The COVID-19 pandemic has prompted ultra-high-net-worth individuals to reassess strategies for protecting their wealth, say industry experts.
SINGAPORE: An increasing number of ultra-wealthy families are setting up offices in Singapore to manage their wealth, with the current total nearing 700 family offices—nearly double the 400 reported at the end of 2020 and seven times the figure from 2017, according to government estimates.
These families are not only relocating from Asia but also from Europe and America. However, demand from Asia is particularly significant, as private wealth in the region has been expanding faster than in other parts of the world, industry observers note.
“The pandemic has led many affluent families to reevaluate their wealth management and succession plans to better prepare for future uncertainties,” explained Carrie Ng, head of family office advisory at Bank of Singapore.
“In addition to Asian family offices, we are witnessing a growing influx of non-Asian families establishing family offices or satellite offices in Singapore to support their investments in the region.”
This trend has been fueled by the COVID-19 pandemic, compelling ultra-high-net-worth individuals and their families to rethink strategies for safeguarding and growing their wealth for future generations, according to Richard Loi, Deloitte’s private leader for Southeast Asia.
Experts highlight that Singapore’s strong reputation as a financial and wealth management hub is another major attraction for these families.
Several factors contribute to Singapore’s competitive edge over other financial centers like Hong Kong, Switzerland, and the UK. These include a stable political and regulatory environment, a well-developed financial services sector, and a skilled workforce, along with high living standards supported by robust healthcare and education infrastructure.
Geography also plays a role, with Singapore viewed as a gateway to Asia, appealing to those seeking proximity to their regional investments, Mr. Loi added.
Furthermore, Singapore has been actively supporting family offices through targeted tax incentives. The establishment of the Global-Asia Family Office Circle network in 2021 has created a “trusted ecosystem” for industry players to collaborate and share best practices, according to Ms. Foo Mee Har, chief executive of the Wealth Management Institute and a Member of Parliament.
What Are Family Offices?
Family offices are private entities designed to manage a family’s wealth.
There are typically two types of family offices:
The first is a single-family office, providing wealth management services akin to those offered by top-tier private banks for one family. This type of office is highly customized to reflect the specific characteristics and aspirations of the family it serves, Mr. Loi noted.
The second type is a multi-family office, which offers similar services to several families.
A single-family office does not need to register or be licensed by the Monetary Authority of Singapore (MAS) since it doesn’t manage third-party funds. In contrast, a multi-family office must be licensed or registered as a fund management company.
Some family offices in Singapore originate from established offices in locations such as the UK and the US, Mr. Stephen Banfield, partner of family office and private clients at KPMG in Singapore, mentioned.
“This trend is increasingly common among large dynastic structures, many of which have existed for several generations and are highly professional,” he added.
Family offices manage not only investments but also aspects like finance, philanthropy, tax, and wealth planning. Consequently, they often hire accountants, lawyers, and administrative professionals based on their specific needs.
Typically, a single-family office starts with two investment professionals and expands according to the family’s requirements, Mr. Loi explained.
For multi-family offices, the number of investment professionals is determined by the number of families served, allowing for cost-sharing among them and broader oversight of their activities.
Mr. Banfield highlighted that establishing a family office can be complex and involves various considerations.
“Singapore is a preferred jurisdiction for the ultra-rich, and setting up a local family office can form part of a migration strategy,” he said.
“Often, the ultra-wealthy are motivated by commercial factors when choosing where to reside, which makes the decision-making process more intricate than simply comparing tax rates and lifestyle options.”
The stricter tax regulations implemented by the MAS last year are not expected to diminish Singapore’s appeal in the long term, according to experts.
These new rules, which came into effect in mid-April, include minimum capital, local investment, and talent hiring requirements for family offices to qualify for tax incentives.
For instance, applications for funds managed or advised directly by a family office must have a minimum fund size of S$10 million at the time of application and S$20 million within two years under the new Section 13O of the Income Tax Act.
Family offices under this section must also hire a minimum of two investment professionals. Previously, there were no minimum requirements for either fund sizes or staff.
These changes reflect the authorities’ intent to enhance the quality of family offices in Singapore and create positive economic impacts, according to Ms. Ng from Bank of Singapore.
“Rather than dampening the establishment of family offices, we believe the growth trend will persist even with the new guidelines,” she stated.
Benefits to Singapore
The expansion of family offices can benefit Singapore in multiple ways, experts assert.
For one, they contribute to the assets under management here, bolstering Singapore’s position as a global wealth management hub and enriching the local financial services ecosystem.
This growth also translates into job creation in related sectors such as private banking, legal and tax advisory, estate planning, and professional services, Ms. Foo noted.
Citing the experience of the Bank of Singapore, Ms. Ng indicated that authorities have become more stringent in assessing the qualifications and experiences of proposed investment professionals hired by family offices.
This has led to a higher demand for local professionals with relevant expertise, she added.
The number of investment professionals employed by family offices is about 1 percent of the total workforce in financial institutions, as reported in a recent parliamentary reply by Mr. Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS.
So far, the rise in family offices has not resulted in significant talent outflow from financial institutions, as ongoing efforts have been made to cultivate the sector’s talent pool, he noted.
For family offices specifically, two skills maps outlining the essential competencies for workers at family offices and external service providers were launched in 2021.
These skills maps are utilized by training providers like the Wealth Management Institute to develop pertinent programs.
The Wealth Management Institute reported that over 1,200 participants have engaged in its family office training programs since 2020, aiming to enroll 5,000 by 2025.
Singaporean firms and the broader economy stand to gain, as tax regulations implemented last year require family offices to allocate at least 10 percent or S$10 million of their assets to local investments.
Ms. Foo has observed increased interest in private market investing among family offices, which is positive for supporting innovative technologies and business models in Singapore.
Additionally, with a focus on environmental, social, and governance (ESG) metrics, family offices can provide “patient capital” for initiatives addressing climate change, experts noted.
“Funding social and environmental causes encompasses a wide range of initiatives, from blended finance to capacity building and direct grant-making,” Mr. Banfield explained.
“Singapore is well-positioned to leverage these opportunities, which are fundamental for some family offices and a planned evolution for others.”
A burgeoning opportunity lies in philanthropy—an area that the ultra-wealthy are increasingly prioritizing.
“Philanthropy is becoming more intentional, strategic, and impactful,” Ms. Ng stated, noting that younger generations prefer active engagement with social enterprises and supporting social entrepreneurship rather than simply donating money.
The Wealth Management Institute, along with MAS and the Private Banking Industry Group, is launching an initiative to raise awareness of strategic philanthropy among family offices and address social issues collaboratively.
Additionally, the government is evaluating its tax incentive schemes to encourage family offices to increase their contributions to local charities and non-profit organizations, as Deputy Prime Minister Lawrence Wong highlighted during the inaugural Global-Asia Family Office Summit’s owners’ symposium last September.
“These are long-term plans, but our key message is this: If you are a family office looking to give back to the local community in Asia, there is no better place to do it than Singapore,” Mr. Wong affirmed at the time.
