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Dependencies


FOCUS ON Crown


“Guernsey’s court system and rule of law are robust and well-tested”


more clearly that they have the expertise and the ability to make informed decisions rather than simply rubber-stamp them. Having a real presence (managed or actual) in the chosen jurisdiction is becoming more critical.


New wealth


The concentration and size of personal wealth has never been as great, and the affairs of the wealthy have never been more complex. The historic structured wealth of the entrepreneur and landed estates of UK and continental Europe are already generally settled. It is the wealth principally coming from the new European economies and the Middle East that is dominating the establishment of private family and investment offices, either for the first time or separating out functions and locating each in the preferred location. With more aggressive tax and regulatory impositions in mainland UK and Europe, many active private investment offices are shifting their activities to jurisdictions with easy access, benign tax systems and regulation. This is also true for more sophisticated private equity houses. While many known names have established their own offices locally, typically the process is gradual. Usually the first step is to establish a ‘managed’ presence with a local service provider, which offers all the usual office infrastructure, staff and regulatory resources needed. Ultimately, many firms and private offices wish to establish a greater presence by having dedicated allocated offices, meeting rooms, servers and staff, and so require a jurisdiction that offers them the ability to easily shift from a managed presence to a physical one.


Creating opportunities This opportunity has not been created by any one particular factor. On the investment side, Britain is home to 70 per cent of Europe’s hedge funds and is a major centre for family offices and their investment teams. The cost and bureaucracy of greater regulation, such as the Alternative Investment Fund Managers Directive, is driving these businesses to look elsewhere. Individual and corporate taxes are also increasing and as a consequence many are considering strategic options, in particular how to gain access to Europe without actually being there. Guernsey offers such a facility and can give businesses a passport into other markets. Many wealthy families have historically used private banks to assist them in managing their wider investments, structuring and management of day-to-day affairs. There has, however, been an increasing trend to uncouple the single relationship with one institution, in particular for families that self-invest or have more sophisticated investment needs. These


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families are looking for solutions that are more specific to their needs, which often lead to the propagation of their own private offices. Guernsey is host to an increasing number of single-family offices, either managed within existing fiduciary service providers or those that have fully incubated and now manage themselves.


Regulation


While the traditional qualities that Guernsey offers still hold true, there are some more subtle changes that are influencing both IFCs and investors. Professional businesses and wealthy families generally accept that appropriate regulation is needed. However, it should not be overly restrictive, which is increasingly becoming the case in the main markets and in most onshore jurisdictions. Guernsey’s regulatory system is highly regarded and the island has received exemplary independent evaluations from the IMF.


Taxation


Then there is the question of taxation. More than ever before, governments are looking at ways to increase tax revenues, and they are becoming more intrusive in the process. Guernsey’s zero/ten tax regime (zero tax for all foreign corporates, 10 per cent tax for domestic corporates of a particular category) offers an attractive tax environment in which investors and families alike can base their worldwide asset-base, without the added drag of domestic tax.


Reputation


In addition to the need to find the right business and tax environment, there has been a shift in attitudes towards secrecy and reputation. Confidentiality is vital to all private and business matters, and is a cornerstone of Guernsey’s financial services industry. Transparency in financial markets and cross-border transactions is today’s reality. Guernsey’s court system and rule of law are robust and well-tested, and offer significant comfort to those who seek legitimate privacy. Reputation is increasingly important for families with international interests, and being associated with a reputable jurisdiction comes with a certain cachet.


Welcome change Guernsey’s fiduciary market is changing. No longer is it just the destination of choice for international trustee companies, but wealthy families and entrepreneurs are also looking to create a more substantial presence on the island. This in itself should create opportunities for the future and sustain the needs of the new breed of the super-wealthy.


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