STEP has published Offshore Perceptions, a major new piece of research looking at the current state of the offshore world. It paints a picture of a sector adapting rapidly to a new regulatory and institutional environment. It also confirms that measures designed to tackle abuse by a few, are actually having a major impact on costs for the legitimate clients who are the overwhelming majority of users of private client services both offshore and onshore.
The research, sponsored by First Names Group, is based on a survey of over 1,000 respondents, fairly evenly split between the offshore and onshore world, and with a very broad geographical reach.
Over three quarters of the offshore respondents to the survey report that compliance has become a burden to a ‘great’ or ‘large’ extent. Not surprisingly, this rising burden of compliance is driving up costs to the client and the report highlights a shift away from smaller clients and lower value work, both of which are no longer economically viable in the new cost environment.
Another major factor impacting the industry is the move by banks to de-risk their business. Half of all offshore respondents identified this as impacting their business to a ‘great’ or ‘large’ extent. Intriguingly, the de-risking issue was seen as important by even more onshore practitioners, with 60% telling us that it was having a ‘great’ or ‘large’ impact on the offshore worlds.
This mix of rising costs and the major banks withdrawing from many areas as they lower their risk appetite is, not surprisingly, expected to produce yet more consolidation in the offshore world, with most offshore respondents expecting the pace of consolidation to accelerate still further.
This inevitably raises fears about employment prospects, although there is still considerable optimism about business opportunities, not just in Asia and other traditional offshore markets but also, increasingly, from Africa. The survey confirms that family offices are also seen as an important growth area within the overall offshore environment.
Measures to improve transparency and tighten regulation have been one of the key global themes of the past few years, impacting offshore and onshore practitioners alike. The Offshore Perceptions report confirms that industry concerns have proved accurate in predicting that these measures, aimed at tackling abuse by a few, would result in sharply higher costs and less choice for the many.
The report also suggests, however, that the offshore world is busy adapting to the new environment and is far from gloomy. Over three quarters of offshore respondents feel optimistic (to a ‘great’, ‘large’ or ‘moderate’ extent) about the prospects for their jurisdiction and a broadly equivalent number are also optimistic about the prospects of their business sector. Many of the offshore centres have had to adapt to major challenges in the past. Generally they seem well placed to do so again.
George Hodgson is Interim Chief Executive of STEP