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In 2020, Guernsey was the jurisdiction chosen to establish my own employee benefit and private client group, with three other like-minded individuals, called The UAP Group. Subsequently, we completed our first acquisition, Concept Group, a well-respected Guernsey-based international pension and private client company, in October 2021. The Group currently has offices in London and Guernsey with plans to open in Spain, South Africa, and the US later this year.

Through my role, I support the local industry group and sit on the technical ESG and marketing panels of the Guernsey Association of Pension Providers alongside being a member of the main committee.

Having a personal interest, and being exposed to the US tax system myself, I recently developed a retirement plan that is more suited to US nationals working overseas and US-connected individuals.  This pension plan is innovative and came about after several years of research working with key tax people in the US and overseas. The plan allows individuals to save for retirement and at the same time be free to change their country of residence and ultimately retire in the US or overseas. Clients can get all of this with the benefit of freedom of investment choice, which is often not available for this group of individuals.

Often I get asked, why did we choose to base the UAP Group in Guernsey? The decision was an easy one. After spending the last 12 years living in the island, it’s a pleasant and safe place to live and it has excellent links to both the United Kingdom and Europe, giving us easy access to the rest of the world. From a business perspective, for a group which specialises predominantly in international pensions, Guernsey is the obvious choice. The island has a long-standing and excellent reputation internationally for its regulation, stability and expertise in financial services, especially pensions.

As a jurisdiction, Guernsey is committed to maintaining its international and domestic reputation as a leading centre of substance for financial services. As such, it is whitelisted by the OECD and the EU. It meets the tax transparency requirements of the OECD and US and is branded as a co-operative jurisdiction by the OECD.

The island’s pension legislation dates back to 1975, giving it almost 50 years of pension experience. Its law is well established and understood, and there are many licensed and regulated firms involved in international pensions in Guernsey with more than 90 offering either trustee, administration or both services. Add to this a wide range of experienced investment, banking, actuarial and accounting firms providing support, and this gives consumers a wide variety of choice. It also leads to a competitive market and the probable cause for the island being the pioneer of many innovative pension solutions for consumers.

Guernsey is a very well-regulated jurisdiction and consumers of its pension products can enjoy regulation of the pension providers and also regulation at scheme level. In addition, consumers have access to an impartial ombudsman to resolve complaints. Guernsey also prides itself on being a member of the International Organisation of Pension Supervisors (IOPS).

Guernsey is committed to promoting and facilitating sustainable finance and was one of the first international finance centres to create the green funds regime. It is also signed up to the UN charter on sustainable finance.

As a pension industry, we are currently taking this commitment from the jurisdiction and developing an ESG code for pension providers that will help to assist them when considering climate change and other sustainability issues.

Consumers have a choice in Guernsey of how they have their retirement plans structured. This is because Guernsey is one of a few jurisdictions that can offer pensions arrangements through the traditional trust-based solution and through a contract pension solution. The domestic pension legislation enables providers of both corporate and personal pensions to use contract law or trust law when establishing local or international arrangements. This is increasingly an important factor for the consumer, given that Guernsey operates in the international space. Civil law jurisdictions can often get confused by pensions written under trust, which can have unforeseen consequences for members. This is easily avoided when plans are written under contract as they understand the contract law framework, whereas trust law can cause difficulties such as adverse taxation to members, which often is avoided when written under contract.

We have, as a result, developed several very popular employer-based pension solutions that meet the compulsory criteria while giving employers and employees the flexibility that has proved popular over the years.

When people look to establish a pension plan for either themselves (personal arrangement) or a company it is important to consider several factors. These include:

All the above factors are important for people wishing to establish a pension arrangement. Unlike other financial planning needs, a pension is a long-term arrangement. You want the arrangement to be flexible enough to be with you in the early years, as you accumulate the funds in the plan, but also in the retirement years, as your goals and often the location of where you live will change. It can be costly to have to keep changing product or provider as fees inevitably will apply. This is one of the reasons Guernsey is often chosen. Guernsey plans are flexible to allow you to move around the world and live in different places while keeping the same arrangement.

UAP & Concept Group are well placed to provide these pension services. Concept Group was established in 2003 and has more than 50 professionals. We have pension arrangements for employers and individuals that are portable and frequently written under contract, although trust arrangements do work well in certain circumstances.

