This article was first published by BL Global.
Private clients have been using Guernsey and Jersey for decades, but it’s only through constant evolution that the islands have extended their expertise and reputation
The Channel Islands have been global centres for private wealth work going back 50 years, with clients from all over the world seeking the expertise the islands have to offer.
All of that hard work and history means that today, Guernsey and Jersey stand tall as key jurisdictions for private wealth work. Trusts, foundations, family office, finance and banking, estates and succession, and philanthropy are among the most prevalent areas of work undertaken in the islands.
As an example of the sheer volume of work taking place, a 2016 study by Capital Economics for Jersey Finance entitled Jersey’s Value to Britain, found that, at the time, more than £400bn of private assets was held in Jersey trusts, of which 94 per cent has been settled there by individuals resident outside the British Isles or by ‘non-doms’.
In Jersey, nearly 360 foundations have been formed since their creation in 2009, and it has 1,252 regulated members of the Society of Trust and Estate Practitioners (STEP). Guernsey has 666 STEP members and 88 live foundations, having been introduced in 2013.
Angela Calnan, Group Partner, Trusts and Fiduciary at offshore lawyers Collas Crill, confirms the islands’ popularity, saying:
‘Before moving to Guernsey, I worked as a lawyer in Dubai, Singapore and London. From all of those places, clients used the Channel Islands as part of their wealth planning.’
In Calnan’s opinion, while both islands are equally well regulated, it’s the very strength of this regulation that sets them apart from other jurisdictions.
‘This used to be seen as a weakness by some clients,’ she affirms. ‘But now, being a well-regulated jurisdiction is undoubtedly a strength.’
Indeed, in a world of ongoing political and financial uncertainty, wealthier individuals from around the world are seeking to place their assets in stable, well-regulated jurisdictions. However, political stability and sound regulation are just one part of their requirements.
As Julie Kleis, Director in RBC Wealth Management’s Fiduciary Services team, explains:
‘If assets are to be held in a corporate or fiduciary structure, one needs experienced administrators and fiduciaries, along with tax advisers, investment managers and legal advisers. Given the maturity of the Channel Islands as financial centres, the firms in these specialist areas have a substantial, rather than token, presence on the islands.’
From the perspective of an experienced City practitioner specialising in trust litigation, Geoffrey Kertesz, Partner and Head of Wills & Trust Disputes at Bircham Dyson Bell, explains:
‘The Channel Islands have local fiduciary companies with a long history of dealing professionally with trust matters. They have the infrastructure for it. They’ve got excellent local law firms. They have a judiciary that’s familiar with trusts, and they have robust regulation in case something goes wrong.’
He’s quick to scotch any suggestion that the Channel Islands are opaque.
‘They’re certainly more transparent than they are opaque. Jersey, in particular, was ahead of the game in adopting a regime of transparency. I think they may have lost some work at the outset because of it, but now everyone else is playing catch-up. This is the way the world is shifting, towards transparency. Yes, there will always be questionable islands where you can put money, but Jersey and Guernsey have very good regimes.’
Kertesz cites the key factors often raised by those on the islands: they’re in the same time zone as the UK, they speak English and they’re an hour’s flight from London.
Naturally, there are slight differences between Jersey and Guernsey. Richard Prosser, Group Director at Estera, which has an office on both islands, says:
‘Jersey is more experienced and has more expertise in private wealth compared with Guernsey, which is more focused on insurance and funds.’
Geoffrey Kertesz doesn’t see a huge difference, but says:
‘Jersey is bigger, so it naturally has more law firms and trust companies. It has more permanent judges, and details of judgments in Jersey are also easier to obtain, but the Guernsey court system is certainly robust.’
Still, given the similarities between the islands, the decision as to which island to choose is essentially a matter of personal preference.
‘In general, the Channel Islands are very active in non-traditional markets when it comes to fiduciary structures. I’ve found that Guernsey is perhaps favoured more by advisers in Asia, while Jersey is seen more favourably by Middle Eastern advisers,’ says Julie Kleis. ‘Although this may vary from adviser to adviser.’
From anecdotal evidence, it appears that the Channel Islands have benefited from a flight to quality since the financial crisis, alongside a growing demand for greater transparency. That’s certainly the opinion of Angela Calnan, who comments with clear relish:
‘We do seem to be picking up business from the Caribbean and Panama.’
