05 March 2019

Trends and developments in Guernsey's trusts and private wealth sector

Private wealth accumulation continues to grow globally year-on-year and so does the demand for wealth management services. However, the environment in which trust companies, professional advisers and clients operate has changed significantly. So too has the needs, expectations and demands of ultra-high and high net worth (HNW) clients.

Local landscape

The Guernsey fiduciary sector continues to see consolidation with multinational organisations acquiring or expanding their Guernsey presence. The trend is likely to continue with increased regulatory pressures impacting on costs and heightened risks associated with the provision of fiduciary services. Notwithstanding, Guernsey's select privately owned trust companies are also seeing increased business flows and corresponding opportunities to expand.

There also continues to be an increased demand for private trustee services, with the Guernsey Foundation proving to be an innovative and popular solution for the provision of private trustee services offered in Guernsey.

In addition, Guernsey is increasingly being considered as a base for family office structures. Family offices already based here are known to be expanding their activities and structures, while Guernsey's Financial Services Policy Framework, published in December 2018, unsurprisingly includes the objective of becoming foremost of mind amongst the global financial community for the provision of specialist family office services.

Next generation

Increased complexity, costs and regulatory demands mean clients are looking for a holistic solution for managing the financial and other affairs of wealthy families across a range of services and multiple jurisdictions. This, coupled with the generational shift taking place with the transfer of wealth to the next generation, means that attitudes, expectations and preferences are changing.

Therefore, the substance and reputation of the jurisdiction in which their private wealth is being managed is increasingly of concern, particularly in light of potential data breaches and reputational damage to high profile individuals or families.

As a result of increased regulatory and reporting requirements worldwide and associated complexity of managing and administering structures, as well as recently introduced substance requirements, we are finding that clients with existing Guernsey connections are choosing to consolidate and streamline existing structures into a single jurisdiction and choosing Guernsey. Equally, we have seen a number of significant structures and entities with no prior Guernsey connection relocating their entire structure and migrating entities to Guernsey from less well regarded jurisdictions as Guernsey is considered to be a mature jurisdiction with real substance.

Markets

Global standards have opened up access to many jurisdictions. Traditional markets of the UK and Western Europe remain. Russia and Eastern Europe, with above average numbers of HNWs, also continue to be a source of new work

Other new or expanding markets include the Middle East, Southern Africa and other emerging high growth regions such as India and parts of Latin America, where political and economic uncertainty means Guernsey's longevity, stability, and reliable court system are real draw cards.

Philanthropy

Modern day philanthropists are looking for innovative ways in which to structure their philanthropic endeavours. Their prime focus is often not the tax advantages of charitable status, but rather a desire to effect social change or promote political reform or other causes.  They are often highly successful entrepreneurs who wish to be actively engaged in the running of the philanthropy during their lifetimes and have experience of using for profit vehicles to generate the wealth which they intend deploying in pursuit of their philanthropic objectives.

A number of substantial philanthropic foundations have been established in Guernsey recently and there has been a noteworthy increase in demand for information regarding services and expertise in this area locally.

Legislative developments

The Trusts (Guernsey) Law, 2007 introduced a number of innovations, has served the sector well and remains fit for purpose.  Nevertheless, the Trust Committee of the Guernsey Bar are considering proposed revisions in line with developments in other jurisdictions, including:

  • the abolition of the rule against self-dealing so as to make clear that a trustee of one trust may contract with itself as trustee of another trust – so as to facilitate, for example, trustees making enforceable loans between trusts they administer;
  • expanding the role of alternative dispute resolution in the resolution of trust disputes; and
  • the introduction of a statutory Hastings Bass power so as to confer upon the Royal Court a power to set aside the exercise of a fiduciary power in circumstances where the power holder failed to take into account relevant considerations of law or fact or took into account irrelevant considerations.

This will ensure that Guernsey's legislative framework for trusts remains up to date, flexible and competitive.

 

An original version of this article was published in En Voyage (Issue 15), March 2019.

© Carey Olsen 2019.