Concept has extensive multi-jurisdictional experience in pensions and other financial service areas. The company has a diverse Board of Directors who have more than 40 years of international pension and finance experience.

Visit https://cgl.gg/ for more information

The Aspida Group offers a broad range of practical, proactive and forward-thinking advice as well as business support services. The Group is able to assist in matters of fund and wealth management administration, fund structuring, drafting of documentation and agreements, fund and company listings, liaison with regulators, as well as bespoke services including project management, information delivery, business outsourcing, registration services, compliance support, para-legal functions, anti-money laundering and other related areas of activity.

The Group is dedicated to working with clients to provide individual, business-oriented solutions to their problems. Aspida’s independent status and creative approach enable the company to rapidly adapt to business change.

Richard Bray joined Aspida in 2007 and has been working in Fund Administration since 1985, including 13 years with a major Swiss financial institution. Richard has worked on a wide variety of funds, from relatively simple long-only bond and equity funds, through to complex structured products and including private equity, property, commodity, derivative, and hedge funds of various strategies.

Principally from an operational background, Richard has also worked closely with clients with the structuring of their products and following on through to the successful set-up and running of the fund. Richard has in-depth knowledge of all aspects of fund operations across a wide variety of fund types and strategies.

In light of Europe’s new Anti-Greenwashing rules coming into effect, can you tell us a little bit about the impact greenwashing has on the fund management industry?

Greenwashing, which is falsely reporting, or dressing up something to be ‘green’ when it is not really so, is a pernicious threat to anyone looking to place their money in investments that will help to benefit the environment.

Imagine that you invested in a fund that claimed to have green credentials, but then you later found out that the fund invested in items such as oil pipelines (oil being less polluting than coal and transporting it by pipelines is far better and less risky to the environment than tankers), open-cast uranium mining (nuclear power stations don’t emit greenhouse gasses), and rail infrastructure that was primarily used for transporting logs felled from rain forests (because rail is less polluting than road). I think you would quite rightly be rather sceptical of the green credentials of that fund.

The threat of scenarios such as the rather extreme example above could give investors doubts about putting their money into such products. This would then slow down the growth of the green investment fund sector unless some guarantees can be made of the veracity of the environmental claims made in fund literature.

The need to avoid greenwashing and provide a decent return to investors then throws challenges to the fund manager. How can they demonstrate that their investments are truly environmentally friendly? What can they do to engender the trust of the investor community and prove that the trust is well-founded?

The answer to these questions tends to be found within sets of defined rules on investing and reporting.

Although these rules place more work on investment managers and fund administrators, we would expect to see more funds being set up to comply, more money flowing into the sector, more money being invested in environmentally beneficent projects and thus a positive impact on the environment.

What will be the impact of these new rules in your opinion?

Europe’s anti-greenwashing rules are one in a developing line of regulations and guidelines that set out rules for green investing. For instance, we already have The United Nations Principles for Responsible Investing, the Guernsey Green Fund Rules, and the International Capital Market Association’s Green Bond Principles.  So now Europe brings us their Sustainable Finance Disclosure Regulation (“SFDR”) which sits with their Low Carbon Benchmarks Regulation and their Taxonomy Regulation as part of the EU’s commitment to enabling the financing of sustainable growth.

As you may guess from the name, the SFDR focuses on imposing mandatory reporting requirements on Alternative Investment Fund Manager and on UCIT Managers where their products are sold into the European Economic Area. It also demands that investment managers consider the principal adverse impacts of their investment activity. The more claims you make about the product targeting environmentally friendly investments, the more you have to do to back up these claims.

Meanwhile, the Taxonomy Regulation sets out which economic activities can be deemed to be ‘sustainable’, with one of the many defining criteria being that ‘an economic activity should not qualify as environmentally sustainable if it causes more harm to the environment than the benefits it brings.’

So what Europe has done is to provide definitions of environmentally beneficial investments and define reporting standards to follow if you make green investment claims. This should help to give assurance to potential investors that their money will be used as claimed; for example, the oil vs coal example I gave above would, one hopes, fail the Taxonomy test

Although these rules place more work on investment managers and fund administrators, we would expect to see more funds being set up to comply, more money flowing into the sector, more money being invested in environmentally beneficent projects and thus a positive impact on the environment.

