Facing up to public scrutiny

Read our article in the Cayman Financial Review Magazine, eversion 

All areas of the legal and financial services industries are currently seeing unprecedented levels of attention from politicians and others.

In the wake of the banking crisis financial institutions and fund managers initially came under the spotlight, but the fiscal crisis that followed the banking crisis in many of the western economies has seen the roles of International Financial Centres (IFCs) and wealth structuring advisers also coming under close scrutiny. 

The French presidential elections, for example, have at times resembled a competition to see who can sound the toughest on ‘tax havens’. In the UK a new General Anti-Avoidance Rule (GAAR) is under active consideration amid escalating political rhetoric against ‘unacceptable tax avoidance’.

In the US, even before FATCA has been fully implemented, prominent politicians are calling for further anti-avoidance measures against some of the smaller IFCs.

It would be foolhardy to assume that the mood of various national politicians does not accurately reflect the views of a significant part of the societies they represent. Various campaign groups have become ever shriller in their attacks on those giving tax advice.

On both sides of the Atlantic we have seen groups of wealthy individuals arguing that the tax breaks open to them are too generous. The ‘Arab Spring’ has also raised some awkward questions about how the financial services industry handles wealth in jurisdictions where democratic institutions and the rule of law may be weak or non-existent.

The overall effect of these multiple trends is that the standards of behaviour expected of professionals working in a wide range of areas connected to financial services and savings are shifting. The challenges to the industry are coming through at two broad levels.

Regulatory standards imposed on the industry are being raised. Just as importantly, the industry is under growing pressure to examine the ethical dimensions of what it does. On both levels it is important that the industry responds appropriately and professional bodies such as STEP can play an important role in helping develop an appropriate response.

Of course there is little that is new about professionals having to adapt to shifting expectations of them. There may have once been a time when a professional could work hard to qualify and then safely assume that for the rest of his (or, rarely in those days, her) professional life the knowledge they had accumulated during initial training would be all they needed.

It was also often true that the standards of behaviour they were expected to conform to were much the same as their predecessors, with widely accepted professional practices changing little from one generation to another.

Such a world is now probably unrecognisable to most professionals. The need for effective regulation, good skills and continuing professional development (CPD) is acknowledged in almost every sphere of professional life.

For example, no client would dream of employing a practitioner in medicine, tax or trust and estate planning who qualified 20 years ago and had not updated their knowledge base since then. In most professional sectors, therefore, much of the pressure for good regulation and rising standards of training and competence flows from the market place.

Whatever your field of expertise, its usually good for business to be able to show you are well qualified, have maintained your skill base via CPD and are effectively regulated.

Different jurisdictions are nevertheless moving at differing speeds in developing regulatory standards and multinational organisations are increasingly frustrated by inconsistencies between the qualifications demanded by regulators in differing jurisdictions.

Such inconsistencies not only make it difficult to move staff from one jurisdiction to another, they can also cause organisational problems if staff in different locations are doing similar jobs but need dramatically different levels of qualifications to meet local requirements.

In consequence one of the most notable trends STEP has noticed as a professional body is the rise in demand for qualifications and learning materials that are compatible with regulatory requirements across a range of jurisdictions.

One example is the STEP Foundation Certificate and Diploma in International Trust Management, which has become widely recognised as an industry leading qualification allowing employees to be trained in different locations to the same standard.

More recently, and in a similar vein, STEP has launched an Advanced Certificate in Family Business Advising offering advisors training in how to work with family businesses and designed in a way that allows it to be delivered to students in any jurisdiction.

Professional bodies such as STEP have nevertheless always had a role that extends beyond education and qualifications. For most people ‘professional behaviour’ means much more than technical competence.

It covers a range of ‘softer issues’ related to protecting client interests and maintaining ethical standards of behaviour that often cover the impact of any actions on wider society. It is clear that one of the biggest issues now confronting the wealth structuring sector is how it can meet the standards of behaviour in these areas that governments and society generally expect of practitioners.

One problem is that if the qualifications debate gets bogged down in the issue of differing requirements in differing jurisdictions, then so does the ethical standards debate. The practitioner can at least rely on the fact that regulators are usually reasonably explicit about the qualification standards they require.

