Guernsey's recently published Financial Services Policy Framework describes how the government, industry and the regulator, the Guernsey Financial Services Commission (GFSC), will work together to capitalise on the range of specialisms that attract family offices, and the business they generate, to the jurisdiction.
With recent research suggesting family offices currently hold global assets in excess of USD4 trillion, the merits of this strategy are clear for Guernsey, where financial services and associated support services account for more than half of economic output. The act of defining 'family office', however, is an art rather than a science. No two families are the same, and it follows that no two family offices are the same, at least towards the higher end of the client sophistication spectrum.
The jurisdiction's success in the provision of specialist wealth management and fiduciary services to high-net-worth (HNW) families over the past 50 years has been founded upon the cornerstones of stability, security and service.
Guernsey's constitutional independence, coupled with political and economic stability, enables clients to plan for the long term. Guernsey was the first jurisdiction to regulate trust and company service providers, enhancing the protection of the families that benefit from locally established structures. The number and variety of licensed service providers ensures that there are sophisticated options for structuring wealth and providing estate planning to suit the vision, values and purpose of all manner of families.
Encouragingly, we have recently seen more families choosing to establish their own family offices in the jurisdiction, for a range of reasons. For some families, inadequate service levels from providers elsewhere is cited as a reason. For others, Guernsey's good international reputation, whitelisted status, rule of law, substance and professional infrastructure are what attracts them. Guernsey's continuing global leadership in tax transparency and reporting gives reassurance to clients seeking comfort and confidence in the reputational credentials of a jurisdiction.
Of course, some Guernsey service providers will work with families over the course of several years, sometimes during periods of difficulty. Relationships become strong, and the management and staff of the service providers become trusted family advisors. Some families wish to personally secure the full-time services of those individuals and establish local family offices with them.
For some HNW families with complex demands, the cost of employing their own staff to provide key services is less than the cost of the services of a licensed third-party provider. Some local family offices have been established in Guernsey to take advantage of the jurisdiction's highly qualified and talented professional workforce. In some cases, those family offices go on to become fully regulated by the GFSC and provide services to other families in order to defray the cost, which in turn results in new fiduciary businesses being established.
Other family offices are being established because key family office staff members, or even family members, are relocating to Guernsey. In a world that is becoming increasingly transparent, it is difficult for wealthy families to remain below the radar. In some parts of the world, living incognito is not just a matter of preference, but a matter of personal safety. Guernsey is beautiful, with a unique history. It has very little crime and relatively low tax rates, and it is in the same time zone as the UK, all of which are additional reasons cited by wealthy families for relocating.
The Financial Services Policy Framework now makes clear Guernsey's goal to become 'foremost of mind' among the global financial community for the provision of specialist family office services. Further, Guernsey is willing to hone its legal and regulatory approach to provide the most supportive global environment and ecosystem for servicing private capital and wealth. This process has already commenced, with the GFSC publishing revised guidance on how private trust companies (PTCs) can be controlled and administered by licensed fiduciaries. It is no longer a requirement that a representative of an administering licensed fiduciary must sit on the board of a PTC in order for the GFSC to grant an exemption from the need for a PTC to be licensed. Going forwards, the licensee will be required to confirm that it will retain sufficient knowledge and information about the PTC's ownership and control structure, and its activities, to be satisfied that the PTC is effectively governed. The changes, which have been welcomed by local industry, simplify arrangements around a PTC's control and offer clients greater certainty.
An original version of this article was published by the STEP Journal, October 2019.
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