First published on Financial Times.
28 October 2024 Protecting the legacy of the new generation of wealth generators
Their income may be generated from ad revenue or brand partnerships instead of inheritances and property sales, but the new generation of wealth creators is no less in need of sound advice and a network of trusted providers to guide them through proper financial and estate planning.
Whether it’s a star of the creator economy like Charlie d’Amelio or Emma Chamberlain or world-class athlete like Mikaela Shiffrin or Michael Olise, the need to navigate the complex world of financial services will always be there.
A recent Harvard business review article described creators as ‘change agents’, and estimated the creator economy capable of affecting $130billion of purchasing decisions annually. A Goldman Sachs Research report highlights that there are at least 50 million economically consequential creators worldwide, contributing to the total addressable market of the creator economy of $480 billion. Still not part of ‘the institution’, this massive global community struggles to find support from traditional financial services.
A younger person who quickly generates a significant amount of wealth will undoubtedly suffer from inexperience navigating this complex world. Forbes reported that the cost of financial illiteracy was estimated at $352 billion in the US alone in 2021. There are practical considerations such as estate planning and cash flow management for long-term benefit, combined with more unique issues like the fact that being in the public eye can make these clients a more obvious target for those who may try to take advantage of this lack of experience and offer ‘quick fix’ solutions likely to backfire. They need experts comfortable managing complex family dynamics and minimising potential conflicts between families, agents and advisors, and in Guernsey, with one of the largest populations of STEP-qualified individuals in the world, there are a multitude of legal and tax advisors who can help.
That planning is supercharged by the robust case law history, fiduciary and company legislation, and Guernsey’s Royal Court’s infrastructure, years ahead of some of its peers in terms of adoption of technology. Guernsey Trust law provides an excellent framework that newcomers to the idea of working with fiduciaries can rely upon.
There are numerous types of Guernsey trusts that could be considered, including discretionary, purpose, reserved power, or fixed interest trusts, with the option for revocability. All of these instruments are ideal to help a client ensure they have asset protection and management plans in place, support confidentiality, could be used to help control spending if long-term asset protection is a concern, could include provisions for guardianship of minors, or even ensure that instructions securing a client’s digital legacy are enacted clearly and per the client’s wishes. If their entire life’s work is digital, that’s a lot of content to consider the value and management of in the long-term. The Guernsey Protected Cell Company (PCC) could be a very effective structure for managing varied income streams, whether by source or geography, which segregates different assets with completely separate profit and loss but remaining consolidated under the same ownership (if so desired). Guernsey’s Foundations also provide a compelling option for family governance and philanthropic concerns.
This NextGen of private clients will also require trusted advisors to ensure their plans meet all the regulatory requirements of their chosen jurisdiction. One of the first jurisdictions worldwide to regulate fiduciaries, Guernsey is well-regulated, reputable and operates under a pragmatic risk-based approach. Guernsey is compliant with OECD and FATF standards and world-leading when it comes to AML and CFT regimes.
New wealth creators and NextGen clients bring with them an emphasis on changing values—a recent Guernsey Finance report on Managing Changing Families highlighted the fact that sustainability is a core concern for these clients. Guernsey is well suited to support this changing value proposition by facilitating generational development as well as goal alignment to ensure the younger generation of decision makers is heard and respected accordingly. Indeed one’s philanthropic objectives form a foundational component of personal branding—just look at the late (great) Kobe Bryant’s legacy with After-School All Stars or the Venus and Serena Williams Tennis Academy. GB Olympic sailing star Hannah Mills is passionate about the environment, founding an initiative called the Big Plastic Pledge aimed at changing the way we use single-use plastic. Guernsey is a leader in sustainable finance and green initiatives, having launched the world's first regulated green fund product, the Guernsey Green Fund, in 2018 and more recently the Natural Capital Fund focused on biodiversity.
This new generation of private clients, whether creators, sports stars or anything in between, will need to look to a jurisdiction with a demonstrable track record of expertise combined with a dynamic mix of industry professionals to guide the way—Guernsey may well be the solution they’re about to be searching for.