The Channel Islands are increasingly being considered as the main base for trust structures, a professional in the sector told the Guernsey Private Wealth Forum in London.
David Bowen, who leads Deloitte’s private office consulting practice, said that the current climate had become challenging for high net worth families, both in the issues they faced and the issues confronting the jurisdictions where their wealth is based.
Bowen said: “We are starting to see a shutdown of jurisdictions which people would have typically looked to use, and they are relocating trusts or shoring up substance requirements where trusts are involved.
“The focus is to move away from areas seen as tax havens to areas with a more robust framework, and a real focus and defensibility around using the location.
“We are seeing significant interest in the Channel Islands right now from the BVI, the Cayman Islands and from US families internationalising their affairs.
“They are not looking towards Luxembourg or Dublin and are starting to look to the Channel Islands, and even ignoring the double taxation treaty benefits that they would otherwise be able to access,” he said.
Concerns
Bowen highlighted political and economic stability and the quality of service providers as key for any jurisdiction. And while he said that privacy concerns had not, in his experience, led to families seeking to relocate family office structures, data security was becoming a greater concern.
Bowen added: “There is a real fear of being hacked, where the entire positioning and wealth of the family can be destroyed. Families are looking at how to protect themselves better from data and cyber hacking.”
Bowen described the current economic and geopolitical climate as a “Vuca” – volatile, uncertain, complex and ambiguous – world.
He said: “But that offers tremendous opportunity and we are seeing shrewd clients looking at that and creating different ways of doing things. Opportunistic actions and being brave is the way forward.
“There is a seismic shift in the way family offices organise themselves – it’s no longer about minimising tax leakage. They are saying ‘we don’t want to be the family equivalent of Starbucks, make us more transparent, help to remove potential pinch points’.
“Reputational risk for those families is one of the biggest limitations that will present itself over the next few years.”
Family office operation
Guernsey said in a statement that it is poised to make enhancements to its family office capabilities from next year.
Bowen added: “We are starting to see the people who created the family wealth and who sit at the head of these families wanting to professionalise and structure themselves to compete with the best in class.
“In many ways they are filling the void created by the big financial institutions post-crash, and now private capital as an asset class will become a big determining factor, with the shift in investing power going directly down to individuals.”
