This article was originally published in Global Assets Online, February 2008
The picture that has been painted during the past few months is of a world economy in turbulence. However, if we look more closely it appears that these problems are fairly well restricted to certain parts of the financial services industry; for example, there seems to be no slowdown in the growth of private wealth being created. Much of this is looking for a home in offshore structures and therefore Guernsey, where its experience in providing trust and corporate services make it a jurisdiction of choice in this field, has a fiduciary sector in particularly healthy shape. However, notwithstanding this success, work is ongoing to further enhance Guernseys fiduciary environment to ensure that providers in the Island can offer clients the very widest range of products and services. Guernsey is far from resting on its laurels.
Jurisdiction of Choice
Guernseys fiduciary sector is the Cinderella of the Islands finance industry: over the last 50 years it has been a mainstay and yet its progress during this period has largely been without fanfare despite the fact that this heritage has developed a wealth of expertise and a first class infrastructure.
Today the Island plays host to some 140 licensed fiduciary providers, ranging from large organisations to independent, boutique operations, with more than £200bn. of assets in trust. There are nearly 60 licensed individuals who can act as directors, co-trustees or trust protectors.
As well as a plethora of experience, Guernsey also boasts substantial expertise in using the innovative modern structures that are available on the Island for the preservation of both institutional and individual/family wealth. Guernsey is very much a jurisdiction of choice for fiduciary business.
Integration and Cooperation
Fiduciary services is just one sector of the Islands broad-based finance industry, which includes also banking, insurance and funds providers, supported by a comprehensive network of legal, accounting, audit, tax and actuarial advisers.
Although the ratio of the number of independent trust companies to those owned by corporate entities from other sectors notably banks remains fluid, regardless of formal ownership status there is without question ever-increasing integration and cooperation between sectors and particularly, although not exclusively, in the provision of wealth management solutions.
For example, the close links with the banking sector remain and notably these providers benefit from the influx of assets into the fiduciaries. At the end of September 2007 deposits with Guernsey banks had reached more than £112billion a rise of £4bn (4%) during the quarter and £23bn (26%) over the year.
These figures have also been swelled by flows from the Islands booming funds industry. The value of funds under administration and management reached a new record high of more than £164bn at the end of September 2007 an increase of £9bn (6%) over the quarter and £44bn (36%) year on year. On the back of such success, fiduciaries are increasingly looking to develop a funds presence in terms of providing administration and company secretarial services.
The cell company concept was pioneered in Guernsey for its pre-eminent captive insurance industry but both the Protected Cell Company (PCC) and now the Incorporated Cell Company (ICC) are being increasingly used within the funds and fiduciary spheres as wealth management tools.
Latest Developments
A substantial amount of the business coming into Guernseys fiduciary sector is introduced from within City of London law firms, with whom the Island has a close relationship and which was reinforced last year through a half-day seminar at the Institute of Directors (IOD) in Pall Mall. This promotional activity will increase during 2008 to provide key contacts with an update on the latest developments within the sector.
A series of amendments to Guernseys Trust Law, including the introduction of Purpose Trusts and abolishing the personal liability of directors in Private Trust Companies (PTCs), have now been approved and will be effective from Monday 17 March.
The final proposals from a review of the Guernsey Companies Law were passed by the Islands parliament, the States of Guernsey, at the end of January this year. The changes will place the fiduciaries as the gatekeepers to a more streamlined company incorporation process that from the summer of 2008 will be facilitated by a modernised, including automated, Company Registry and where annual returns will be replaced by annual validations. Similarly, Guernseys Intellectual Property (IP) environment is in the midst of being modernised. A dedicated office, solely responsible for its administration and regulation, opened in spring 2006 and a suite of IP-related legislation will continue to be introduced to the market.
With a fiduciary services heritage and modern legislation, Guernsey is now looking to the world stage and to expand its business from Europe, the Middle East and the Far East as the Anglo-Saxon Trust concept becomes more readily understood and recognised in these regions. Not withstanding this, the Island is working on the introduction of Foundations.
The Right Conclusion
It is an exciting time for Guernseys fiduciary industry: the sector is in particularly healthy shape, there is ever-increasing integration and cooperation between the sectors of the Islands finance industry and legislative changes are already well along in the pipeline. However, Guernsey is not resting on its laurels. Work is ongoing to further enhance the Islands fiduciary environment so as to ensure that the Islands providers can continue to offer clients the very widest range of products and services. Guernseys fiduciary sector will retain its hallmarks of quality of service and innovation for customer solutions into the future.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
