Growing specialisms is Guernsey’s target

10 December 2018

Written by Dominic Wheatley Guernsey Finance

In Guernsey we are proud of our track record of sophistication and innovation – establishing strong niche leadership positions through expertise and excellence.

To maintain this position in the global market, we have developed a policy framework to grow our range of specialisms, create the best conditions for our firms to succeed, and set out a clear strategy to provide a path for future development.

Our financial services sector accounted for some 44% of the island’s Gross Value Added figure in 2017 at £1.3 billion, a success we expect to build on.

The new policy framework confirms our commitment to a sector that has delivered enviable standards of living on the island, and sets out Guernsey’s priorities, principles, objectives and approach to deliver continued growth and innovation in our financial services offering.

It is a positive statement of intent, targeting leadership positions in key sectors of financial services.

Fintech

Guernsey has been open to the exploitation of technology in financial services and boasts many examples of excellence, including the introduction of the use of blockchain into private equity fund administration in 2017, a project led by Northern Trust which is making excellent progress.

We intend to lead the way in the creation of a robust efficient technology landscape that provides a safe, secure and efficient environment for the provision of specialist global financial services from 2020 and beyond.

This environment is bolstered by the powerful legislative tool kit available to the jurisdiction in the form of the electronic transactions law and the recently-lodged electronic agents ordinance – a world-first confirmation of legal certainty to provide a robust underpinning to the exploitation of smart contracts and AI.

The island plans to be at the forefront of the trend towards exploitation of distributed ledger technologies in finance, given the practical, open approach in practice taken by the regulator to the application of technology.

In 2016 the island was determined as ‘compliant’ or ‘largely compliant’ with 48 out of 49 of the recommendations of the Financial Action Task Force in respect to anti-money laundering and combating the financing of terrorism, which was the best score of any jurisdiction – Guernsey can provide a safe and secure environment for the widespread adoption of electronic AML. There are some estimates that widespread adoption of electronic AML could create industry-wide cost savings of 10-15%.

Green finance

Guernsey is at the forefront of green finance. And as a responsible global citizen, we are contributing our expertise and experience as a global finance centre to the fulfilment of the United Nations’ 17 Sustainable Development Goals. Guernsey’s commitment to the Kyoto Protocol indicates its longstanding awareness of the part it plays.

To accompany this, a green financial services strategy supports a migration of the jurisdiction’s wealth management offer towards a greater focus on a socially responsible outlook, both among private clients and institutional investors looking to meet increasing demand from ultimate beneficial owners.

Guernsey’s ability to provide a complete green infrastructure – a green ecosystem encompassing insurance, investments and exchange listings – allied to our strength and expertise, creates a powerful offer in this space.

Earlier this year the Guernsey Financial Services Commission launched the concept of the Guernsey Green Fund – a ‘kitemark’ to validate green funds, providing a platform upon which investments into green initiatives can be made.

The Guernsey Green Fund enhances investor access to the green investment space and offers them certainty by providing a trusted and transparent product that contributes to the internationally-agreed objectives of mitigating environmental damage and climate change.

The first Guernsey Green Fund has now been registered and we expect many more to follow.

We also intend to build on the success of the Green Fund by broadening our range of green products and developing the concept of “Guernsey Green Finance”, moving to develop a comprehensive green finance offer across investment, securities and insurance.

Our mission is to be at the forefront of the development of green and sustainable finance – to become the “go to” jurisdiction for green, and the Guernsey Green Finance brand will build on our current market leadership and status as an emerging global contender.

We will continue to work with global public policy groups to foster international co-operation on the development of green finance.

Family office

Guernsey’s traditional success in providing specialist wealth management and fiduciary services to global high net worths and their families is based on our three cornerstones – stability, security and service.

Uppermost among our strengths is the stability that has sustained Guernsey through 1,000 years of constitutional autonomy. We were also the first jurisdiction to regulate trust and corporate service providers back in 2001.

A sophisticated, discreet service of unrivalled depth and breadth across fiduciary, funds and wealth management lend itself to greater focus on the provision of services to private capital and private wealth and family offices.

Our objective is to become foremost of mind among the global financial community for the provision of specialist family office and private wealth services.

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.

Substance

From a position outside of the European Union, and for more than 50 years, Guernsey has built a comprehensive financial eco-system and infrastructure of professional and risk management services, and firms capable of providing all the services required by the wealth and investment management and brokerage community. Our business activities have been founded on substance for a very long time.

Guernsey’s global leadership in tax transparency and reporting provides confidence to global clients. Combined with the strengths of global distribution and global product, Guernsey’s position as a jurisdiction to reach and service global clients from a substantive base is unmatched.

Our objective is to combine all our key ingredients – a responsive regulatory regime, a tradition of innovation, and a strong technology base – to create a powerful new specialist substance offer that enhances the competitiveness of the island and provides a powerful proposition.

Global distribution

A Guernsey fund enables managers to reach markets representing 80% of global wealth.

As a global finance centre for more than half a century, Guernsey has positioned itself at the centre of a network of bilateral agreements that facilitate capital flows. We provide the ideal environment for asset managers to pool capital and enable efficient investment. A Guernsey-domiciled investment fund reaches the parts of the globe that asset managers want to reach – institutional investors in more than 50 jurisdictions across five continents, including the USA, EU and China. In Europe the National Private Placement Regime provides a proven, fast and flexible route to market into the European Union and the UK, and that will remain unchanged post-Brexit.

Recognition and appreciation of our proven global distribution and product capabilities grows as global uncertainty grows. Guernsey’s aim is to develop our global reach and market access, particularly targeting the Far East and North America. We also aim to enhance our product range for institutional and private investors, as we see the convergence of private fund and private capital servicing creating demand for more specific and bespoke fund solutions.

The new Policy Framework has been led by Dr Andy Sloan, Deputy Chief Executive, Strategy, for Guernsey Finance, promotional agency for Guernsey’s financial services industry, in collaboration with the island’s government, regulator, industry and wider stakeholders.

An original version of this article was first published in the 2018/19 edition of IFC Review.

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