Guernsey – an IFC at home with the family office

09 November 2015

Written by Dominic Wheatley

Guernsey Finance’s Dominic Wheatley explains how there is growing appreciation of the products and services that international finance centres such as Guernsey can provide to high-net-worth individuals, particularly as regards family office solutions.

The Guernsey advantage

Guernsey’s popularity within the family office sector is driven by several factors. The island has its own elected parliament, a stable system of government, and a mature, sophisticated legal system that provides certainty in terms of the ownership and operation of wealth structures.

The island’s proximity to London and mainland Europe, as well as its convenient time zone and tax neutrality, is also advantageous, as is the fact that Guernsey, with more than 50 years’ experience of servicing private and corporate clients, has unparalleled capability in dealing with family office structures.

Guernsey’s 150-plus licensed fiduciaries range from multinational organisations to independent, boutique operations, all specialising in the preservation of individual and family wealth. These fiduciaries are complemented by Guernsey’s broader financial services industry and a strong network of professional support services, including multi-jurisdictional law firms and global accountancy practices.

A number of big international players provide family office services in Guernsey. However, independent and privately owned trust companies have also developed family office expertise, with many small to medium-sized fiduciary businesses hosting one or more family office structures.

Indeed, an increasingly common trend in Guernsey in recent years has been the expansion of single-family offices into multi-family offices (MFOs). An MFO can still offer specialised services to a given family but will do so on a non-exclusive basis, delivering economies of scale.

Guernsey Structures

Guernsey’s corporate, trust and foundation structures can be used to hold assets of all types across the globe. Most recently, the island has introduced legislation enabling the establishment of limited liability partnerships. This wide variety of structures has fuelled the growth of a range of financial services sectors, including captive insurance, fiduciary and investment management.

Since Guernsey pioneered the protected cell company (PCC) more than 15 years ago, it has become a key corporate vehicle used by many family offices. Incorporated cell companies (ICCs) are increasingly popular too. Such private cell structures can be used to segregate different assets for different strands of a particular family or simply for risk-management purposes.

A pertinent benefit of a PCC or ICC is that it allows for consolidated reporting, which means a family head can have one report or statement consolidating the assets and liabilities across the entire family cellular structure. This wrapper-like reporting is appealing, particularly when coupled with the ability to segregate the assets and liabilities of one cell from those of another.

Private Wealth Investments

Of course, wealth management encompasses not just preserving but also increasing wealth, and so many families often wish to invest their money in high-yielding investment funds. Indeed, the average family office portfolio allocates around 9 per cent to hedge funds, up from 7 per cent in 2014, according to the Global Family Office Report 2015, produced by Campden Wealth Research, in partnership with UBS.

Guernsey continues to develop its world-leading investment fund and private equity sectors, the success of which has been due partly to the wide variety of robust, tax-neutral structures available under local legislation. Corporate and limited partnership structures are used to hold assets and investments of all types, with Guernsey platforms managing investments in North America, Europe, Latin America, Asia Pacific and the emerging markets. There are also major international providers based in Guernsey fulfilling the important custodian role. Therefore, there is the option to invest in existing Guernsey platforms, as well as the option to establish a new or bespoke investment platform for larger private clients or family offices.

Expert in Family Offices

One of Guernsey’s greatest strengths is its heritage in providing offshore wealth management and family office services and solutions. The island has significant experience in administering not just basic but also the most complex private wealth-structuring arrangements.

An original version of this article was published by the STEP Journal, November 2015.

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