Guernsey has been working hard to establish links with jurisdictions in Asia. Many private client businesses face issues which hinder progress including failing to do the necessary research into the cultural differences, the current attitudes to wealth preservation and succession planning and not fully appreciating the long standing relationships in the chase for new business. Nerine Trust (Hong Kong) Director Melanie Rihoy examines the current state of play in Asia and why Guernsey as a jurisdiction is well placed to meet the challenges and provide ideal solutions for the Asian market.
The Guernsey finance sector has a long connection with Asia with regular visits to the region over the years and, more recently, establishing offices in places like Hong Kong, China, Singapore and India. It is understandable that there is keen interest in Asia with several fast growing economies and many high net worth individuals looking for wealth planning solutions. There are some businesses, however, which are quick to jump on the bandwagon of the business opportunities available without truly understanding the cultural differences and how business is done in the region. Quite often, there is an expectation of an immediate influx of business after only undertaking one or two meetings with a client.
Developing a client base does not happen overnight and Guernsey businesses must demonstrate their commitment to the region. Asian business relationships, whether with banks, lawyers or trustees, often go back more than one generation. To arrive in the region without understanding the value placed in these relationships is to court disaster. It is important to note, however, that Asia is also evolving at quite a pace with Asian clients not necessarily being Asian centric in their business dealings and private client needs. Asian private clients often have business connections throughout the world, as well as family living in a number of locations so there is growing need to work with service providers that have access to multiple jurisdictions. In other words, while there is a core of Asian clients with established, valued relationships with advisers, there are also a growing number that are yet to do this.
Guernsey is extremely well placed to provide services to support all Asian private clients in their search for further creation of wealth, asset protection and succession planning among other things. What is very well known is Guernsey's robust regulatory and licensing framework which provides clients with the comfort of being serviced by firms that are suitably qualified and regulated. Guernsey is also a leading, forward thinking and dynamic international financial centre with well-established and substantial training support to continually enhance expertise.
Asian private clients
Guernsey's experience in the area of private clients is unquestionable and its growing reputation in Asia means it is ideally placed to take advantage of the business opportunities available. It could be argued that Guernsey's thorough regulatory regime might be off-putting for the Asian market where the culture is not necessarily driven by this level of regulation. This view is immediately offset against the innovative and up-to-date private client laws which enhance Guernsey's offering and continually evolve.
For example, Guernsey's trust law is one of the most up to date trust laws available; Guernsey companies are now able to list on the Hong Kong stock exchange and, most recently, Guernsey is introducing a new Foundations law in 2013. These developments, in addition to being able to provide sophisticated fund administration experience, complex insurance and banking work and high calibre lawyers, mean Guernsey's proposition is a compelling one. Guernsey's commitment to the Asian region is further cemented through the establishment of a Guernsey Finance office in Shanghai offering information and support to the region. Also a number of Guernsey-headquartered companies have established dedicated offices throughout the region.
This provides excellent support for Asian private clients in their own time zone which is crucial for Asian private clients to be able to plan accordingly. Equally, Guernsey's location geographically gives good access to all time zones, from East to West. Asian private clients often have complex and dynamic family situations, including multiple families and family businesses underpinned by a culture not necessarily familiar to the West's usual models. They require bespoke solutions which reflect their way of doing things. Historically, Asian private clients have been offered a series of "products" without being able to fully understand what they are agreeing to. "Guernsey Inc" is not driven by products and has always worked with private clients to offer bespoke solutions and, as a consequence, we are now seeing many more Asian private clients developing a better understanding of structures and solutions available which they may not have considered previously.
Typical Asian succession planning
Typically, an Asian private client will want to put in place a succession plan for their family business, taking into consideration relevant family circumstances that might influence the way in which the business is governed in the future. Asian clients are not familiar with the common structuring model of the Anglo world where much of the control is given away to a third party (a trustee or similar). Guernsey's private trust company (PTC) is one tool that can offer a solution. The PTC offers an ability to ensure succession but it is also flexible enough to provide the client with continued management and control during their lifetime and the ability to access professional advisers who can provide independent directorships or assistance with ongoing corporate governance.
Price sensitivity
It would be remiss to discuss Guernsey's relationship with the Asian market without considering the costs. With a varying range of cultures in the region, one thing is common to all – price sensitivity. The Asian private client sector has historically paid much less in fees for structures to assist with wealth preservation and succession planning. This could, arguably, have set an expectation in the Asian market that the fees charged by Guernsey private client practitioners should be lower. Of course, as the Asian markets' demands for more complex structuring and more sophisticated solutions grow (which they most certainly are) there will be an increasing understanding that the level of expertise, experience and knowledge needed from private client advisers comes at a premium. Asian clients, as they continue to become more familiar with the Guernsey proposition, will see the results and willingly invest in the services.
Originally published in Private Client Practitioner, January 2013
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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