Brandon 00:00
Hello and welcome to today's episode of the Guernsey Finance Podcast, the show where we bring you interviews with top thinkers from across the global financial services industry. For those of you who are not familiar, we dive into emerging trends and themes from investment funds to captive insurance and everything in between. My name is Brandon Ashplant. I am Technical Manager, Funds and Private Wealth at Guernsey Finance, the island's promotional agency for the financial services sector. Today, I'm delighted to be talking to Kerrie Le Tisser, chair of the Guernsey Association of Trustees, and Greta Pender, Chair of STEP Guernsey. Prior to becoming a trustee, Kerrie practiced as a senior private wealth lawyer in several leading law firms here in Guernsey, and so has extensive experience of advising on complex, high-value structures, including trusts, foundations, and various corporate entities set up by high net worth individuals and entrepreneurs. Kerrie, as we said, is chair of the Guernsey Association of Trustees, which represents and promotes Guernsey's fiduciary sector. Greta has more than 25 years' experience in the fiduciary services industry here in Guernsey. She specializes in working with ultra-high net worth individuals on their intergenerational wealth planning and asset protection needs. Greta is an associate director of the Chartered Governance Institute, a member of the Institute of Directors, a chair of STEP Guernsey, as we said, and a committee member of the Guernsey Association of Trustees. Today, we'll be drawing on recent data made available to us by the Guernsey Financial Services Commission to discuss why the Guernsey Private Trust Company structure, or Guernsey PTC as it's commonly referred to, is providing increasingly popular, typically for means of asset protection amongst the ultra-high-net-worth and high-high-net-worth individuals communities. So, without further ado, thanks for joining us both. Firstly, Greta, I understand you work closely with high-net-worth individuals, ultra-high-net-worth individuals, and families on asset protection. Can you tell me about the difference between the sort of asset types typically held by high-net-worth individuals and ultra-high-net-worth individuals, and how this sort of impacts, I suppose, wealth planning.
Greta Pender 02:27
Yeah. So to give some context, the tipping point from high-net-worth to ultra-high-net-worth is often defined at around 30 million US dollars. So given that sum, we often see that the ultra-high-net-worth individuals have a much wider diversity of assets, so this can include the more usual investment portfolios, but this tends to be alongside alternate investments such as private equity and hedge funds. There may be shareholdings directly in operating businesses, as well as property and personal luxury assets such as yachts and aircraft. From a wealth planning perspective, this really adds further complexity in structuring and managing the assets, and how that's aligned to the future needs of the family.
Brandon 03:07
And what sort of structures are appropriate for ultra-high-net-worth individual clients, and why?
Greta Pender 03:17
Sure, I mean these are of course subject to legal and tax advice being taken by the relevant individuals, just for the usual caveat, the trends we tend to see amongst the ultra-high-net-worth clients is looking to transfer their assets to be held via a trust or a foundation, and this is largely for asset protection or succession planning purposes. In some cases, though, giving up the actual legal ownership of those assets can be challenging, particularly if, for example, those assets include a business the settlor has maybe built up over many years, and so that's one of the circumstances where maybe a private trustee structure is worth considering.
Brandon 03:54
For those of you who don't know, can you just outline, Kerrie, what a private trust company is and how it is different to say you know just a regular trust company?
Kerrie Le Tisser 04:05
Of course, a private trust company or PTC for short is simply a company that acts as trustee of a specific trust or a group of connected trusts, usually for one family. PTCs don't offer their services to the public, unlike a regular license trust company, which is not usually restricted to acting as trustee for one family, a Guernsey PTC can apply to the Guernsey Financial Services Commission for a discretionary exemption from licensing, also known as a granted limited permission, where it meets certain criteria. The criteria include that it can only act as trustee to this to a specific trust or a group of connected trusts with a common interest, such as trust for one family. The PTC mustn't advertise or market its services to the public in any way. The PTC must be administered by a Guernsey license. Fiduciary, the licensee administering the PTC must confirm to the GFSC that it will retain sufficient knowledge and information about the PTC's ownership and control structure and its activities to be satisfied that the PTC will meet applicable laws and regulations in Guernsey. That's usually achieved by the licensed fiduciary providing a director, which would sit on the board of the PTC, or sometimes they'd provide a company secretary or resident agent, unauthorized signatory to the PTC. The PTC would usually be administered within the AML controls and framework of the licensed fiduciary. So, for example, the licensed fiduciary would carry out a CDD on the relevant parties. An alternative type of PTC is where the PTC would obtain its own fiduciary license rather than being exempted, and that might be appropriate in some circumstances where the family, for example, have sufficient expertise to run the PTC themselves. In which case they go for a full license from the GFSE. It's also just worth mentioning that an alternative to a PTC is a private trust foundation, and that's another type of private trustee structure that we're seeing more of, and that would be a PTF for sure.
