I Love Guernsey Finance


Guernsey Finance is our marmite Financial Services sector promotional agency. You either love it or you hate it. I’ve worked closely with it for many years and thoroughly enjoy its unique, malty flavour.

It always surprises me therefore that many who can’t stand it seem to be generally bright and switched on people. But for some weird reason that can’t see the benefit and even more worryingly they can’t understand why the tax payer is asked to stump up money to support it.

Many are paid up members of the “We Hate Finance Fat Cats” and therefore are too set in their ways for me to even waste my time to convince them otherwise. However the majority are normally reasonable and sensible people. Perhaps a tad too fond of recycling or ridding our roads of cars, but in the main they are normally just like you and me.

Given that the States of Guernsey will soon have to decide if GF (I like to call it “GF”) is going to get an extra wad of that diminishing resource the taxpayers money I thought I would have a little go and explaining why cash support at this time is not just a “nice to have” but is essential. Essential if you believe we need to keep schools and hospitals open and see our income tax revenues holding against severe downward pressure.

Quite simply GF is the promotional agency for Guernsey’s financial services industry. It doesn’t perform business development or marketing functions for the finance firms here, they have their own staff and budgets for that. The individual businesses need to see a quick return for their spend on sales. They work existing markets and get the best returns by pushing against open doors. These days for many companies a long term plan covers the next 3 years.

Guernsey Plc hopes and prays that the Finance Sector will last longer than 3 years. It therefore invests in exploring new markets and paving the way for future business flows. Yes, that will help individual companies when they have access to a new source of business but better they do it from here than from some other jurisdiction that had the budget to open the markets before us.

Currently the States supports GF with significantly less than half of the amount we spend on subsidising milk production. An industry which produces directly and indirectly 70% of our Gross Domestic Product and provides over 6,500 jobs isn’t even worth supporting as much as our daily pinta.

Our major competitors are facing up to difficult times by investing in opening up the new markets we will also need access to if we want to survive. Our near neighbour and greatest competitor, Jersey, has already invested millions where we only get thousands. They understand about investing to generate more income for their future prosperity. Seemingly we don’t.

An opportunity is coming up. Some money has been found, not the millions Jersey has found for their promotional agency, but £300,000 a year for 3 years. Not the £2m+ for the kerbside recycling trial but just £900,000 drawn down over 3 years. GF, bless them, believe they can compete successfully with other jurisdictions who have been given significantly more. I think they will do the job with the money but it’s quite shameful that to preserve the future of an industry that contributes 100s of millions a year to our economy all we can find is an extra £300,000 for 3 years.

Even then that money is not certain to be forthcoming because there are Deputies who don’t want a penny spent on supporting our Financial Services Industry. When you next see your Deputy tell them that you are prepared to gamble an extra £300,000 a year to help keep our Island afloat.


The Pioneers of the Channel Island Stock Exchange


Back in the late 1990’s when the Horacle was still just a lad there was a whisper circulating around that a Stock Exchange would be very useful in helping our finance industry to grow. As we all know Guernsey is a great place for people to come up with ideas that get talked about a lot but never actually happen. Indeed, our model of Government is based on this principle.

However one incomer who has more drive than seems possible to cram into her short stature wasn’t prepared to let this idea die. Day by day, week by week and month by month the concept became to be accepted and more importantly the financial support that would be needed was found.

A Channel Islands Stock Exchange seemed an impossible dream and the pitfalls were many. Not just the worry that it would be a commercial failure with initial investment lost but also the reputational damage if we had a failure on our hands. Our industry leaders were less risk averse and more entrepreneurial in those days and our regulators still believed they had a responsibility to encourage the industry.

How do you start a Stock Exchange on a wing and a prayer which is just about all the setup team had to play with. Many of us who supported the idea only gave it, at best a 50/50 chance of survival.

The early years were tough. Coveted “Recognised Stock Exchange” status was critical to ensure success. Why would anyone grant such a status on a cottage industry exchange in little old Guernsey? I’ll tell you why. It was because the Chief Executive officer of the CISX had the drive and determination to make it happen.

