Originally Published in Global Assets Online, June 2007
Any suggestion that the private banks in Guernsey are struggling to succeed is quickly crushed by the facts. By the end of March 2007 total deposits held with Guernsey banks had reached a new record level of £105.3 billion (up 14% during the first three months of 2007 and a 23% rise year on year) and total assets and liabilities had increased to a new high of £116.3 billion.
International commentators on the offshore private banking marketplace have suggested that the offshore private banks and the Channel Islands in particular, might, in the long term, suffer from increased regulation and associated costs. Further, the EU Savings Tax Directive is seen as a possibly uncompetitive constraint on the Channel Island banks compared with international centres such as Singapore or Hong Kong which are unaffected. The result was a suggestion that the Channel Islands might become an uncompetitive centre for international business. The facts, in terms of deposits made in Guernsey, do not seem to back this assumption and all feedback from the industry indicates that the flows of business continue to be substantial. So what has driven the continued success of private banking in Guernsey in particular?
There are a number of factors that have contributed to the continued success of Guernsey private banks. The cornerstone of this success is the diversification by Guernsey banks to position themselves to capture wealth structured in new forms or from new centres. The traditional focus for the Channel Islands was on the UK expatriate. However, the increasing internationalism of private banking clients and the emergence of new wealth centres have caused private banks to reach into new markets. A bank such as my own, Fortis, which has a strength in the Benelux region and has expanded through acquisition and commercial banking activities into East Europe, Turkey and the Middle East, is now able to reach a much broader client base. Clients from these regions are themselves expanding their horizons and are looking to secure, well regulated centres such as Guernsey to house their wealth and structure their businesses.
A further trend amongst the private banks has been to position themselves to capture a broader array of assets from their private clients. Most of the successful private banking organisations in Guernsey are now able to provide a comprehensive product offering, including offshore credit, discretionary asset management and bespoke funds selection services, coupled with the capability to structure wealth within trust companies or tailored investment vehicles, such as protected cell companies or incorporated cell companies. This diversification and increasing expertise has made Guernsey an attractive centre for the increasingly sophisticated private client who is seeking advice on a number of possible investment opportunities.
Private clients are also keen to explore the use of hedge funds, private equity and property investment vehicles. Often these investments are themselves housed within specialist offshore structures and managed by specialist offshore managers. The Guernsey private banks have followed this trend keenly and have also positioned themselves to be banker to the trust companies, hedge fund organisations and private equity specialists that are themselves now based offshore. In this sense, the Guernsey private banks are still managing private client wealth but accessing it through agents or other specialist business organisations. They therefore have become suppliers to other financial businesses that manage private client wealth and have tailored banking systems, accounting, reporting and administration services, alongside traditional banking custody, to deliver a much broader service to the wealth management industry. This has been a key driver of growth in Guernsey that has acquired a strong reputation for quality and service to specialist niche wealth managers.
The final key building block in the ongoing success of the Guernsey private banking industry has been the strength that has kept the industry alive for a number of years – i.e. traditional quality of service. Whilst many onshore retail banks have resorted to call centres and a processing mentality, the Guernsey private banks still provide relationship managers that can be directly accessed and who have an intimate knowledge of their clients’ affairs. This strength should not be underestimated. The most common reason quoted to me for a defection from an onshore retail bank to a private bank is the need for a truly personal service. Whilst service standards are strong and personal relationships valued, private clients and wealth managers alike will still seek out this personalised support in Guernsey. It is this ethos of private banking service and relationship management that will continue to drive the success of the 50 licensed banks in Guernsey and ongoing growth in the sector.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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