Family offices in Singapore

Family offices have experienced a significant rise these days. Many experts have suggested that 70% of families lose their wealth in the second generation, and 90% will lose their wealth in the third generation. As such, many wealthy individuals have decided to seek professional help to manage their wealth and preserve it for future generations.

Family offices are private vehicles set up by Ultra-High-Net-Worth Individuals (UHNWI) to manage a family's financial assets. These family offices offer a comprehensive solution to managing finances and investments, including legacy planning, tax planning, charitable giving, and more, besides the typical financial planning and investment management activities. 

There are two types of family offices: single-family and multi-family. As the name suggests, single-family offices render their services to one family. Multi-family offices, on the other hand, support multiple families, which, in turn, reduces clients' costs due to economies of scale and cost-sharing.

Singapore as a preferred wealth management hub and family office location

Singapore has become a leading hub for family offices and wealth management services in recent years, with a proactive government introducing initiatives to promote development in this space, including various tax incentive schemes to encourage more family offices to set up in Singapore (KPMG, 2022: https://home.kpmg/us/en/home/insights/2022/05/tnf-singapore-changes-to-family-office-tax-incentive-regimes.html). 

According to EDB Singapore, around 700 family offices were set up in Singapore as of 2021, compared to 400 in 2021 (The Business Times, 2022), increasing by a whopping 75% in just one year! So why is Singapore the preferred destination for wealthy individuals and businesses alike? 

1. Safety and security

It is no secret that Singapore is ranked as one of the safest countries globally. According to a recent study, Singapore has low crime and traffic accident rates and little or no natural disaster risk (The Swiftest, 2022). Singapore is a reputable and well-regulated jurisdiction for financial services with a stable and sound financial system (MAS, 2015). This gives families peace of mind when setting up their family office in Singapore and choosing Singapore as their preferred wealth management hub.

2. Stability

Singapore has maintained independence as a sovereign state since 1965 while building and maintaining strong alliances with many other countries. Singapore's political stability, low corruption rates, sound monetary and fiscal policies, and robust legal system are the key reasons behind the country's stability and a strong economy.

3. Competitive tax regimes

Besides the tax incentives schemes mentioned earlier, Singapore's tax regimes are extremely friendly, with no tax on capital gains and no dividend tax in general, a competitive corporate tax of 17%, and comprehensive double taxation agreements in place with various countries. 

4. Access to opportunities

Because of the reasons above, Singapore attracts many foreign investors and a strong deal flow of investment opportunities both regionally and globally. These are further supported by top-notch wealth management platforms and a highly experienced talent pool of wealth management professionals, making Singapore an ideal location to set up a family office and gain access to exciting opportunities, professional expertise, and resources. 

Areas of consideration when setting up a family office

1. What are the objectives to be achieved through the family office?

• Typically, the family office’s activities include implementing an investment strategy for the entire family, portfolio management, tax filing, fulfilling reporting obligations, and so on. Setting the objectives for the family office would help ensure that the optimal structure is established, and the right professionals are recruited to help set up the family office, such as lawyers and tax advisers.

2. What are the assets that will be managed by the family office?

• There are many different types of assets that can be managed by a family office. These include bankable assets such as cash and financial investments, insurance policies, and non-bankable assets such as real estate, valuable items (e.g., jewellery, private jets), collectibles (e.g., rare artworks), and even companies! Deciding which assets to be transferred to the family office is critical, primarily if the assets are located offshore. This is because different parties will have to come together to identify the most effective way to transfer the assets while considering the tax and legal implications of the jurisdiction in which the assets are located.

3. What is the family office’s investment strategy and mandate?

• If a family office intends to submit an application through the Monetary Authority of Singapore (MAS) and the Economic Development Board (EDB), the regulatory authorities would require the family office to provide a clear roadmap of the investment strategy and business mandate as part of their evaluation process. Investment objectives and risk tolerance would be a good starting point for deciding the investment strategy and business mandate to implement for the family office.

Other areas for consideration include licensing matters, ongoing operational requirements, and legacy planning and philanthropy arrangements, all of which are relatively complex and should be discussed with a professional.

Interested in setting up a family office in Singapore?

At KGI Securities (Singapore), we offer our clients (onshore and offshore) a suite of Wealth Management investment products and services. These include global stocks, bonds, options, futures, leveraged forex, mutual funds, structured products, and hedge funds. We also provide access to private market products with high potential returns and low correlation with traditional asset classes. Through our alliances, KGI Securities (Singapore) can further assist you with your wealth planning needs, such as life insurance solutioning, establishing a trust or family office in Singapore, or even immigration. Contact us today for a no-obligation discussion.

References:

1. https://www.businesstimes.com.sg/companies-markets/banking-finance/whos-who-private-banking-aug-2022/singapore-family-office-scene)
2. https://theswiftest.com/travel-safety-index
3. https://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Monographs%20and%20Information%20Papers/Objectives%20and%20Principles%20of%20Financial%20Supervision%20in%20Singapore.pdf