Guernsey: Looking Forward – Guernsey’s Financial Services Sector

Last Updated: 24 March 2015
Article by Dominic Wheatley

Most Read Contributor in Guernsey, September 2018

Guernsey Finance's recently appointed chief executive, Dominic Wheatley, provides an overview of what Guernsey has to offer for both firms and the private clients they look after.

Having taken over the reins at Guernsey Finance at the beginning of December last year, I am sure you can appreciate how excited I am by the challenge of getting to work and promoting the island's financial services offering internationally.

My predecessor, Fiona Le Poidevin, and her team have done a fine job in flying the flag for Guernsey and I will be looking to build on this positive work in the years to come. Of course, while I have only been in the role a short time I can already appreciate that one area where some of the greatest progress has been made in recent years has been within the private wealth sector.

Guernsey has a long history of being a very well respected private wealth jurisdiction and one that has always looked to diversify its offering. Indeed, recent years have evidenced this more than most. Just some of the developments in the fiduciary industry include creation of the world's first image rights register and accompanying legislation at the end of 2012, the introduction of Guernsey's own foundations legislation at the beginning of 2013, and the launch of the Guernsey-based 2-REG, the Channel Islands Aircraft Registry, at the end of 2013.

Most recently Guernsey introduced its own form of Limited Liability Partnership (LLP) with effect from May 2014 in response to increasing demand for this type of structure in Guernsey. Whilst LLPs have been introduced in several other jurisdictions, including the UK (from 2000), in drafting the Guernsey law we have had the advantage of being able to learn from those other regimes to develop an alternative business structure that will be attractive to a wide variety of users, both domestic and international.

Strong base

With this progress in mind it is interesting to note that Guernsey's financial services regulator, the Guernsey Financial Services Commission (GFSC), recently told the island's licensees that the total fiduciary assets held in Guernsey had increased four percent from 2013 to 2014. This is undoubtedly extremely encouraging news for the island's private wealth sector.

We also heard that the total number of fiduciary licensees increased over the course of the year from 187 to 193. This figure comprises 153 lead corporate fiduciary licensees – ranging from multinational organisations to independent, locally-owned firms – and 40 licensed individuals, who can act as directors, co-trustees or trust protectors. Overall, it was a very encouraging update from the GFSC on what it is seeing from a regulatory and factual standpoint, particularly at a time where Guernsey is increasingly looking to innovate and diversify its financial services offering in areas such as FinTech.

Innovation

What has always struck me about Guernsey's finance industry is how innovative the island is. I referred earlier in this piece to recent developments such as image rights, foundations and our aircraft registry, but let us not forget that looking further back we were responsible for pioneering the cell company concept with the introduction of the Protected Cell Company (PCC) for use in the captive insurance sector.

The subsequent success of this innovation is illustrated by the fact that the cell company is now used across the financial services world as an alternative application for the structuring of many different types of products such as those individuals and families might seek when utilising family office services from their wealth managers.

Guernsey was also one of the first jurisdictions in the world to regulate trust providers and for example, the UK amongst others still does not have a regulatory regime for trust providers. Guernsey updated its trust law in 2008, which included abolishing the personal liability of directors in Private Trust Companies (PTCs) as a way of encouraging greater use of such entities and the introduction of Purpose Trusts. 2008 was also the year when Guernsey modernised its Companies Law – with changes that included placing fiduciaries as the gatekeepers to a more streamlined company incorporation process, which itself was facilitated by the opening of a new modernised, automated, Company Registry.

Markets

While part of my focus will undoubtedly be taken up with facilitating future innovations across Guernsey's financial services sector, my time will also be spent ensuring we make fresh ground geographically and enhance the awareness and knowledge of Guernsey in emerging markets. As a jurisdiction we have already made progress in markets such as India, Russia, the Middle East and Asia, in particular China. For example, since Guernsey Finance established its own representative office in Shanghai in 2007, a growing number of Guernsey-based firms have also developed their own presence in Asia.

Law firm Ogier has offices in Hong Kong and Shanghai, Mourant Ozannes is now established in Hong Kong, and Collas Crill has an operation in Singapore. Louvre also has an office in Singapore and, along with fellow wealth management firms Nerine and Newhaven, an office in Hong Kong. Another private-client specialist, Richmond Fiduciary Group, has opened an office in Shanghai, while fund administrator International Administration Group has established joint ventures in both Hong Kong and Singapore with the Tricor Group, a member of the Bank of East Asia Group.

Perhaps not surprisingly, given the number of Guernsey-based firms establishing a presence in Asia, figures from the GFSC show that wealth from that region is becoming increasingly important to Guernsey's wealth management community. This was borne out by the fact that more than 140 delegates attended a Guernsey private wealth management event in Shanghai in October, demonstrating the interest the region has in our offering.

Speaking at this event was Li Jun, the Deputy Director of the Shanghai Municipal Financial Services Office (SMFSO). Guernsey signed a Memorandum of Understanding with the SMFSO in 2010, something Mr Li referenced in his speech. He also emphasised the desire to further strengthen the working relationship between Guernsey and Shanghai in the future.

The same Asian delegation also saw the Guernsey Government sign a Statement of Cooperation with the Beijing Municipal Bureau of Financial Work, an agreement which demonstrates our continued commitment to not only China but Beijing specifically.

It also represents the next phase of our relationship to cooperate, exchange ideas and trade together more extensively in the future. One of the fiduciary opportunities available to Chinese financial institutions that we are starting to see traction with is the Managed Trust Company (MTC) concept, which provides firms from countries such a China the potential to service their clients' international needs through a 'managed' operation. The MTC's sponsor, for example a Chinese bank of domestic trust company, owns the MTC but has the management and administration carried out by a service provider in Guernsey.

The MTC is also regulated in Guernsey by the GFSC in exactly the same way as any resident trust company. It would be my hope that moving forward we can make similar progress in other new markets that matches our progress in Asia, while not neglecting our core markets of UK, Europe and the US and the existing client base we have already established in these markets. I fully appreciate that it is early days in my tenure at Guernsey Finance but I see no reason why we can't achieve this.

An original version of this article was published by Private Client Practitioner's 2015 Guernsey Special Review, January 2015.

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.

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