Overview:

Introduction

With money leaving offshore centers in the billions, understanding the nature of offshore clients and what strategies to employ to attract and retain them has become absolutely critical, not just for offshore bankers but also for their onshore competitors.

Scope

*This report draws on the findings of the Offshore Banks Survey 2010.
*This survey was conducted in February/March 2010 among banks in Jersey, Guernsey, the Isle of Man, Switzerland, Hong Kong and Singapore.

Highlights

Out of all offshore clients by assets under management, 69% are from Western Europe, and 57% of these are from the UK.

The most important reason that British offshore clients choose to bank in the islands is because they get a more personalized service compared with onshore banking.

The average offshore client has 37% of his holdings in cash and near-cash, and this is expected to fall to 32% in two years' time.

Reasons to Purchase

*Understand the nature of offshore clients in the Isle of Man
*Gain insight into the future needs of offshore clients
*Access strategies for success in the marketplace.

Overview

Catalyst

Summary

Methodology

Executive Summary

Many of the offshore clients of banks in the islands are British,and they are generally risk-averse individuals

Offshore clients are looking for the basics from their banks and are expected to maintain a defensive stance going forward

Manx bankers need to focus on brand,image and reputation and defensive products in order to attract and retain offshore clients

Table of Contents

Table of figures

Table of tables

The Islands' and the IoM's Offshore Clients

A significant number of clients of banks in the islands and the IoM are from Western Europe,especially the UK

The three island centers service a very Western European offshore clientele

IoM focus: the IoM has a wide spread of clients

Britons are very important to the island banks,but not uniformly important

IoM focus: the IoM has a much wider spread of clients

Historic links with Hong Kong make this region particularly important to banks in the islands

IoM focus: Australians are well-represented among the Asia Pacific client segment

Offshore clients are banking on the islands because they get a more personalized service than they would onshore

UK clients that bank n the islands are attracted to the region because they get a more personalized service

IoM focus: the IoM clients seem to be more motivated by tax avoidance

The average portfolio of an offshore client is very conservative in nature,and this is not expected to change much going forward

Cash and near-cash is the most important asset category in the portfolios of offshore clients of banks in the islands

IoM focus: the IoM clients are particularly heavily invested in cash and near-cash

Offshore clients of banks in the islands are expected to make small adjustments to their portfolios going forward

IoM focus: the portfolios of offshore clients of banks in the IoM should show very little change

Offshore clients are unlikely to move center or bank and have little appetite for risk

Offshore clients of banks in the islands do not seem prone to switching

IoM focus: IoM clients have fairly low levels of product knowledge and understanding of risk and return

The appetite for risk among offshore clients has dropped and is unlikely to recover much going forward

Offshore clients of banks on the islands tend to be self-made individuals

The single most important source of wealth among offshore clients is business and entrepreneurship

IoM focus: most of the IoM clients have sourced their wealth through earned income

The Competitive Environment in the Islands and the IoM

Offshore clients in the islands are looking for the basics from their banks

Offshore clients place a great deal of importance on the brand,image and reputation of providers when deciding who to bank with

IoM focus: IoM clients are particularly focused on excellent customer service and brand,image and reputation

Tax prosecutions and amnesties are not the major reason why offshore clients might leave their bank

Change in personal circumstances is the number reason for client defection from their bank

IoM focus: change in personal circumstance is also identified as being key in the IoM

Offshore clients of banks in the islands are relatively light users of online services

Offshore clients do not make intensive use of online services from their bank

IoM focus: IoM clients have embraced online services a little more than clients of banks in Jersey and Guernsey

Island bankers think that their clients will be looking for low-risk products in two years' time,and that the greatest opportunity lies in discretionary asset management

The expectation is that offshore clients will still be looking for products and services geared towards wealth preservation in two years' time

IoM focus: deposits and savings and financial planning should see strong demand from IoM clients in two years' time

Discretionary asset management is seen as the best way for banks to attract new offshore business

IoM focus: discretionary asset management will also be key on the IoM

For basic accounts,offshore clients are interested in one key feature: high interest rates

High interest rates are very important both for savings and deposit accounts in the islands

IoM focus: offshore clients of banks in Mann have a number of key interests when looking at savings and deposit accounts

Strategies for Success in the IoM

Offshore bankers identify customer service as being key to keeping clients

Datamonitor has identified eight key strategies that IoM bankers should pursue for success in their marketplace

Strategy one: excel at customer service

Strategy two: improve brand,image and reputation

Strategy three: provide a range of defensive products and services,but try to move clients on from basic products

Strategy four: offer competitive interest rates,and (again) try to move clients on from basic products