Brandon 06:16
Kerrie, as I understand it, you have quite a bit of experience advising on complex structures such as high-net-worth individuals and entrepreneurial established ones. One of the main strengths of a PTC is that they are bespoke and so can be used for sort of multiple underlying asset classes. What are the other sort of main benefits of a PTC?
Kerrie Le Tisser 06:37
Guernsey's regulatory regime for PTCs is transparent and proportionate. Guernsey PTCs must fall within the AML regime framework of a licensed fiduciary, but there's no requirement for a PTC itself to be regulated if it falls within the criteria for an exemption. There's therefore no requirement for a PTC to appoint its own money laundering reporting officer or compliance officer, or for it to have its own AML policies and procedures, or for it to submit annual returns to the regulator, which is unlike in some jurisdictions where that can be quite burdensome and costly.
Brandon 07:14
And how can PTCs offer an element of control for clients? And how do Guernsey fiduciaries come into this?
Kerrie Le Tisser 07:24
So the settler could retain a degree of control by being on the board of the PTC themselves, alongside the licensed fiduciary that would also provide a director. So where the settlers on the board, they've got control in the way any director would on the board of a company. Alternatively, they could choose someone else to be appointed to the board or other certain individuals. So, for example, selected family members that meet certain criteria, or a trusted advisor. So they might choose someone with particular expertise. If the underlying assets they include property, they might appoint a property advisor that they know very well, or where the underlying assets are a family business, they might appoint someone that's involved in the family business or that's got significant knowledge of the family business to sit on the board of a PTC. In that way, they've retained some degree of control over who runs the PTC. Could also be a requirement for the set law or another individual that they nominate to consent to any changes to the board of the PTC. So, while they might not sit on the company board themselves, they retain kind of a veto over who can get appointed, and in that way, they retain another type of control. The constitutional documents of the private trust company would usually set out the board composition and requirements for appointment and retirement of directors, which the set law again can have some control over when they're designing the PTC with their advisers when they're setting it up. The set law's chosen directors would usually sit on the board of the PTC, alongside at least one representative from the fiduciary that administers the PTC, and in that way, the licensed fiduciary is able to attain enough oversight to meet their regulatory obligations. And the board is also strengthened by the experience and knowledge of the director from the licensed fiduciary.
Brandon 09:20
Greta, how can PTCs assist with intergenerational wealth planning and protecting wealth for the future?
Greta Pender 09:28
Sure. So, as Kerrie mentioned, the board makeup can involve the wider family, and so this can be one way to facilitate some of those conversations about succession planning, particularly where there's a family business involved who might be running that in the future as well. It's a good way to bring the next generation along in terms of the decision-making, and also kind of using it as a forum to hear about what what they their values and priorities are as well. It can also be used to enhance the financial literacy of the next gen around structure. In international finance centres, which is something we're hearing a lot of demand from clients at the moment. However, from attending STEP Global Congress recently, they shared some data from a study of over 2000 students who were all born after 1996 into entrepreneurial families, and it was quite surprising that over 88% had no intention of going into that family business. So maybe we'll see a shift in terms of what that next gen are bringing to thee board of the PTC. Maybe they're going to be less focused on that historic family business, and they might push towards diversifying into areas that interest them, such as digital assets, startups, and possibly deploying funds into philanthropy too.
Brandon 10:48
Greta, you've travelled to the Middle East recently to meet with clients about Guernsey's offering. Do you find there are jurisdictions that have more interest in PTCs? If so, where are these clients generally from, and what makes it attractive to them?
