Much has already been said about the life-altering changes brought about by the COVID-19 pandemic with, quite understandably, a trend towards analysing the widespread negative consequences many of us have experienced, largely as a result of the immense restrictions imposed on our lives.
However, bucking this trend, the growth of private client work offshore appears in some respects (and at least to date) to have continued on unaffected in any profoundly negative sense by this recent turmoil. In fact, the impact of the pandemic on private clients has been the opposite; many have experienced increases in their personal wealth that have been nothing short of startling. According to the Global Wealth Report[i] published by Credit Suisse in June 2021, more than five million people became millionaires across the world in 2020 despite economic damage from the pandemic. In addition, the report notes that the number of ultra-high net worth individuals, usually defined as those having investable assets of more than US$30m, grew by 24 per cent worldwide in 2020, the fastest rate of increase since 2003.
Experience dictates that the generation of immense personal wealth results in increased demand for professional services such as fiduciary appointments and the private client industry in the Cayman Islands has seen this demand jump significantly. Official statistics published by the Cayman Islands General Registry in January 2021 showed that the number of new trusts registered in the jurisdiction grew in 2020. With trust business booming, it is interesting to take a closer look at exactly what types of trusts are being formed in the jurisdiction, and who is forming them.
Trusts In The Cayman Islands
Interestingly, tax mitigation is no longer the sole (or in many cases, the primary) reason for the establishment of Cayman Islands trusts and the reality is that the circumstances and needs of modern clients vary significantly. The following are just a few examples of the types of trusts being established in the Cayman Islands:
As can be seen from the above, the variety of modern forms of trusts available in the Cayman Islands, the protections they offer, and the flexibility with which they operate ensures that the jurisdiction continues to attract a steady stream of trusts work from around the globe.
So, what does the future hold for the private wealth space in the Cayman Islands? As noted in the Global Wealth Report, the short-term consequences of the COVID-19 pandemic for wealth "confounded expectations", with personal wealth and wealth macroeconomic indicators appearing to be "on different trajectories". The report predicts a continued trend of growth in personal wealth and this seems to be the trend reflected in the circumstances of the client base that is attracted to the Cayman Islands. Here, early signs are that growth will continue and at a steady pace particularly with immigration to the Cayman Islands becoming so popular among the ultra-high net worth set. As a result, trustees of Cayman Islands trusts can expect the administration of those trusts to be increasingly hands-on and their mandates to widen significantly to include new service lines. Related to these developments, the need for wealth managers, relocation specialists, private bankers, commercial and residential property agents, among other skilled service providers, is significant and very much on the rise.
In terms of challenges, the regulatory burden for clients and trustees will undoubtedly continue to increase and trustees in particular will need to pay close attention to the ever-evolving requirements associated with, for example, anti-money laundering initiatives and regulations around economic substance and beneficial ownership. A growth in client attraction to, and investment in, new forms of assets such as digital assets may also introduce greater volatility into traditional structures and expose all involved to more risk. And as clients and their business recalibrate to operate in a vastly changed global environment, private client advisors can expect new, interesting, and possibly very delicate situations to arise that require careful handling, good communication, and hard thinking.
As the old saying goes, change may be the only constant in the years ahead. But, having established a culture of flexibility and robustness already, the Cayman Islands private client industry continues to face a strong and vibrant future.
Partner and head of Carey Olsen's trusts and private wealth practice in the BVI and Cayman Islands. Bernadette has a broad private client practice advising on wealth structuring and estate planning matters, including the administration, restructuring, and termination of trusts, as well as probate and testamentary issues. She also has significant experience in trust litigation, regularly appearing before the Grand Court of the Cayman Islands on multi-party contentious trust disputes, estate litigation, and other cross-border private client disputes. Bernadette is admitted as a barrister and solicitor in New Zealand (2002) and Australia (2005), and as an attorney-at-law in the Cayman Islands (2008).
Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Jersey, Cape Town, Hong Kong, London and Singapore.