Guernsey's Guernsey Private Wealth Forum, held online on 14 October, looks at the challenges of 2020 and how the family office sector is responding. Alasdair McLaren, Head of Private Wealth at IQ-EQ in Guernsey, and Natasha Kapp, Partner in Carey Olsen's trusts and private wealth group in the island, discuss the impact and how Guernsey is responding.
If 2020 is accurately summarised as a year of uncertainty, what has this done to the private wealth/family office market?
Alasdair McLaren (AM): I believe the market has been affected in a number of ways. For a start, when the pandemic hit, service providers had to swiftly reassess how (and where) they worked, implementing changes overnight that may ordinarily have taken months or years.
Maintaining close client relationships despite travel restrictions and social distancing measures has been a challenge. At IQ-EQ, we have run a virtual client visitation programme to uphold close contact while proactively protecting client interests against market volatility, and we are finding increasingly that phone conversations and video calls are replacing emails. The pandemic has also given wealthy families the time to reflect on what and who is important, and prompted them to accelerate their succession planning and check whether existing plans are still fit for purpose.
We are seeing an increased focus on safety, stability, security – not only because of Covid-19 but also in light of political turbulence. Sophisticated and stable jurisdictions such as Guernsey have been benefactors from this uncertainty.
Sophisticated and stable jurisdictions such as Guernsey have been benefactors from this uncertainty.
In addition, Covid-19 appears to be accelerating interest in ESG-focused investing rather than distracting attention from it. Aside from the feelings of collective social responsibility associated with the crisis, investors and market players are increasingly realising the power of ESG – particularly as the millennial generation take the helm of more family businesses and fortunes. Ultimately, where there is uncertainty there is opportunity, and this very much applies to the private wealth market amid Covid-19. Strong jurisdictions like Guernsey – and firms that are flexible and innovative – will add value amid the disruption and emerge in a favourable position.
Natasha Kapp (NK): It is very much business as usual. Following the initial coronavirus lockdowns there was an initial flurry of activity to get projects that were pending completed and long outstanding proposals finally implemented. Thereafter complex restructuring and other projects are being progressed in the normal course.
Which factor has proved the most disruptive and why/how?
AM: Overall, I would say technology innovation is the biggest disrupter in the market, with developments such as process automation and intelligent reporting. In terms of the pandemic specifically, however, the one key disruptor has been the worldwide mystery in terms of what will happen next. When will everything be "normal" again, and what will be the long-term economic impact?
Every country appears to have taken a different stance, and planning is in a constant state of flux. We have been very fortunate in Guernsey in that all restrictions, other than travel, have been lifted for some time. Everyone is back in the office and in an environment that is 100% "normal". We are aware that barely any other country has this luxury nor knows when it will return.
NK: Guernsey's financial services sector and the legal industry has the infrastructure and technology services in place that allowed for the working from home transition to be largely seamless. The most disruptive element was, of course, the inability to meet in person with clients and other contacts and advisers. Personal relationships are really important within the trusts and private client world, but it did not take long for people to adapt to Zoom and other video technology platforms.
What developments/progress have you seen in the Guernsey family office and private wealth sectors in recent years?
NK: There has been a concerted focus on the family office arena in recent years, whether that be attracting family offices, HNW individuals or business to relocate to the island. Similarly, there has also been a desire to streamline the servicing of private trust companies and family offices, particularly those that are not already located on the island, but have some aspect of their business or operations serviced here. Rather than continue to have some aspects done by fiduciaries or legal advisers in Guernsey, it makes sense on a number of levels to have the whole structure established in and serviced on-island.
Within all aspects of Guernsey's financial services sector there is a growing specialisation and expertise in the ESG, green and sustainable investing space – something that is particularly attractive to HNW individuals and family offices. Importantly, it is a message that is getting through to people, and potential clients are beginning to understand that Guernsey is a destination for this type of expertise and guidance.
Similarly, Guernsey is becoming known as a premier location for establishing philanthropies. Philanthropists, quite rightly, want to ensure their efforts or funding lead to real and lasting positive change and that the desired outcomes are achieved. This means ensuring that there is good oversight and control of any funds, transparency, diligence and monitoring of the application of such funds within robust structures – something Guernsey can offer with its well-rounded and well-regulated financial services industry.
AM: We have seen a growth in the number of family offices in the island and an even bigger growth in the interest in family offices. As the private wealth sector has realised that no two family offices are the same, firms have introduced specialist services to add value to these offices – such as luxury asset teams, consolidated reporting platforms, outsourcing facilities and family office incubation support.
In the wider private wealth sector in Guernsey, most companies have seen, as regulatory statistics show, a move to fewer but larger and more complex clients. There has been an undoubted flight to quality in recent times for those clients looking for real added-value service. I have noticed that international families in general do now recognise that substance and regulation can be a comfort and an attraction, rather than an expense or a hindrance.
What is the future direction for Guernsey and the sector?
NK: The focus remains the same – attracting and working with HNW/UHNW individuals, family offices and private trust companies. The way the island has handled and responded to the challenges of COVID-19, and how we have been largely unaffected, has undoubtedly caused people to reflect and consider Guernsey as an attractive destination, not only for the establishment of their structures or to move existing structures, but also for personal relocation. COVID-19 has been a tangible example of the security and stability that Guernsey can offer.
AM: I expect to see continued focus on demand for succession/estate planning, for security and stability, and for firms who can provide sophisticated, integrated and international solutions for sophisticated and international families. Also, continued growth in private capital investing from families and family offices that leads to the growth in institutional solutions to private client problems. And we are developing specialisms in ESG investing and philanthropy as second and third generations look at the moral and ethical dilemmas and opportunities that come with wealth. Our future is not as administrators – our future is as problem solvers. In troubling times I would also like to think that the old Guernsey trust principle of "bon pere de famille" has never been more important or valued.
Originally published by Guernsey Finance, October 2020
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