The Horacle can be a slightly bit cynical at times and though I expected the worst but  well blow me down but didn’t the human dynamo negotiate approval after approval.

Now we had a Stock Exchange that was recognised but didn’t have enough business to make it financially viable. No problem. The CEO moved into sales mode seamlessly and began a one woman campaign of putting the CISX on the map.

The Horacle’s no slouch when it comes to selling but I take my hat off to Tammy Menteshvili. Give that woman a platform and a box to stand upon and she will give a polished presentation and dominate the room with her compelling sales pitch.

Soon the work started flooding in and the ancillary work for local firms have made a significant contribution to our economy. My own industry, Funds, owes a lot of its success to the CISX presence in our Island.

Throughout the whole pioneering process Tammy has been supported by some of our cleverest and best who volunteered to give their expertise supporting Guernsey Plc. All of them had significant day jobs and I applaud the sacrifices they made for us. Including our current Chief Minister who did a great job for us at the CISX.

In the old black and white movies I love to watch, the brave pioneers often end up peppered with arrows and the next wave profit from their sacrifices.

I fear we have have already forgotten the efforts of Tammy and her Board  and instead will be lauding those who have the easier task of fine tuning an existing, successful exchange.

When the statues of the pioneers who created our Stock Exchange are erected on the market plinths I very much hope they won’t be portrayed with sheaths of arrows sticking out of their backs. They deserve better.

Ah, but they’re English, eh?

The Internet is a wonderful thing. While doing a bit of random googling I stumbled upon the strap line “Competition Policy for Small Economies” which seemed worth exploring to see what insight it could offer on the Easy Jet paradigm.

Well blow me down when I read the list of small economies who considered the globalization of policies favoured the big boys and didn’t take into account the needs of the little ones. As I read on I began to feel sorry for the down trodden small economies forced to apply theory that just didn’t apply to their nano economies.

I soon felt sorry for Israel, Switzerland, New Zealand and of course poor little Belgium for being forced into adopting policies which didn’t work for them.

How odd you may think. Adopting Global policies and theories seems to pose no problems or threats here in a far, far smaller economy. We happily spend large amounts on planet saving policies or appointing a competition regulator for markets too small to allow for competition.

Or is it time for us to remember that we are not a small economy, or even a very small economy we are a tiny economy? Even our nearest neighbour has an economy that is larger than ours and probably has a critical mass which makes comparison with them inappropriate.

Should we accept that rules that apply in the big world just don’t work at our sub atomic level?

I think that it exactly the mindset we need to regain. In the past we listened to experts who explained to us just how wrong everything we were doing was. In the past we would respectfully pay careful attention to them and then after they had gone would remark “Ah yes, but they are English, eh” and then design something that worked for Guernsey.

Even though our experts now are drawn from all corners of the globe I still apply the “but they are English” rule to all of their suggestions. Try it, it always works a treat.

For example when listening to Education presenting theory and data to support school closure silently say “Ah yes, but the theory and data is English” and then consider the argument from a purely Guernsey perspective.

When considering the Easy Jet application many will subconsciously be applying competition policy for large economies which is all that we ever have presented to us by global media. We take it for granted that free competition in a market is bound to make that market efficient. A fine theory which may even work in markets large enough to enable competitors to all make a profit.

How does that work in a market which has time and time again proven that it cannot support multiple operators? Who can name the airlines which have flown in like a lion and limped out like a dying duck?

Let’s apply a Guernsey logic to the application. We need Gatwick route which is essential to our economy. Only an operational airline can hold the slots which ensure that life line is permanently maintained. Other Airlines have demonstrated that protecting our economy is not in the best interest of their shareholders.

The market is not big enough to generate sufficient profits for airlines offering a comprehensive, regular scheduled service.

Allowing a second airline to compete against Aurigny may have short term benefits but ultimately will cost us more as tax payers paying an “insurance” premium to protect our slots.

