There is a growing trend of the setting up of family offices in Singapore, and the establishment of Singapore as a wealth management hub. This is concurrent with the upward trajectory of wealth in Asia, with the consequent necessity of the handling of such wealth being overseen and managed, and the efficient transmission of such wealth across generations. With Singapore as an international business centre and a key wealth management and financial hub, the main advantage that Singapore offers family offices, among other benefits, is the volatility of exchange rates and absence of capital gains tax in relation to the growth of the investment assets. Our firm specializes in family office set up in Singapore, offering bespoke solutions tailored to your needs.
Setting up a family office in Singapore has numerous advantages. By definition, a family office is not a financial service activity but is an administrative, investment and trading office set up by ultra-high net worth families to manage their private investment portfolio. Family offices may choose to be set up as private or exempt companies, or as limited companies. Family offices may also be fund managers and, depending on their scope, be licensed or exempt under the Securities and Futures Act. Family offices setting up as family investment or family office fund managers would have to meet certain capital requirements as well as comply with certain conduct requirements under the Securities and Futures Act. As fund managers, accredited and institutional investors may find it easier to invest in unlisted or illiquid investments and private trusts. Family offices that are not relevant CMS licensees would need to seek approval through the imposition of such restriction or conditions as the Authority attributes to be necessary in the provision of fund management or exempt fund management business. Navigating the complexities of a family office Singapore has never been easier with our expert guidance and support.
Overview of Singapore as a Wealth Management Hub
We provide comprehensive services for establishing a single family office Singapore, ensuring a seamless and efficient process. Proposed criteria for wealth preservation of single and multi-family offices:
– Investable capital has to be carefully structured and preserved over generations due to the effects of dilution resulting from expanding numbers of descendants.
– Considerations and objectives include eligibility of beneficiaries, conflicts, confidentiality, and perpetuity.
– Types of investments may include real estate and equities with lifecycle fund management requirements; active engagement in philanthropy and/or corporate social responsibility programs.
– In the case of countries with less defined financial services: include asset migration planning for rapid flight of capital during political strife and tax credit implications of large gifts and intergenerational transfers.
– Risks to consider: economic specialization and instability in only a few industries. These are accompanied by the associated risk factors of Singapore’s economic and military dependencies on foreign countries. Regulatory factors and costs of capital markets and legislative and political constraints on foreign business activities. Company and regulatory fraud exposure. Opportunities for forced diversification, corporate relocation, and confiscation/expropriation of wealth.
What is a Family Office?
Family offices are private wealth management advisory firms that serve ultra-high-net worth investors. These investors are mostly families whose wealth, derived from generations of wealthy succession, exceeds US$100 million. Ultra-high-net worth investors seek to manage and enhance their wealth across multiple wealth management advisory services and through multiple investment asset classes and private business ownerships. Family offices are established to manage the investments of these ultra-high-net worth investors, including wealth transfer planning for the next generation.
The services provided by family offices are comprehensive. They include income distribution planning, income retention planning, asset and cash management, individual taxes and tax planning, estate planning, life insurance, private foundation, annual gifting program, trust holding companies, charitable contribution, and special wealth transfer services through certain estate planning arrangements. Family offices grow when the family’s fortune grows. It employs its own portfolio manager and trading desk, which allow for control over their investments. Family offices do not use pooled investment funds and as such, are not subject to the same regulations as hedge funds.
Types of Family Offices
When we talk about family offices, what comes to mind most frequently are single family offices, serving the investment and financial needs of the patriarch or matriarch and living members of the family. However, there are really two types of family offices. A single family office is a private company that manages the investments of one affluent family. Some family offices employ staff to manage the investments, taxes, estate plans, or philanthropic activities of the family. The assets are the family’s own wealth, often accumulated over many family generations. Besides, multi-family offices work under a broader cost-sharing model. The basic idea is that by spreading the costs of the family office across multiple families, the cost for each of the family members is significantly lower.
A family office and a multi-family office are similar in that they are both private wealth management companies that manage investments and typically provide a variety of other services to a small number of ultra-high-net-worth families. However, there are also key differences between family offices and multi-family offices. While both family offices and multi-family offices provide similar private wealth management services, they do so for different types of clients. A multi-family office can be established to serve family members of the opposite sex, multiple family members working with a family business, and multiple generations of a family. Multi-family offices serve family members by developing strategies and new ideas for the future and establishing a structure for developing a family’s unique and valuable resources. Clients who use these valuable resources are typically related and typically have similar financial priorities.
Benefits of Establishing a Family Office in Singapore
The benefits of setting up a family office in Singapore can be broadly categorized into the following areas:
Singapore as a wealth management hub
Firstly, Singapore is a well-established wealth management hub in the region. It has won accolades over the years as a top wealth management center. Singapore has evolved into an international asset management center serving high net worth individuals, family offices, and asset managers. Recognized for its strength in providing robust regulatory support, a wide spectrum of products, transparency, and quality service, the city-state is home to a comprehensive range of wealth management solutions including trust services for a wide range of structures, portfolio management, and trustee services. It is also a fund management center with a large and growing pool of independent managers managing a significant portfolio of funds. The strong wealth management ecosystem in Singapore helps support the growth of family offices in the country. For example, a robust network of reputable private bankers and asset management institutions exists in Singapore, and reputable and experienced wealth management professionals have been attracted to Singapore by the strong labor market and the benefits of living in Singapore.
Tax Benefits and Incentives
Singapore’s tax policies have features that make it an attractive place for setting up a family office. Despite strict bank secrecy laws and a refusal to sign on to the Organization for Economic Cooperation and Development (OECD) Convention on Mutual Administrative Assistance in Tax Matters, family offices are not subject to capital gains, inheritance or estate tax in Singapore. The country does not impose a withholding tax on dividend and interest payments. This allows family members and beneficiaries to enjoy robust tax efficiency for personal income, and to potentially avoid tax altogether. Although the absence of an OECD agreement with Singapore to share tax data may raise red flags from a compliance perspective, providing a poach haven for wealth that has been legitimately created may prove irresistible.
According to a study commissioned by the Income Tax Act, there are indeed compelling reasons why wealthy individuals can enjoy significant tax benefits when they decide to locate their single family office in Singapore. This can be illustrated by assuming that the single family office has Singapore-based shareholders and employs investment staff in Singapore to manage investment portfolios for the benefit of its shareholders. For simplicity, the amount of assets under management is not taken into consideration in deriving the tax benefits in this illustration.
Based on the reasons provided above, family offices should consider establishing themselves in Singapore as it continues its efforts in being an attractive global wealth management hub. Since the opening of the first Singapore family office, many others have followed suit. Strong market conditions and a developed financial market have contributed to the influx of investments into the region. Singapore stands out as the best destination in Asia for private banking and wealth management. Its stability, security, supportive government, and tax policies help to ensure uninterrupted business operations for many multinational businesses and investment and wealth management companies.
To foster and strengthen Singapore’s wealth management and fund management capabilities as a family office hub, Singapore should continue taking the initiative to develop its attractive wealth management by collaborating with financial institutions and financial regulators to further promote Singapore as a preferred financial, capital, and wealth management hub. The development of Singapore’s legal framework, tax regime, infrastructure, and the growth of the wealth management and family office industry supported by other reliable professional service companies (e.g., reputable law firms, accounting firms, and financial advisors) will position Singapore well to be the regional powerhouse. With these efforts, it is expected that more family offices will establish in Singapore.