Which is undoubtedly a good thing.

What has been the impact of the COVID-19 pandemic on the fund sector in Guernsey?     

The fund sector in Guernsey has proved itself to be resilient during the pandemic. We were forced to adapt to this new environment, this ‘new normal’ but adapt we did. Firms successfully embraced working from home. Virtual meetings became the norm whether between team members, Boards, or potential client meetings.

We were of course able to come out of lockdown and return to the old normal (without travel abroad) sooner than most, but we learned from the experience.

So where are we now, as the world is slowly but surely moving to ‘living with COVID’? Discussions with various people within the fund sector reveal a pretty universal theme of ‘very busy dealing with the new business’. This reflects, I think, on the resilience of the fund sector.

Being able to continue operating throughout the pandemic; and being one of the few jurisdictions that were operating business as usual, allowed us to demonstrate to the finance world the benefits of working with us. Their business was, and is, in good hands.

We do still have some challenges; for example, being able to demonstrate proper substance when people cannot readily come to the island on day trips for board meetings springs to mind. But the fund sector is up to these challenges, and I find that the sector is one that throws up solutions to problems rather than becoming mired in them.

How is Brexit affecting the sector on the island?

Until the UK finalises its financial services agreements with the EU, we will not know the full extent of the effect that Brexit has had on the Guernsey Fund Sector. There were some immediate effects: Guernsey was to be granted third-country passporting rights for marketing funds into Europe, but with Brexit, that process was put on hold.

The Fund Sector has seen the movement of business both ways as a result of Brexit, but our resilience and ability to adapt and move quickly should put us in good stead as matters develop.

What do you think the future holds for funds in Guernsey?

My crystal ball is rather murky on this matter. But our fund sector has demonstrated its strength and resilience. It is able to lead the way in innovations such as the Guernsey Green Fund, it is able to react quickly as financial markets evolve, and it is able to work with Governments and Regulators across the world. While we have strong regulators, and skilled and experienced personnel to support the fund sector, I believe we are well placed to meet whatever challenges are thrown at us.

His focus is on advising and managing the larger and more complex structures for both institutional and private clients.

The Dixcart Group office in Guernsey was founded 50 years ago and is one of ten offices covering nine jurisdictions. Other offices are located in Cyprus, Isle of Man, Malta, Portugal (Lisbon and Madeira), St Kitts & Nevis, South Africa, Switzerland and the UK.

Dixcart globally provides effective solutions to both private and institutional clients, by establishing and managing structures in appropriate international jurisdictions as well as offering residency and citizenship advice for those clients looking to relocate themselves, their families or their business.

The Guernsey office provides wealth preservation and succession planning solutions to private clients, with extensive experience in establishing and managing family offices, trusts and foundations.  Alongside this, the office also provides services to institutional and corporate group clients and offers experience in administering the varied structure types generally used. Services also include company secretarial and corporate governance support to mid-tier and listed companies.

Why do more people need to consult a professional who can help them with wealth management, especially in the current uncertain environment?

There is an ever-increasing number of individuals creating wealth. This wealth is not just generated through the traditional routes of property, businesses and investment, but also through new technologies such as e-commerce and e-gaming, as well as higher incomes being earned in sport and entertainment. Much of this newer wealth is being generated at a greater pace and a younger age.

Clients and their families are increasingly mobile with family members widely spread across multiple jurisdictions. They require professional guidance for the correct structuring and planning of their affairs to ensure compliance with the differing jurisdictional requirements, while still meeting their overall goals and objectives. The correct professional adviser will offer advice and guidance and suggest solutions that the client might not even be aware of, as well as provide the comfort of having the knowledge and experience in dealing with such technical matters. In today’s world of obligations pertaining to multiple tax treaties, exchange of information and substance requirements, together with varying regulation and legislation from jurisdiction to jurisdiction, failure to comply can have substantial consequences.

With the current pandemic and its effect on the world economy, governments are going to need to fund their expensive national COVID-19 support programmes. Tax revenues will be down from traditional tax sources, and governments will look to collect additional tax from the individually wealthy.

