Guernsey a haven of stability for jittery international clients

When it comes to housing financial assets in a safe, jurisdiction, building structures around them for generational transfers, and protecting their owners against ransom demands and kidnap risk, practitioners in the Channel Island of Guernsey think they have the formula about right.

Private clients seeking stability, rather than tax savings, and worried about “the risk of assets being taken away from them for nefarious reasons,” are forming the bedrock of the island’s clientele, with Russia and its neighbouring countries now a key source of business for Saffery Champness.

The international accountancy firm is regularly setting up structures to protect wealth amassed in Russia and neighbouring countries and expects this to be a lucrative future source of income. “These are not people paying 60, 70 or 80 per cent tax and trying to reduce their tax bill, these are business people worried about political stability, a change of environment and change of regime,” confirms Saffery’s director Philip Radford from his seafront office on the fringes of capital St Peter Port.

“We have been doing this for the last five to 10 years, it’s the future of our industry and where the demand will come from, that fits the skill set of what we can offer here in Guersney.”

Although Russia is the biggest source of wealth which Saffery is servicing and Middle Eastern business is also encouraging, the firm is beginning to broach more specialist segments, such as setting up ‘purpose trusts’ to match decommissioning liabilities for the energy industry, including oil rigs, coal mines, wind turbines and nuclear reactors. This allows energy companies to ring-fence funds set aside for environmental purposes to fund liabilities, which can last for hundreds of  years.

The third strand of the firm’s business involves support work for entrepreneurial families, where Guernsey staff can take on many family office duties, including fitting out and servicing boats, planes and supervising a variety of concierge services. Saffery has appointed separate teams dedicated to servicing the family wealth of a handful of emerging market clients.

Guernsey companies have also been typically used by wealthy international families to structure purchases of commercial property in London, while the island has prospered more recently as an important hub for listing funds investing in private equity and infrastructure, in addition to real estate.

“We are a centre for illiquid investments,” says David Waldron, PwC director responsible for the funds business. “We could not keep up with Luxembourg and Ireland once they moved into the retail space.”

Guernsey, he believes, must focus on higher value, lower volume products, due to island restrictions on property ownership and population growth. “We can’t compete with all the people commuting into Luxembourg to work, which is why we ended up with listed and closed-ended funds. With a daily pricing vehicle, you need a lot more staff to do it. We are playing to our geographic and demographic strengths, having developed a new niche and servicing it better than everyone else.”

Mr Waldron is very positive about the island’s regulators, the Guernsey Financial Services Commission. “Some of the regulations are stronger than in the UK,” he says. 

“The GFSC regulates all sorts of people not regulated in the UK, like trustees looking after other people’s money and rightly so. Anybody operating on this island is under no illusion that you need to know who the owner of the asset is.”

This question of regulatory competition is one that finds particular favour with Dominic Wheatley, the combative chief executive of the industry’s promotional body, Guernsey Finance.

“We are better than London in transparency and AML [anti-money laundering provisions],” says Mr Wheatley. “I am absolutely certain there is more dirty money in London than the Channel Islands put together. We have the best AML regime in the world.”