For her part, Kleis stresses:
‘Clients seeking investment management services are certainly more aware of the need for quality, active risk management. This is both a legacy of the financial crisis, which led to a number of regulatory initiatives promoting transparency, but also a result of changes in client behaviour, with more clients looking to have greater oversight of their assets.’
One product that has benefited from this desire for control is the foundation. Introduced in Jersey in 2009, and then in Guernsey in 2013, these are now well established. A foundation is distinct from a trust, has its own separate legal personality and can own assets directly, enabling a founder to have more control over their family’s business and assets.
Keith Dixon, a Partner in Carey Olsen’s Trusts and Private Wealth practice in Jersey, explains:
‘They’re ideally suited as vehicles for holding private wealth or for philanthropic / charitable purposes.’
Andrew Laws, Managing Partner at Babbé, adds:
‘The Guernsey foundation is particularly useful for asset protection, estate and succession management, and private wealth planning for globally mobile individuals and families.’
Jersey has long prided itself on its reputation as a leading jurisdiction in the field of private client trusts. Not wishing the jurisdiction to rest on its laurels, in March 2018 the Jersey government made certain changes to some of the main articles of the Trusts (Jersey) Law 1984, which are likely to come into effect later this year.
‘The provisions regarding the disclosure of information to beneficiaries, indemnities afforded to trustees or retiring trustees and the accumulation of income have all been revised, refreshed and updated so that they’re in line with modern practice and case law,’ says Dixon.
What’s more, the overwhelming consensus among the experts contacted was that the private wealth industry in the Channel Islands is now far more based around traditional wealth planning and less around tax and fiscal advantages.
As Estera’s Richard Prosser confirms:
‘Clients are using Jersey structures as part of their succession planning for future generations.’
Certainly, the Channel Islands have a lot to offer private clients, intermediaries and advisers from the City. Aside from the ‘experience and professionalism of private wealth advisers’ noted by Estera’s Prosser, they’re also great places to live, attracting professionals from across the globe. According to Andrew Laws, this gives them ‘a truly international understanding of business and clients’ needs’.
In April, Guernsey also appointed a permanent London-based representative, Adrian Norman, to help build closer connections with the City.
Some interesting trends have also developed in recent years. Richard Prosser notes that his firm is seeing a concentration of business at the ultra-high-net-worth end of the market, which he believes is largely driven by the cost of doing business in the Channel Islands.
‘Foundations have been a helpful addition to the stable of products offered, as they are attractive to wealthy families who prefer the flexibility offered by these structures compared with the more traditional trusts,’ he says.
In addition, Julie Kleis reveals that private trust companies (PTCs) are being used increasingly in the Channel Islands by high-net-worth private clients, who prefer to establish their own PTC to act as the trustee of their family trusts, rather than transferring assets to an offshore service provider’s professional trustee company.
‘In my experience, clients using PTCs are becoming bigger and more sophisticated and we’re seeing increased cross-referrals between the City of London and the Channel Islands,’ she explains.
Prosser has also seen more entrepreneurs moving to the islands who are interested in family offices and philanthropy. It’s a trend confirmed by Kleis, who explains that she’s seen an increase in the number of family offices being set up in the Channel Islands, both in the form of independent units with their own physical presence and those accommodated within existing licensed fiduciaries.
‘We’re also seeing an increase in the number of philanthropic requests from clients in recent years,’ she explains. ‘This might be partly due to the introduction of the Charities (Jersey) Law 2014, with the appointment of a Charities Commissioner in 2017. Our younger clients believe more and more that philanthropy should be an obligation rather than a ‘good to have’.
Guernsey is introducing new anti-money laundering (AML) regulations this year to bring its AML framework into line with international Financial Action Task Force standards. This will also address recommendations made by Moneyval, a body entrusted by the Council of Europe with ensuring that member states can prevent money laundering and terrorist financing.
The Channel Islands are still at the top of their game when it comes to providing private wealth services to a global clientele, and by constantly evolving their offerings, they look set to remains so.
As City practitioner Geoffrey Kertesz concludes:
‘When we’re asked to recommend a jurisdiction, the Channel Islands are at or near the top of the list, depending on the client’s specific needs.’