Banker do?

What have you been working on recently?

I’ve been helping Russian and CIS clients who have a UK focus. They have investment needs, and property in the London area has been popular. Many are educating their children in the UK, and/or have immigration needs. Ensuring they are linked in with the right professionals from the outset is important and Jersey offers an abundance of professionals equipped to cater for international clients moving to the UK.

Which locations in London, and more widely in the UK,

are proving most popular with Russian and CIS clients?

West London and Surrey are the most popular places. Surrey boasts beautiful countryside, good boarding schools and affluent private communities. London is the centre of everything. Kensington, Mayfair and Chelsea are the hot-spots.

Apart from property, what other investments are appealing to the

Russian community?

Exposure to financial markets is always a topic for discussion. Clients invariably prefer to invest in safer asset classes and are keen to diversify. Some clients have more specific investment requirements to assist them with their immigration applications, specifically with Tier 1 investor visas.

What do you think makes a good Private Banker?

Experience and qualifications first and foremost, but definitely a good broad understanding of finance and investing. Some Bankers specialise in different sectors of investment. More importantly a good Private Banker has impeccable interpersonal skills and is able to navigate their clients through all market conditions and provide support through different stages of their life. The ability to work well with other professionals, such as lawyers and trustees, is also very important.

What do you like most about your job?

I get fulfilment from helping people, I enjoy travelling at the moment and meeting new clients is always interesting… I’m always learning.

Why Jersey?

Jersey has a wealth of experience in providing financial services to international clients. It has an excellent reputation with high regulatory standards and a professional workforce. All are in close proximity; Private Banks, Trust Companies, Law Firms, Accountancy practices… International investors are spoilt for choice!

What are the opportunities for Jersey?

Emerging markets in general present a wealth of opportunity for Jersey. The more we learn about different cultures, the better equipped we become to assist.

ART AS A TRUST INVESTMENT

Increasingly artwork is being held in trust structures, particularly by wealthy Russians. Such has been the demand for artwork by Russians over the last

decade that the major auction houses, Sotheby’s and Christie’s, hold regular Russian art auctions in London and have even opened offices in Moscow.

To many investors the purchase of art is a high risk venture, yet, in light of ongoing economic uncertainty and market volatility, art is increasingly seen as a key asset class, given that it tends to have a low correlation with equities and

other financial asset classes.

That said, there are unique considerations and challenges associated with managing and administering what is often described as a ‘non-traditional’ asset.

Alan Binnington, Private Client Director at RBC Wealth Management, discusses


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INVESTMENTS OF

Storage and usage

Families who suggest that their trustees purchase artwork will often wish to enjoy it. Displaying items in their homes is the most obvious way to do this. Not only does that raise issues such as security and insurance, but there may be tax considerations; for example, having the use of a valuable painting may constitute a taxable benefit on the part of the beneficiary and moving it into the beneficiary’s country of residence may subject it, or even the trust itself, to taxes or duties.

If the art is to be stored in a secure storage facility then a choice will have to be made as to its location. There are, of course, obvious factors to consider, such as physical security and the type of fire protection systems, but location may be important for other reasons. For example, is the facility close to the likely country of sale, should a sale be considered in the future, or is it situated in a tax free zone? The situs of artwork often has a tax implication, even where the owner is resident or domiciled outside the relevant country. For example, there may be inheritance or estate taxes if they are located in the UK or the US, wealth tax if in France.

If an item is lent for public display, it is important to ensure that appropriate agreements are negotiated with the relevant museums in relation to matters such as care and security and liability for loss or damage. It is also vital to ensure that appropriate insurance cover is obtained to cover the item whilst in transit. Similarly, transporting the item to the museum requires specialist assistance and there may be tax considerations arising from a move from one jurisdiction to another.

With appropriate advice, art can be an important component of a trust, allowing family members to indulge a passion whilst at the same time assisting in preserving and enhancing the family wealth – and Russian clients certainly appreciate this. ■

Acquisition

The first challenge is establishing a piece of artwork’s history of ownership, known as provenance. We are all familiar with having to identify the source of funds in a transaction but, in the case of artwork, establishing its origin is equally important. Not only is it vital from an anti-money laundering perspective, but also in ensuring that the piece is not on a register of missing or stolen artwork, or has not at some stage been removed from a country illegally.

Risk and reward

Whilst art may be a useful asset class as part of a broadly diversified portfolio, trustees need to bear in mind that it is also a higher risk class, given its susceptibility to non-economic factors such as fashion. Typically, contemporary art tends to generate the highest returns, old masters the lowest, but the latter tends to be the least volatile. If a collection is being put together for the purpose of investment, applying traditional portfolio construction theory is just as important as it is in relation to other asset classes.

A trustee will need to ensure that the collection is properly catalogued and valued on a periodic basis. Value is not just important for insurance purposes, but enables the trustees to monitor the performance of the asset class in relation to the remainder of their investments.


Useful Networkof Contacts

4th Floor, Sir Walter Raleigh House,48-50 Esplanade, Jersey JE2 3QBChannel Islands

T: +44 (0)1534 836000F: +44 (0)1534 836001E: [email protected]

www.jerseyfinance.jewww.jerseyfinance.ru

The States of Jersey (Jersey’s Government)

Website: www.gov.je

Jersey Financial Services Commission

Website: www.jerseyfsc.org

Jersey Bankers’ AssociationWebsite: www.jerseybankersassociation.com

Jersey Society of Chartered and Certified Accountants

Website: www.jscca.org

Jersey Association of Trust Companies

Website: www.jatco.orgLaw Society of Jersey

Website: www.jerseylawsociety.je

Jersey Funds Association

Website: www.jerseyfunds.org

Jersey Chamber of Commerce

Website: www.jerseychamber.com

Chartered Institute of Marketing

Website: www.cimjersey.com

Jersey International Insurance Association

Website: www.jerseyiia.org

Jersey Finance Members

Website: www.jerseyfinance.je/members

www.youtube.com/[email protected]/company/jersey-finance

www.jerseyfinance.jewww.jerseyfinance.je

Date post:	27-Mar-2016
Category:	Documents
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