With the current pandemic and its effect on the world economy, governments are going to need to fund their expensive national COVID-19 support programmes. Tax revenues will be down from traditional tax sources, and governments will look to collect additional tax from the individually wealthy. There is therefore even more reason for clients to ensure that their affairs are being reviewed and looked after by appropriate professional advisers.

What’s the best wealth preservation advice you can offer to our readers?

Know your goals and objectives. Think carefully about what you want to achieve and review these goals regularly. If your goals are not clear and cannot be clearly communicated, you are unlikely to attain them.

Consider how you are going to achieve these goals and objectives. You need to choose your professional advisers and service providers with your own goals in mind. Track record and experience is important but ensure that this experience is relevant to you and your circumstances. The advisers you choose must not only be good at what they do, but be professionals that you must be able to work alongside in the longer term as well.

Plan for the future. As soon as the next generation are old enough, involve them in the process. This will ensure continuity and an inflow of new ideas.

What are the current trends re-shaping wealth management?

For some time, tax has been less of a motivator in terms of wealth management with wealth protection, preservation and succession planning becoming more of a priority. This trend has been highlighted during the current pandemic as the worldwide lockdown has given people time and inclination to review their affairs. We are receiving many requests for advice on wealth protection, preservation and succession planning. Good corporate governance, transparency and tax compliance is far more important than the privacy and cheap structures of the past.

Good corporate governance, transparency and tax compliance is far more important than the privacy and cheap structures of the past.

Social and environmental concerns are much higher on clients’ agendas, particularly when looking to invest, as is reputational awareness regarding where the individual’s or family’s wealth is being managed.

Clients and their families want to be more mobile and flexible and need appropriately aligned advice.

With the potential for further lockdowns, consideration is being given as to where individuals and families wish to live.  We are seeing an increase, within the Dixcart Group, of clients looking to move to jurisdictions perceived as being ‘safer’, with no doubt increased numbers of private residences.

What is the impact of ‘Economic Substance’ (ESR), as this new requirement is being introduced across circa 140+ international jurisdictions?

ESR is very much an extension of the historical ‘mind and management’ requirements and the BEPS legislation, introduced to ensure structures meet the appropriate tax residency test. Where jurisdictions already have a good track record of tax compliance and harmonisation, ESR has effectively put what was best practice for these jurisdictions, into legislation.

This has led to a review of offshore structures by clients and their advisers with questions being asked as to the structure’s purpose and whether this is still relevant under the new legislation. Decisions are then made whether to migrate them onshore or to a more suitable jurisdiction, or simply close them down.

Jurisdictions with a less favourable track record of meeting international standards are now facing an uphill battle to meet the ESR legislative requirements that they have had to implement, with the result that banking and lending institutions are reviewing all of the arrangements with structures located in these jurisdictions.

We are pleased to report that in March 2019, the EU Code of Conduct Group approved Guernsey’s substance regime. This was followed by further endorsement in July 2019 by the OECD Forum on Harmful Tax Practices, who concluded that the domestic legal framework of Guernsey was in line with agreed standards and therefore “not harmful”.

Why is Guernsey such a popular location for High Net Worth Individuals to relocate to?

Guernsey is a popular choice for individuals looking to relocate, with its proximity to the UK and mainland Europe, together with its beneficial tax regime.

Guernsey has no capital gains, inheritance or other wealth taxes. There is no VAT or goods and service tax. There is also an attractive tax cap for newcomers to the island.

The island has the added benefits of beautiful scenery and a slightly slower-paced, more traditional way of life with the reassurance of personal safety and excellent community spirit.

What sets your firm apart from other wealth management consultancies?

Dixcart Group is privately owned and completely independent. We are not tied to any other Group that may have conflicting goals, nor owned by a Private Equity House that has performance targets to be met, nor listed on the Stock Exchange with an expectation of shareholder returns.

This means that we can provide clients with impartial advice and the best solutions to meet their specific needs.

There is constant communication throughout the Group through regular meetings and more recently via electronic conferences, to ensure that everyone is kept abreast of developments in the wealth industry. There are deep friendships that run, not only within and across the Dixcart offices, but also with our clients where we have often been trusted advisers across multiple generations.