Discussions about ethical standards, in contrast, are often much more opaque and conducted in a context – in politics or in the media – that the average busy professional has little contact with.

It is clear, nevertheless, that the financial crisis and its aftermath are provoking a broad debate internationally about the standards of behaviour expected from bankers, investment professionals and wealth structuring advisers.

Those in the industry may find some of the suggestions emerging from this debate unpalatable and it is certainly true that at least some of the ideas being floated regarding new ‘moral compasses’ for those involved in our industry are a little detached from reality and occasionally move from ethics to politics.

Yet the industry ignores the debate at its peril. All industries and those operating in them need to reflect the societies they operate in.

If financial services in general, or family advisors in particular, fail to respond to an emerging consensus about what is acceptable and not acceptable there is a very real risk that new restrictions could be imposed in a draconian manner.

What constitutes ‘ethical behaviour’ is an issue that has not yet seen an enormous amount of debate in our industry. The experience of other industries suggests that this may represent an omission.

A prominent UK newspaper owner recently told an official inquiry into conduct of the press that he didn’t know the meaning of the word ethical and that as a business “we don’t talk about ethics or morals”. Many, although not the newspaper owner, took that as an open admission that the newspaper industry in the UK does indeed need much more rigorous oversight.

All areas of the financial services industry and its representatives need to be able to articulate clearly their ethical values. In drawing such a statement, there also needs to be a recognition that, just as regulation varies between jurisdictions, so do consensus views of what society has a right to expect in terms of ethical behaviour from practitioners.

Even geographic neighbours, such as France and Switzerland, have differing national views on what they expect from wealth structuring advisers and others working in the tax and financial services field.

For those working on a cross-border basis that not only complicates things still further but signals the need to communicate and explain the differences and explore ways of bridging the gap via better communication.

The broadly based international professional bodies such as STEP can play a leading role in such a communication process. Certainly a recent poll of senior STEP members indicated that they saw ‘ethical behaviour’ as every bit as important an attribute of ‘professionalism’ as ‘integrity’ and ‘knowledge’ and therefore a key issue that a professional body such as STEP needs to promote.

Looking to the future it is clear that the industry needs to behave in a way that is broadly recognised as ‘ethical’. Not only will this meet many of the criticism currently levelled at us, it will also ensure that we maintain the long-term trust and confidence of our clients – an essential objective for the long term prosperity of the industry and the communities that depend upon it.

It is equally clear that the industry needs to participate actively in the debate. Practitioners and clients alike have legitimate views on the ethical application of wealth; walking away from the debate is opting to be an easy target and that is in no-one’s interest.


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David Harvey

David joined STEP in 2001 and is a board member at the Family Firms Institute. He has participated in a range of small and family business policy initiatives, including as deputy chairman of the Better Payment Practice Group and as a member of the Bank of England Seminar Group on Small Firms. He sits on the Genesis small-business Senate and is a former council member of the Centre for Policy Studies and former president of the UK Institute for Small Business and Entrepreneurship and a former visiting fellow at Kingston Business School. He read history at Mansfield College, Oxford.

David Harvey
Chief Executive
STEP Worldwide
Society of Trust & Estate Practitioners (STEP)
Artillery House (South)
11-19 Artillery Row, London
United Kingdom

E: [email protected]       
W: www.step.org 



The Society of Trust and Estate Practitioners (STEP) is the leading worldwide professional body for practitioners in the fields of trusts, estates and related issues. STEP members help families plan their long term financial future, facilitating good stewardship and financial planning across future generations. STEP members also help families comply with the often complex tax rules surrounding trusts, estates and inheritance.

STEP is a unique professional body providing members with a local, national and international learning and business network. STEP provides education, training, representation and networking for its members.

Full members of STEP are the most experienced and senior practitioners in the field of trusts and estates. Members advise clients on the broad business of the management of personal finance.



STEP Worldwide
Society of Trust & Estate Practitioners (STEP)
Artillery House (South)
11-19 Artillery Row, London
United Kingdom

E: [email protected]       
W: www.step.org