Guernsey Private Wealth Report 2020/21
October 2020: We are very pleased to launch the Guernsey Private Wealth Report 2020/21.
A total of 84 Guernsey based individuals participated in the independent research study, comprising of 28 private clients (HNWs, UHNWs, HVRs and wealthy entrepreneurs) and 56 private wealth professionals (trustees, investment managers, family office professionals, private bankers, insurance brokers, estate agents, lawyers, tax advisers, relocation consultants). All participants are taking part in qualitative interviews, sharing their expert views, insights and experiences in the context of Guernsey private wealth.
Family offices. Patriarchs and matriarchs of high-net worth (HNW) families are truly global. With that comes complexity in terms of geographic spread, multiple jurisdictions, extended multi-generational families and subsequent complex tax and legal issues. Family offices are looking for jurisdictions which are robust in terms of political and economic stability, quality of service providers, privacy, data security and reputational risk. Family offices are more unique, complex and sophisticated than ever before, and are looking for simplification of services and structures in a well-regulated jurisdiction with a robust legal system. Family offices require a suite of specialist services, ranging from global wealth structuring, tax planning, succession planning, investment management and compliance to full concierge services. There is a significant increase in the professionalism of global family offices and their service providers. Family offices are committed to transparency but maintain the right to their privacy. At present, the demand to establish multi-family offices is increasing, higher than that for single family offices. Furthermore, the regulatory environment is increasing for all family offices.
Substance. Substance requirements are so significant that they are influencing where HNW families set up base for their family office. Economic substance is a doctrine in tax law, which states an arrangement must have both a substantial purpose and an economic effect, aside from tax, to be considered valid. As complex and multi-jurisdictional arrangements, family offices must guard against the risk of accusations of lack of substance – that their means and motives are contrary to the letter or spirit of the law – and should look to ensure they demonstrate otherwise.
Beyond traditional and alternative investing. The choice of asset classes has exploded in recent years. Age and personal history shape private clients’ investment approach more than the size of their wealth. Private clients can be distinguished based on whether they take an aggressive or a defensive approach to investing, and whether they adopt an active or a passive role in decision-making. Private clients’ personal approaches can lead to wealth managers extending the range of their offerings.
Green and sustainable investing. There is growing interest in ESG among wealth management private clients and close association between ESG and philanthropy. Wealth managers and private clients increasingly see positive action and profit as not mutually exclusive. A massive generational shift is underway in life philosophy and investment objectives. “Ownership” and personal involvement are important for ESG investors.
Collectibles. For the majority of UHNWs, collecting is a passion rather than an investment strategy. Collectibles are also seen as a way to safeguard value. Collectibles pose challenges that traditional investments don’t. Wealth managers need to access expert knowledge and specialised services, including structuring, tax planning, valuation and insurance. Guernsey has developed awareness and expertise in several key areas.
Succession planning. Succession planning is unique to each family, with no set model or structure applying to everyone. Bespoke solutions are needed. How and when family members are brought into businesses or included in wealth management vary among cultures and ages. Tax is no longer the main reason behind succession planning; wealth preservation is usually the overriding objective. With the increase in transparency and push to share wealth information, political and other risks need to be kept in the frame when creating structures for transferring wealth to future generations.
Philanthropy. A large amount of charitable giving in Guernsey is conducted anonymously. There is a significant rise in charitable AUM. Younger generations are changing the philanthropic landscape. Guernsey residents are notoriously good at giving, yet still believe there has been a significant increase in philanthropy from within the Island in recent years and their private clients in general are incredibly philanthropic.
Global citizen. Families are more likely to be spread across many countries, hold multiple passports and have investments in several jurisdictions. Physical meetings may be less viable in future and technology may be the way forward. Communication challenges need to tackle diverse age groups as well as multiple time zones. A knowledge of the rules in several jurisdictions is needed to service a global client base. Links with service providers in a variety of jurisdictions, as well as opening offices in multiple locations, may be helpful to service a global client base.
COVID-19 pandemic. All respondents believe COVID-19 will inevitably have an impact on future business but the significance of this is likely to vary, with most (71%) expecting it to be minor. A reduction in business-related travel, face-to-face client contact and consequential costs, seems certain, which will surely help those businesses which expect to see a decrease in their number of clients, income generation and profit, whilst they potentially need to reduce their fees.