Make your own decision but please apply the “but they’re English” test first and see if you change your mind.

Better a Sore Posterior


How many readers remember when news of any minor embarrassment would reach your mother 10 minutes before you actually got home? It was a disadvantage of living in a small Island that there was no way to hide misdemeanours.

Sometimes though living in a small Island has its advantages. How many readers remember the style of policing which involved a “respect” for the police and the higher likelihood of a good unofficial “telling off” than any official action? I’m sure there are several establishment figures who were happier to have been put back on the right track by a metaphorical kick up the backside by a burly copper than having a police record to blight future career prospects.

For many years our financial services Regulator has applied a small Island approach to regulation. The UK regulator, for instance, has never had the advantage of industry gossip helping to identify companies which are let things slip and who need a bit of tough love to help them get back on track. Hence the UK regulator has had to use the stick to keep its financial services business in line because they have to wait for businesses to fail badly before they notice something is wrong.

Here we have done it so much better. Mother Hen GFSC has kept an eye on all her chicks and when one starts to behave badly immediately sits on it until the lesson is learnt. In this way no chicks fail and all can take advantage of her wise ways.

I like that approach and have seen the wonders that have been performed to keep all our financial services businesses on track and preserving our greatest selling point, our reputation. The GFSC by taking advantage of small island mentality has vastly outperformed the regulators in the great nations of the world.

The problem is the outside world doesn’t understand regulation where regulators meet the people they regulate in shops, sportsgrounds and pubs on an almost daily basis. They don’t understand how a regulator can have a good idea of the current state of play in every entity they regulate. Therefore their measure of a good regulator is the number of successful enforcement actions that have been taken. They don’t understand that a good regulator, like ours, can operate a policy of rectification not vilification.

Is it better to wait for a business, for many reasons, to dig a hole big enough for the regulator to trap it in or to step in and help them climb their way back to the top?

I’m a small minded Islander and I much prefer our regulator helping us not to fail rather than them measuring their success by how many they have let fail. To me every enforcement case which is not criminal is a failure by both the financial services business and the regulator.

The GFSC costs Industry £12m a year and is generously staffed both in numbers and remuneration. For that vast sum I expect them to continue to keep their eyes open and to offer strong words of encouragement to put defaulters back on track. Better a sore posterior to avoid failure than a successful court case to punish failure.

Who decides if the funds industry stays and thrives in our Island?

Last week, before a packed audience in St James, The Horacle was doing his Industry Giant bit by pontificating on the future of the Funds Industry in Guernsey. Assisted by other Industry Greats and ably chaired by the Business pages own James Falla we spent an hour pondering where we are going.

We started off by looking at where we had come from, the happy, chaotic, serendipitous path that has led to us becoming, probably, the most important pillar of the Finance Industry that supports our economy.

We often read about the diversity in our principal industry and of the four pillars that support it. I agree with do have four pillars but two are bigger than the others and one is getting exceedingly weaker than in its prime. Funds and Fiduciary carry most of the weight these days and the loss of either to our economy would be devastating. A hundred extra unemployed sent SSD way over budget so how would they cope with an extra two thousand? Add to that the reduction of £80 to £100 million of salaries from our economy and a fall of £15 million in personal taxes. Then the lost rents, Aurigny flights, hotel beds, meals in restaurants, it just goes on and on.

Who decides if the funds industry stays and thrives in our Island? Not us. I will explain why.

Increasingly businesses we once considered local are now global. Where sales people travelled with presentations extolling the virtues of only Guernsey increasingly those presentations are peppered with references to their offices in Luxembourg, Malta, Cayman or BVI. Once if a client expressed a preference for Luxembourg the sales person would present a strong argument for Guernsey but now will offer the Luxembourg office.

In the global firms based here even senior local staff can have very little influence on local decisions. With the number of senior redundancies here it can be argued that local bosses are often the last to know the business is being stripped down.

