Guernsey’s trust sector eyes opportunities in the emerging markets

Debate at a recent trusts forum in Guernsey has highlighted how the local trust sector is increasingly keen to explore opportunities in the emerging markets, according to Peter Niven, Chief Executive of Guernsey Finance.

Speaking at the event titled, The Future of Trusts – Guernsey, both Michael Betley, Managing Director of Trust Corporation of the Channel Islands and Paul Hodgson, Managing Director of Butterfield Trust in Guernsey, highlighted the importance of looking further afield to the emerging markets for new business going forward.

“The comments from these leading fiduciary professionals locally are a significant endorsement of the work that Guernsey Finance has been leading in the emerging markets,” said Mr Niven.

“They highlight the fact that while our fiduciary sector remains buoyant, we cannot be complacent and need to look to the future. We have to attract business not just from our traditional centres such as London but also from developing economies where there are increasing numbers of high net worth individuals looking for a safe and secure home for their wealth and assets.

“Guernsey has a strong heritage in providing these fiduciary solutions and our experience and expertise in wealth management is a key message that we are emphasising to advisers and clients in these emerging markets. We are aware that attracting business from these countries is likely to have several more hurdles to overcome than usual but that is why we need to establish our roots early. Guernsey Finance has been pushing back the boundaries in terms of establishing the name and brand in China and India and we have plans to visit Russia during the first half of this year. It is encouraging to hear that our efforts are appreciated and indeed, supported by the industry and we look forward to working with an even greater number of firms going forward.”

Mr Hodgson told delegates at the event that fiduciaries could not rely on simply servicing existing clients or attracting business from traditional centres. He said that the UK market is still important but there is a need to look further afield.

It remains the case that there are also opportunities in the US where Guernsey can provide a safe and secure location for well advised structures. Providers need to be aware of US-related developments, such as FATCA and the Dodd-Frank Act but there is a space for Guernsey firms which can offer high quality and complex solutions to perhaps a smaller number of larger value clients.

Mr Hodgson added that the economic growth in Asia means that it offers the greatest potential. His firm has been involved in the work of Guernsey Finance and has won business from the Far East. There are practical challenges, in particular with the way the structuring is presented and therefore the fees that can be charged. Cayman and the British Virgin Islands are well established in the region but Guernsey has substantial breadth and depth to its offering and – unlike the Caribbean region – a time zone which allows business to be conducted with the Far East during the same day.

Mark Lea, Partner at Lea & White in Hong Kong, spoke at the event on the challenges of developing a successful Chinese private client portfolio. He noted that there are potential opportunities for attracting private client business from the country but the culture means that centres such as Guernsey have to start building relationships as early as possible.

Speaking after the conference, Mr Betley said: “When China liberalises its attitudes to capital markets and allows its citizens to invest abroad it is predicted that there will be a wave of opportunities for centres like Guernsey but to take advantage of that we must get to know these markets. By being in the region we too can share in the new opportunities which the increasing wealth and resources in that region will generate. We also learnt that whilst our skill set is highly regarded and sought after, culturally and commercially we have a lot to learn from understanding how business is won and undertaken and it will be a lot harder than we have been used to. However as our traditional markets retract it is essential for us to look elsewhere.”

The comments come as reports show that China has overtaken Japan as the world’s second-biggest economy and GK Dragonomics, a Beijing-based economic consultancy, is predicting that China will replace the US as the world’s top economy in about a decade. In addition, the latest in a series of ‘The World in 2020’ reports from PwC concluded that the global financial crisis has accelerated the shift in power to emerging economies, including Brazil, Russia, India and China – the so-called BRICs.