A flight to quality

12 December 2019

Written by James Crawford Guernsey Finance

Guernsey Finance International Business Development Director James Crawford discusses why South African financial advisers and clients are seeking the stability of a jurisdiction such as Guernsey. 

Trading links between South Africa and Guernsey go back many years, with a number of the country’s big finance houses having a presence in the island, which is perfectly positioned between England and France.

That relationship is certainly strengthening again as Guernsey is seen as a secure and stable financial centre for financial advisers and clients seeking that comfort in politically turbulent times.

I have been privileged to visit your country in August and September, promoting Guernsey’s strengths in international pension provision and private wealth services, and again most recently to discuss the structuring of investment funds.

I used to be a regular visitor to South Africa a decade ago in a previous private wealth role. The message has not changed greatly – Guernsey is still in the vanguard of private wealth solutions for those wanting to invest outside of their home country. However, I could discern a much stronger interest in our message at this time, and our delegation was well received in both Johannesburg and Cape Town.

Feedback we regularly received was that those already experienced in investing outside South Africa were often frustrated by poor performance and spiralling costs in other jurisdictions. By contrast Guernsey meets the need for a well-regulated, secure jurisdiction, offering a quality, bespoke service with a solid reputation, with a stable and sensible cost base.

The “flight to quality” became the motto for our private wealth trip, as it seemed to describe perfectly the solution that the clients and advisers which we met were looking for.

The search for a reputable tax environment, based on economic substance and modern standards of transparency, has been a big issue in the offshore industry over the past two years. Some jurisdictions have taken the process more seriously than others, and confirmation of Guernsey’s position of compliance in these areas, supported by the endorsement of international bodies such as the OECD and the EU, is a significant selling point for us as a jurisdiction.

The island has certainly benefited recently from migrations of structures and companies to Guernsey. An industry-wide drive to find cost-effective security and stability is leading clients to consolidate offshore structuring to a single, credible jurisdiction such as Guernsey, where existing local regulations provide a strong economic substance framework set to withstand the ebb and flow of the new international substance tide for years to come.

Investment managers in South Africa continue to be attracted by the opportunity not only to invest outside of the country, but also to attract capital from overseas institutions and high net worth individuals into the country, and are finding that Guernsey investment funds are the perfect structures to facilitate these ambitions.

We have discovered on previous trips to the country that EU UCITS funds are something of a default, but South African clients should be aware that there is no need to use those structures compared to a Guernsey “Class B scheme”, which is quicker and more cost-efficient to launch, and offers managers far more flexibility and control, without the burden of European regulation and compliance.

The value of a Guernsey platform is already well known to a number of established South African managers, and more are picking up on the opportunities offered all the time as word spreads.

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