There is a seismic shift in the family office space which Guernsey is set to capitalise on
Guernsey is increasingly being considered as a base for family office structures, an expert in the sector told the Guernsey Private Wealth Forum in London.
David Bowen, who leads Deloitte’s Private Office Consulting practice and leads on a wide range of family office work, said that the current climate was challenging for high net worth families, both in issues they were facing, and issues confronting jurisdictions operating in the sector.
‘We are starting to see a shutdown of jurisdictions which people would have typically looked to use, and they are relocating trusts or shoring up substance requirements where trusts are involved,’ Mr Bowen said.
‘The focus is to move away from areas seen as tax havens to areas with a more robust framework, and a real focus and defensibility around using the locations.
‘So we are seeing significant interest in the Channel Islands right now from the British Virgin Islands, the Cayman Islands and from US families internationalising their affairs. They are not looking towards Luxembourg or Dublin and are starting to look to the Channel Islands, and even ignoring the double taxation treaty benefits that they would otherwise be able to access.’
He highlighted political and economic stability and the quality of service providers as key for any jurisdiction. And while he said that privacy concerns had not, in his experience, led to families seeking to relocate family office structures, data was a much more concerning.
‘There is a real fear of being hacked, where the entire positioning and wealth of the family can be destroyed. Families are looking at how to protect themselves better from data and cyber protection.’
Mr Bowen described the current economic and geopolitical climate as a ‘Vuca’ – volatile, uncertain, complex and ambiguous – world.
‘But that offers tremendous opportunity and we are seeing shrewd clients looking at that and creating different ways of doing things. Opportunistic actions and being brave is the way forward.
‘There is a seismic shift in the way family offices organise themselves – it’s no longer about minimising tax leakage. They are saying ‘we don’t want to be the family equivalent of Starbucks, make us more transparent, help to remove potential pinch points’. Reputational risk for those families is one of the biggest limitations that will present itself over the next few years.’
Guernsey’s commitment to tax transparency and sharing information – while still offering privacy by refusing to adopt public registers of beneficial ownership – is seen as important in this regard.
Guernsey, which has decades of experience in providing specialist wealth management and fiduciary services to global high net worth individuals and their families, is poised to make enhancements to its family office capabilities from next year.
Mr Bowen said that such a move was in line with the rising professionalism of the family office.
‘We are starting to see the people who created the family wealth and who sit at the point of these families are wanting to professionalise and structure themselves to compete with the best in class. In many ways they are filling the void created by the big financial institutions post-crash, and now private capital as an asset class will become a big determining factor, with the shift in investing power going directly down to individuals.’
Guernsey Finance Chief Executive Dominic Wheatley said: ‘We intend to hone our legal and regulatory approach to provide the most supportive global environment and ecosystem for servicing private capital and wealth, and to meet the evolution taking place in the world of the family office.
‘The concept has been around for many years and the objectives remain broadly the same – to provide a centralised and cost-effective hub to manage the financial and other affairs of families – but the activities, structures and asset classes involved are ever-more diversified and sophisticated.
‘Our objective is to become foremost of mind among the global financial community for the provision of specialist family office and private wealth services.’