This article was originally published in HNW Journal, November-December 2007.
This time last year I was looking back over the tremendous achievements of the Islands wealth management industry in 2006. Given those successes and the positive start to this year, it appeared that such growth might not be sustained throughout 2007, particularly in view of the changed global economic scene with the sub-prime crisis and the unprecedented issues regarding Northern Rock.
However, business flows have remained strong and I am still hearing that there is a pipeline out there into at least the first quarter of next year overall the market in our sphere of operation seems buoyant. Perhaps that might be a case of famous last words and I wonder whether looking back later at 2007 we might believe it was a pivotal year a watershed but of course for that we will have to wait well into 2008.
Casting my eyes over 2007 at this juncture, we can see that the banking sector has continued to record new highs for levels of deposits, which at the end of September rose to £112bn up 4.2% during the third quarter and 26% year on year.
These deposits are held by the 50 licensed banks in the Island. Some of the most highly respected names in international finance from Switzerland, Europe, USA and UK have chosen to place their operations in Guernsey. The sector provides products ranging from retail banking and savings through international wealth management to institutional business and specialist lending. Importantly this includes servicing the other sectors of the Islands wealth management industry.
The value of funds under management and administration reached £164bn at the end of September an increase of 6% over the quarter and 36% on the same time in 2006. This vibrant sector has been boosted by Februarys introduction of the innovative registered closed-ended funds regime, which was heralded at a specific Masterclass session in London. This event was followed by Septembers Guernsey Funds Roadshow to Manchester, Leeds and Edinburgh and there are now plans to promote the sector in Geneva, Zurich and New York as further changes emanating from the Harwood Report come on-stream during 2008.
The Island plays host to an extensive array of investment businesses who in combination offer a range of products and services for both retail and institutional investors from the general to the more specialised. The Island is growing a reputation as a centre of excellence for alternative investments like funds of hedge funds, private equity and property, as well as more esoteric asset classes such as fine wine, fine art and timber.
Another area of expansion is the asset management sector. Subsidiaries of large groups as well as independent investment boutiques provide wealthy private clients, their advisers and the institutional marketplace with services, including stockbroking and dealing arrangements, for funds and discretionary investment management portfolios.
Promoting the Island in London is important because it is a key source of new business and this year for the first time a half-day Fiduciary seminar was held in the City. In 2007, exhibition and presentation opportunities have also been taken at third-party fiduciary events and there are plans next year to further increase the promotion of this sector, whose expertise in the preservation of both institutional and individual/family wealth and assets is illustrated by the fact that two Guernsey-based firms picked up accolades at this years Society of Trust and Estate Practitioners (STEP) awards.
The Island, with over 50 years experience in the sector, plays host to some 140 licensed fiduciaries, ranging from large organisations to independent, boutique operations, holding more than £200bn of assets in trust. Amendments to the Islands Trust Law, which include introducing Purpose Trusts and abolishing the personal liability of directors in Private Trust Companies (PTCs), are expected to be introduced early in 2008. Work continues on the introduction of Foundations. Such changes ensure that providers based in Guernsey can continue to offer clients the very widest range of wealth management products and services.
The Islands already business-friendly environment is also being enhanced in other ways: on 1 January 2008, the Island will move to a standard zero rate of corporate tax (and there is already no withholding tax on dividends paid, no capital gains tax, no inheritance tax and no value added or general sales tax); a new Companies Law is set to come on-stream during 2008 it will introduce a streamlined company incorporation process that from the summer of 2008 will be facilitated by a modernised Company Registry; and also during 2008, a suite of IP-related legislation will continue to be introduced to the market.
Work is also ongoing to develop our presence in the emerging markets. As part of this process we have now appointed an official representative in China a Chinese national who will work for GuernseyFinance from an office in Shanghai. This underlines our commitment to the country and at the same time provides us with a platform to directly promote Guernsey to business leaders and within appropriate government circles so that in the future our finance industry can benefit from increased business flows from the Chinese market. This November Guernsey has also had a strong presence at a private equity conference in Dubai and it is in the Middle East that we will also look to increase our visibility during 2008.
The Right Conclusion
In a world of ever-increasing competition, Guernsey remains at the forefront of wealth management through its on-going development of attractive products and pragmatic regulation. In fact, all the ingredients are in place for Guernsey to maintain its position as a jurisdiction where clients want to conduct business (and keep coming back for more) long may that continue.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com
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