Greta Pender 11:07
Yeah sure. So a PTC is a great solution for Middle East families, particularly as we've touched on, where giving up that sense of control and legal ownership of assets is a challenge, and a trust might also still be a slightly under unusual concept, based kind of under civil and also Sharia law. So, by having a PTC in place, this can enable that ongoing involvement that many clients from the region we find are keen to maintain, if possible. I understand from meetings in the region that interest in and knowledge of structuring options is increasing generally, so it's really important that we in industry are also working with Guernsey Finance to make sure that matters like the advantages of PTCs are being shared across these key jurisdictions.
Brandon 11:52
Kerrie, data from the Guernsey Financial Services Commission shows us that 112 of the total 126 PTCs are incorporated here in Guernsey. What does this tell us about Guernsey's financial services ecosystem relative to other sort of similar jurisdictions?
Kerrie Le Tisser 12:14
I would say that tells us that Guernsey is a solid choice for setting up a Guernsey PTC. The fact that a significant portion of PTCs that have obtained the exemption from the GFSE are structured as Guernsey companies highlights the fact that Guernsey is very much a one-stop shop for PTCs. We have a proportionate and appropriate regulation, robust legal structures like Guernsey companies, tax neutrality, and a mature and experienced private wealth sector, with lawyers, trustees, accountants, all with a significant amount of experience in advising and looking after the wealth of high net worth individuals, and dealing with a wide variety of types of structures, including PTCs. So all of this together tells me that Guernsey is an ideal choice of jurisdiction for setting up PTC.
Brandon 13:04
Final question to you both: As the private wealth landscape continues to evolve, what trends do you see playing out, and how can Guernsey structures like the PTC play a role?
Kerrie Le Tisser 13:17
We're seeing a lot of clients reviewing their structures at the moment, so this I'm talking about existing structures. We've got a lot of clients that have been looking at getting refreshed tax advice because the structure's been around for a few years. They've had changes in circumstances, either the death or loss of capacity of someone that's got power within the structure. Office holders. We're also seeing a lot of outdated trust instruments, for example, that have been around for a long time that may need refreshing, and all of this is coming together with clients going to their advisors, getting up to date advice, and looking very closely at their structures. And I think now's a very good time to introduce a new private trust company to those existing structures. So that's one big trend, and I think it's something for us all to be bearing in mind. Those that work with high net worth individuals, those listening to the podcast that might be advising high net worth individuals looking at their structures, that now's a good time to think about whether or not a private trust company could be incorporated in terms of new structures and the opportunities for setting up new structures, we're seeing more and more new wealth creators. So this is new wealth, not those inheriting wealth or the second or third generation of a family. New wealth creators such as tech entrepreneurs, social media influencers, sports stars, musicians that are very wealthy and suddenly very wealthy, and getting legal advice, and often they're not experienced with private wealth management. They're the first generation of wealth. They're often internationally mobile. They've got quite unique circumstances, and I think in those. Cases a private trust company could be an ideal opportunity for them to build a team around them to look after their wealth, and so I think that's the trend for us all to watch and be mindful of that. Those types of clients are PTC.
Greta Pender 15:14
Picking up the point on the new structures that we're seeing, and there is increasing complexity and diversity in terms of both the assets, but also the clients and the makeup of their families. Their goals tend to be less focused on tax planning than in the past, and much more on asset protection and succession planning now. And so, I think, you know for the reasons we've raised, that a PTC fits really well in terms of trying to guide that through the family involvement, and also we do have a really strong regulatory differentiator there as well. So I think that's something where if our clients are getting more complex, we need to consider these more sort of diverse structures as well.
Brandon 15:58
Well, thank you very much for joining us on the podcast today, Greta and Kerrie. If you would like to find out more about Guernsey's offering, visit our website guernseyfinance.com. If you want to learn more about Guernsey's success in sustainable finance, tune into our sister podcast, the Sustainable Finance Guernsey Podcast. Thanks also to you for listening. If you enjoyed this discussion, we have a great list of interviews on the Guernsey Finance Podcast channel. You can check them out by searching for Guernsey Finance on your preferred podcast platform. We look forward to welcoming you back soon. Until then, it's goodbye from Guernsey.
