24 June 2019
Guernsey focusing on family offices
Guernsey’s recently published Financial Services Policy Framework sets out an approach to capitalise upon a range of global specialisms to ensure that Guernsey remains a strong, and stable financial centre servicing sophisticated clients from around the world.
Financial services and the associated professional services that support them account for more than half of the jurisdiction's economic output and account for a third of the island’s employment. Finance is the engine of Guernsey’s economy, boasting world class practitioners across its banking, investment management, fund services, wealth structuring and insurance sectors – many within about a mile of each other in the island’s capital, St Peter Port.
The Policy Framework, therefore, rightly recognises that the island’s experience of providing more than 50 years of sophisticated and discrete services of unrivalled breadth and depth across fiduciary, funds and wealth management lends itself to providing a greater focus of services to private capital and family offices. This is important as the Policy Framework serves to provide a route map for industry, government and the regulator as to the direction of travel for the jurisdiction. It is also flagging that from a policy perspective Guernsey is very much open for business and will do all that it can to attract family offices and the business they generate to Guernsey.
The term 'family office' is one of art rather than science. No two families are the same and it follows that no two family offices are the same, at least towards the high end of the sophistication spectrum of clients that Guernsey aims to service. For some families, their office provides concierge services, managing domestic staff, ensuring that everything is ready to welcome the family at their properties around the world, that their aircraft or yachts are fuelled and ready to go when the family wish to use them for example. Other family offices focus instead upon the management of family wealth either with a team of investment managers in-house or monitoring the performance of external investment professionals. Some families have offices which do both and much more.
Guernsey has been providing services to family offices for at least half a century. The use of Guernsey trustees, Guernsey corporate structures, Guernsey-based banks or investment managers and Guernsey fund managers amongst family offices established in London, Geneva and elsewhere is commonplace. However, encouragingly, in recent years we have also seen more families choosing to establish their own family offices in the island. Just as families are diverse the drivers for this are just as diverse too.
For some families, inadequate service levels from providers in other jurisdictions is cited as the reason for looking to relocating the family office or part of it. With others it is Guernsey’s good international reputation, white-listed status, rule of law, substance and professional infrastructure that proves an attraction.
Of course, some Guernsey service providers will work with families over the course of a number of years, sometimes in times of difficulty for the family. Relationships become strong and the management and staff of the service providers become much more than just that; they become trusted family advisers. We have worked with a number of families whose relationships with key personnel have become so strong that they wish to personally secure the full time services of those individuals and establish local family offices with them.
For some high net wealth families with complex demands the cost of employing their own staff to provide key services is less than it would be to use the services of a licensed third party provider. We have worked with some families who, as a result wish of being in this position, choose to establish their own family offices to take advantage of the benefits that Guernsey has to offer and directly employ highly qualified and talented professional staff. In some cases, those family offices then go on to become fully regulated by the Guernsey Financial Services Commission to provide services to other families in order to defray the cost, which in turn results in new fiduciary businesses being established.
Some family offices are also being established in Guernsey because key family office staff members or even family members are relocating to the island. In a world that is becoming increasingly transparent as far as wealth is concerned it is becoming 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 is a matter of personal safety. Guernsey is a politically secure, low crime, low tax jurisdiction in the same time zone as the United Kingdom with good connectivity and a unique concentration of well qualified and well regulated finance professionals. The island is also beautiful with a unique history. All are reasons cited by some wealthy families for relocating (or relocating their family office management) to the island.
The Policy Framework now makes clear Guernsey’s goal to build on the expertise that already exists to become foremost of mind amongst the global financial community for the provision of specialist family office and private wealth services and to hone its legal and regulatory approach to provide the most supportive global environment and ecosystem for servicing private capital and wealth. There will be a number of initiatives following on from the announcement of the Policy Framework. Watch this space.
An original version of this article was published by eprivateclient, June 2019.
© Carey Olsen 2019.