Brand and Reputation, an offshore trustee’s perspective
Many of the worlds’ most successful companies are instantly recognisable by their brands. Brands which have been built up and very carefully maintained, in some instances, for generations. They are not only recognisable, but they also provide customers and clients with instant peace of mind when the brand has a good reputation. Company brands and reputations are intrinsically linked and for a company to succeed it is important to have both a strong brand and a good reputation.
A company’s brand and reputation hold such value that they can even be quantified and recorded on its balance sheet as goodwill; while the valuation may be subjective, it is based on numerous factors with brand and reputation featuring significantly. This ascribed value, coupled with the less measurable elements of a brand and reputation, makes safeguarding them paramount to a company’s continued success.
“It takes a lifetime to build a good reputation, but you can lose it in a minute.” Will Rogers.
This quote succinctly describes the delicate nature of reputations and why firms and jurisdictions spend such considerable time and resource on both brand and reputation, something which extends to both International Finance Centres (IFC) and professional trustees.
In the many years since I started working in the fiduciary services industry there has been considerable change in both the profile of professional trustees and of the IFCs in which they operate. Professional trustees have historically been based in a single jurisdiction and the fiduciary industry was full of standalone providers. IFCs were known as offshore jurisdictions, few were properly regulated (if at all), and only the minority had legislation which required compliance with international laws and standards. The idea of global reporting and transparency was also considered to be whimsical at best. How times have changed!
Professional trustees have since evolved with most providers now based in multiple jurisdictions, both in IFCs and onshore jurisdictions. They arguably have ownership structures which place a greater emphasis on a company’s short-term value and consequently its brand and reputation.
Being a professional trustee has never been more competitive, with modern legislation, regulation and best practice making the cost of entry and remaining competitive higher than ever. Falling foul of a regulator, having high-profile litigation, or any form of scandal, can be extremely costly to fix and is likely to damage a firm’s ability to attract and retain the right type of clients and staff. The damage may well force a sale, delay a planned sale or damage future resale values. Depending on the shareholder’s aspirations for the business, these consequences may be disastrous.
So, what about IFCs, are they as brand and reputation conscious as the professional trustees operating in their local fiduciary services industries? The short answer is yes. For many IFCs, there would be a devastating shock to their economy, given their reliance on the finance industry, if the local industry were to falter and potentially fail. With this in mind, it is important for them to protect their brand and their reputations as compliant and transparent jurisdictions. This means implementing legislation to ensure adherence to international laws and best practice standards, the robust and thorough regulation of professional service providers to guarantee compliance with the local legislation and international best practice standards.
Some IFCs, particularly when considering professional trustees, are doing better than others and, consequently, advisors and clients are starting to see a quite noticeable divide appear amongst the different IFCs, with clear lines being drawn between first tier and second tier jurisdictions (with a third tier also arguably already existing).
The leading IFCs have all established marketing bodies to promote their jurisdiction’s trust industry. They are selective with regards to the firms that can operate in their jurisdiction, the persons who may be authorised to act as directors, and the types of business which is permitted to operate within the jurisdiction. Significant resources are allocated to ensuring that international relations are maintained and that the IFC is able to adapt and evolve with international legislation and best practice. Regulators, industry professionals, and government officials work hard to ensure that the IFCs remain on the right side of the grey and black listings.
In summary, the importance of a brand and reputation cannot be underestimated and as the industry continues to evolve and become more competitive, I expect the resources allocated to the development and nurturing of a brand will in most likelihood increase. It is important to acknowledge that some professional trustees and IFCs are spending a disproportionate number of resources on trying to rebuild their brand and reputation, perhaps trying to remedy past failings or trying to augment their brand and reputation in the market. In a number of these instances, it is worth remembering that ‘all that glitters is not gold’ and past reputations have most likely been earned for a reason.
Michael Giraud, Head of Fiduciary Services, Jersey
A version of this article was first published by Private Client Global Elite in their magazine ‘The Month’, October 2022: The Month - Reputation Edition (hubspotusercontent-na1.net)