Business links with Guernsey are weaker now than they have ever been. Modern communications make it possible to move a 100 jobs to the other side of the world without too much effort.

Imagine Global businesses as a flock of pigeons who spotted a load of tipped bird seed and are feasting off it. If the bird seed disappears or someone comes clapping their hands they will fly off and find nourishment elsewhere. This would be a shame because we have gotten used to making a nice living from the highly lucrative and job creating pigeon dropping industry.

If we want to keep the pigeons we need to invest in creating a nice safe environment for them to feed. Plus we need to constantly keep our bird seed more satisfying and tasty than our neighbours who are jealous of our pigeon dropping wealth.

Currently the States of Guernsey gives Guernsey Finance a packet of Trill every year and employees half the number of people it needs in the PDDU. Luckily we have a band of volunteers who give up a lot of their time developing pigeon calming programs.

It isn’t enough to rely on a token investment by the government and the good will of volunteers to protect against the catastrophic event of losing any of the pillars supporting our economy.

You have been warned.

Time to Confound The Business Prevention Units


Two pieces on the Business Pages of this esteemed publication caught my eye on Monday and both gave me hope. Then I noticed another piece and an advert that didn’t.

The two devoid of hope were a report of a Risk and Audit Seminar and an advertisement for a course designed to prepare financial services businesses for a regulatory visit. Now I have nothing against such initiatives and we do need them to secure the business we already have and tick the boxes for business that may come.

However I’m not a believer that if you build the best mousetrap in the world that people will beat a path to your door. Even more so I believe if you offer a mousetrap only equal to or perhaps marginally better than others on the market you have even less chance of making any sales.

The risk of focusing on “Risk” and “Regulation” as though they are negative terms has helped develop the dreaded “Business Prevention” units in many firms. Fun to joke about but the reality is an overzealous view on regulation can stifle growth.

Remember there is no reward without some risk.

The Horacle is a Salesman. I learnt how to be a salesman in an organisation that regarded Sales in the same way the Earl of Grantham regarded trade. In fact at least one of my colleagues was an Earl. The word itself was not politically correct and had to be disguised as Marketing and then Business Development.

It may be this early aversion to sales when we were one of a very few mousetrap makers and people did stuff money through bank doors to try and get one that led to a very slow acceptance of Sales as an important function.

For many years we struggled to develop sales talent and lost a lot of possible new business as competitor jurisdictions came on line. Which wasn’t too much of a bother when there was plenty of work for all.

The Global recession has changed all that. We now need to identify, support and get our sales people out on the road knocking on doors.

We still don’t have a huge number of great sales people but those we do have are of international standard. I trained some of them myself.

We have the excellent Guernsey Finance but they can’t do everything with the very limited resources we give them. Every finance business needs to put their hands in their pockets and support not just themselves but promote Guernsey Plc.

I had feared that in a period of austerity sales budgets would be cut especially given the rise in Compliance and other regulatory costs which are biting into the bottom line.

I’m sure this is happening here and there but the articles which gave me hope were a sales trip by many to the US to promote our dual AIFMD regime and news of a major new fund being launched.

Finance firms of Guernsey support your Sales teams because we need them now.

Sales teams work your socks off now because there is a very tough market out there. Don’t despair and don’t let the “Business Prevention” units that we all know exist in every firm grind you down.

Thanks to Crooks, Rogues and Shysters


Back in the day we didn’t have regulations so we didn’t need Compliance Officers to point out where we breached them. We therefore didn’t need any regulators to keep an eye on us. Many of our structures back then weren’t companies and the ones that were were given a very light touch on “governance”. Most of us worked on administration which is mostly bookkeeping and we did the same thing today that we did yesterday.

How things have changed.

Now our best jobs are Compliance, Company Secretarial and Regulatory. Our 107  regulators have an average salary of £80k so we are talking seriously good jobs. These jobs are good to our economy for another reason in that they are harder to outsource.

If Criminals, Terrorists and Corporate crooks hadn’t have become so prevalent where would we be today? Well I suggest our finance industry would be going to hell in a hand basket.

