Originally published in Private Client Practitioner, Guernsey Supplement, November/December 2007.
Guernseys fiduciary industry is in healthy shape, there is ever-increasing integration and cooperation between the complementary elements of the Islands finance industry and legislative changes are already well advanced. Notwithstanding this, work is ongoing to further enhance Guernseys fiduciary environment and will continue into the future 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.
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 expertise and 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. 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 growing an excellent reputation in the emerging niche market of the family office, where it can build on its track record of providing trust services for individuals and families. In addition, the Island remains popular with corporate settlors using trusts for the administration of pension schemes and employee share plans. Corporate structures are utilised to hold assets and investments of all types including residential and commercial property, Intellectual Property Rights (IPR) and yachts. Estate and inheritance planning are also key elements of the Islands wealth management offering.
Integration and Cooperation
Fiduciary services is just one sector of the Islands finance industry, which also includes 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 June 2007 deposits with Guernsey banks had reached £108bn a rise of £3bn (3 percent) during the quarter and £19bn (18percent) over the year.
These figures have also been swelled by the Islands funds industry, which is booming. The value of funds under administration and management reached a new record high of more than £155bn at the end of June 2007 an increase of £15bn (11 percent) over the quarter and £32bn (32 percent) 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.
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 earlier in 2007 through a half-day seminar at the Institute of Directors (IOD) in Pall Mall where attendees received an update on the latest developments within the sector.
The Islands parliament, The States of Guernsey, has now approved amendments to the Trust Law, which include 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. Royal Assent is expected to be given by the Privy Council at the beginning of 2008.
This year the final proposals from a review of the Guernsey Companies Law should also go before The States of Guernsey. 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, automated, Company Registry and where, for example, 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 long 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, Guernsey is working on the introduction of Foundations, to add yet another product to the range available in the Island.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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