Email: steven.dejersey@dixcart.com

Tel: +44 (0)1481 738700

Ben Rhodes is a Director at Grant Thornton, Channel Islands. He is a Chartered Accountant, UK Licensed Insolvency Practitioner, Certified Fraud Examiner and qualified Trust and Estates Practitioner. He has specialised in the areas of restructuring, insolvency and forensic investigations since 2003, helping company directors, creditors and other stakeholders. He began his career in London before moving to the Channel Islands in 2012.

 Grant Thornton has the largest single dedicated recovery and reorganisation practice in the Channel Islands, with three UK Licensed Insolvency Practitioners supported by a team of experienced accountants and fraud examiners. Here Ben tells Finance Monthly more about the insolvency and restructuring processes in the Channel Islands and specifically Guernsey, as well as what makes him a thought leader in the sector.

 

What are currently the hottest topics being discussed in relation to insolvency and restructuring trends in the Channel Islands?

The concept of “Insolvent Trusts” has gained much attention in the Channel Islands in the last couple of years and remains a hot topic now.

It is debatable whether a Trust can become “insolvent”, as it does not have its own separate legal personality. However, a Jersey ruling in 2015 in Re Z Trust has helped provide clarification. This matter concerned a Trust that had insufficient assets to meet its liabilities, as they fell due and was therefore insolvent on a cash-flow basis. The Court recognised that it was incorrect to describe the Trust as “insolvent”, however acknowledged that the terminology was helpful in ascertaining how the Trust should be treated and the duties of the Trustee.

The Z Trust ruling is helpful, however there remain problems to be overcome. There is no insolvency regime in place in respect of Trusts and therefore, no clear remedy for creditors and other stakeholders. This lack of regime results in additional cost. Furthermore, there is difficulty finding a replacement for the incumbent Trustee in these situations.

 

Which sectors would you say are faced with insolvency and restructuring proceedings more than others in Guernsey?

As expected of an International Finance Centre, we deal with a significant volume of solvent restructuring matters in relation to Trust and Fund structures in Guernsey. These structures have typically come to the end of their useful life and are therefore being wound down. The structures often include entities in various jurisdictions such as Luxembourg, Cayman, BVI and Bahamas, as well as the UK and therefore, we work closely with our international Grant Thornton colleagues. We also work very closely with our tax colleagues in relation to these matters as decisions are often driven by tax considerations.

 

Do you see any need for legislative change regarding insolvency in Guernsey?

Guernsey is currently embarking on a reform of its commercial and personal insolvency legislation. I was engaged in 2016 by the States of Guernsey to assist with the changes and to provide recommendations on the proposed law reform.

The first phase of the reform is anticipated to include the introduction of insolvency rules; a requirement for independent office holders in an insolvent voluntary winding up; greater consultation with creditors in an insolvent winding up; and greater powers for office holders to obtain information from directors and officers.

These changes will make the insolvency regime far more robust and will enhance Guernsey’s reputation as a safe place to do business.

 

You have worked on numerous high profile cases in the Channel Islands and the UK - what has been your flagship piece of work in recent years and how did you apply particular thought leadership to this scenario? (94)

We continue to be busy with regulatory and insolvency investigations in the Channel Islands. Our clients may include Trust or underlying entities that have been the victim of fraud; or beneficiaries and investors seeking compensation.

Our forensic investigation work may include isolating and quantifying the fraud, interviewing suspects and witnesses, gathering and preserving digital and other evidence and working with the legal teams to pursue prosecution.

Our in-house Business Advisory and Compliance teams also assist clients with putting processes and safeguards in place to reduce the risk of fraud occurring in the first place.

 

As a thought leader in this segment, how are you developing new strategies and ways to help your clients?

 As a member of the Association of Restructuring and Insolvency Experts (ARIES) Legal and Regulatory Committee, I have been assisting with the implementation of Guernsey Insolvency Practice Statements (GIPS). These will help to provide best practice guidance to practitioners in Guernsey, in advance of the law reform. The GIPS will cover such practical areas as conducting investigations, reporting on director conduct, the holding of creditors’ meetings and pre-packaged sales of business through Administration.

The GIPS are expected to be released within the following two months. ARIES has also begun drafting Jersey Insolvency Practice Statements (JIPS) to offer similar guidance to Jersey practitioners.

 

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