Given we owe so much to them who’s with me in lobbying for a “Crooks, Rogues and Shysters” day or a statue on each of the empty market plinths celebrating the saviours of our economy?

I suggest Madoff as the criminal, Bin Laden as terrorist but I can’t think of such an iconic corporate crook. Any suggestions?

My Apologies to Deputy Perrot


I have unintentionally misrepresented Deputy Perrot’s views on independence in my last Horacle post for which I apologise. I hold Roger in the highest regard and would like to assure him that if he is attacked by a Bear I will stand shoulder to shoulder with him.

And not just because I can’t actually run any-more.


The Bear and the Two Travellers (for those who are not familiar with Aesop)

TWO MEN were travelling together, when a Bear suddenly met them on their path. One of them climbed up quickly into a tree and concealed himself in the branches. The other, seeing that he must be attacked, fell flat on the ground, and when the Bear came up and felt him with his snout, and smelt him all over, he held his breath, and feigned the appearance of death as much as he could. The Bear soon left him, for it is said he will not touch a dead body. When he was quite gone, the other Traveller descended from the tree, and jocularly inquired of his friend what it was the Bear had whispered in his ear. “He gave me this advice,” his companion replied. “Never travel with a friend who deserts you at the approach of danger.”

Misfortune tests the sincerity of friends.

Emulate the Reed Mr Harwood


The recent visit of our esteemed Chief Minister to Number 10 Downing Street made me think of Aesop and no, not because he is a venerable old chap who comes from another age.  What I had in mind was the fable of The Oak and the Reed.

A mighty oak which had stood for hundreds of years was brought down in a tremendous storm and fell across a small stream surrounded by reed beds. In its dying moments it asked the reeds around it how they lived their lives being blown hither and thither by even the slightest breeze.

“You are so little and weak and I was so strong and proud” said the Oak.

The reed replied “That is just the reason that the wind did not hurt me. I bent low until it had gone by, but you stood stiff and tried to stop it on its way. No one can stop the wind. It must go where it is sent, but it will not hurt those who are not proud and stubborn.”

Now, I’m not sure how Aesop two and a half thousand years ago could possibly have written advice for the Guernsey Policy Council in 2013 but I just hope his bill has taken account of inflation.

Let us all accept that we are the reed bed, we have always been the reed bed and we like being the reed bed. The one true tactic for us as the great storm of tax transparency blows is to bend as low as they want us to knowing we will spring back as soon as the storm moves on.

All the storms move on and the ones we are expecting to do the most damage just shake a few slates loose on old farmhouses.

This one already looks weaker than it first appeared to do. Politically driven taking advantage of the current “big thing” Cameron believes he will gain some international credibility. He is not the first politician to latch onto a craze nor will he be the last.

Hedge Funds were the target not that long ago generating the politically motivated AIFMD. At the time the Directive seemed to be a storm of epic proportions just over the horizon but it will be a few waves gently slapping against the harbour wall by the time it reaches us.

Though we are undoubtedly moving into a more transparent world, mostly because we believe we have the technology to do it, the devil is always in the detail. Millions of man hours will be spent on tax transparency initiatives and whole forests will be pulped for the final print run. It has as much chance of achieving its aims as does the States of Guernsey in providing a good bus service.

Bend like a reed, stay low and don’t boast about our achievements is our safest bet. For years in the Funds Industry we have advocated a “keep your heads under the parapet” marketing strategy no doubt inspired by the bendy reed. It has served us well but our share of the Global market is less than half of one percent. A measly figure that frightens no one.

Please promise me that if you hear someone in a pub calling for us to stand up to these blighters and that it’s time for us to become independent you will tell Roger Perrot to sit down and read Aesop’s Fables.

I can’t say that I agree with all of Peter Harwood’s domestic policy but on the International Stage I doubt if we could find a better man. I am certain that although he has the appearance of a mighty oak he knows that emulating the reed is the best way of protecting our future prosperity.