Strategy five: address the gaps in knowledge among your client base

Strategy six: be as international as your client base

Strategy seven: understand the source of clients' wealth and cater to it

Strategy eight: recognize that online services are important for some clients

Competitive Analysis: The Offerings of Offshore Banks on the Isle of Man

Bank account excellence is an essential feature of an offshore bank offering

The banks have a patchy record when it comes to their multi-currency offerings

Some have competitive interest rates,others do not

The product and service offerings of the selected Mann banks are fairly narrow,pointing to real market opportunity

Relationship management is on offer to the wealthier clients or those with more complex needs on the Isle of Man

Technology excellence is a potential differentiator for forward-thinking banks

Appendix

Definitions

Domicile

Offshore

Tax amnesty

Methodology

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: In terms of assets under management,approximately what percentage of your offshore clients live in the following regions?

Table 2: In terms of assets under management,what percentage of your Western-Europe-based clients live in these countries?

Table 3: In terms of assets under management,what percentage of your Asia-Pacific-based clients live in these countries?

Table 4: Thinking about your clients living in the UK,what are their main motivations for putting money offshore? (Choose top three reasons)

Table 5: What percentage of your offshore client base's assets under management is allocated to the following five asset categories today?

Table 6: What percentage of your offshore client base's assets under management do you expect to be allocated to the following five asset categories in two years' time?

Table 7: On scale of 1-4,please rate your offshore clients in terms of the following attributes (1 = very low,4 = very high)

Table 8: On a scale of 1-4,please rate your offshore clients in terms of their appetite for risk (1 = significantly lower,4 = significantly higher)

Table 9: Around what proportion of your offshore client base in the islands accumulated their wealth through the following means?

Table 10: Why did your offshore clients choose your bank? (Choose top three reasons)

Table 11: What are the most likely reasons for offshore clients to leave your bank? (Choose top three reasons)

Table 12: How often do most of your offshore clients use your online services?

Table 13: On a scale of 1-4,please rate the following products and services in terms of expected demand from your offshore clients in two years' time (1 = no demand,4 = a lot of demand)

Table 14: Which products and services are most likely to attract new offshore business to your bank? (Choose top three products and services)

Table 15: What deposit account features will be most important to your offshore clients in the next year? (Choose top two features)

Table 16: What savings account features will be most important to your offshore clients in the next year? (Choose top two features)

Table 17: What is the best way to ensure that your offshore client base keeps its wealth with you offshore? (Choose one)

Table 18: Characteristics of offshore clients of banks in the IoM and suggested strategies for targeting them

Table 19: Five offshore banks located in the Isle of Man were selected for a peer review

Table 20: There is plenty of variation in the account offerings of the offshore banks

Table 21: The Isle of Man offers fairly high rates on some accounts

Table 22: Highest earning offshore no-notice accounts,May 2010

Table 23: Highest earning offshore notice account interest rates,May 2010

Table 24: The product and service offerings of the selected banks are very narrow

Table 25: Relationship management services are selectively provided

Table 26: Most banks provide client information online as well as some additional functionality

List of Figures

Figure 1: In terms of assets under management,most offshore clients of banks in the islands are from Western Europe

Figure 2: In terms of assets under management,most Western-Europe-based clients of banks in the islands live in the UK

Figure 3: In terms of assets under management,most Asia-Pacific-based clients of banks in the islands,,live in Hong Kong

Figure 4: UK clients place their money in the islands' banks because they receive a more personalized service than from onshore banks

Figure 5: Offshore clients' assets under management in the islands are weighted towards cash or near-cash products

Figure 6: In two years' time,cash or near-cash products will be the largest asset category within the portfolios of offshore clients of banks in the islands

Figure 7: Banks in the islands rate their offshore clients very highly in terms of their intention to keep their assets under management offshore

Figure 8: The risk appetite of offshore clients of banks in the islands is not expected to change much in the next two years

Figure 9: Business or entrepreneurship is the single largest source of wealth among offshore clients of banks in the islands

Figure 10: The most important factor in offshore clients' choice of bank is brand,image and reputation

Figure 11: The most likely reason for offshore clients of banks in the islands to leave is changes in personal circumstances

Figure 12: A significant proportion of offshore clients of banks in the islands never use online services

Figure 13: In two years' time,offshore clients of banks in the islands are expected to show strongest demand for capital-protected funds or bonds

Figure 14: Discretionary asset management is expected to attract the most new offshore business for banks in the islands

Figure 15: A high interest rate is the deposit account feature expected to be most important to offshore clients of banks in the islands

Figure 16: A high interest rate is the savings account feature expected to be most important to offshore clients of banks in the islands

Figure 17: The best way for banks in the islands to ensure their offshore clients keep their wealth where it is,is to provide superior service