Briefing - 23 December 2021

The lure of Singapore: An attractive destination for single family offices

Find out how and why Singapore has gained prominence as the preferred base for family offices.

With rising affluence and wealth transfer comes a growing number of Ultra-High-Net-Worth (UHNW) families and individuals seeking professional help to manage and protect their wealth. With the average Assets Under Management (AUM) higher than ever before, it is no surprise families are looking for greater sophistication and personalisation, looking beyond their immediate jurisdiction for their wealth management.

The globalisation of wealth creates countless opportunities for UHNW families to access tailor made investment options around the world that align with their wealth ambitions.

This is particularly true in Asia, where most SFO growth has taken place over the last decade, with locations such as Singapore and Hong Kong continuing to gain international popularity.

An evolving picture

Singapore is well established as one of the leading private banking and wealth management centres globally and holds a lot of gravitas within Asia.

Traditionally speaking, Singapore was a destination of choice for Asian High-Net-Worth families, but this has changed considerably over the past five to ten years. The origin of wealth owners setting up an SFO in Singapore are now distinctively more diverse, with a growing number of European families choosing the jurisdiction for their SFOs and family trusts.  

It has a strong track record as a robust and politically stable jurisdiction with a transparent legal system and a supportive and responsive government encouraging the growth of the private wealth market. All these factors have helped provide confidence among investors.  

Boasting one of the most competitive tax regimes globally with no capital gains or estate tax, and a roster of incentive schemes to ensure the efficient wealth transfer and consolidation of investments of SFOs has likewise attracted investors.  The Republic’s robust financial licensing frameworks with shared reporting standards to the EU and US and multi-lingual professionals provide a familiarity appealing to many families.

What's next for Singapore?

Last year Senior Minister Tharman Shanmugaratnam commented that the total AUM for SFOs in the Republic was estimated to be around US$20 billion, and with more families entering the market, that value will continue to grow to create jobs across the financial industry.

As the need for family office experts grows, so will the need for independent trust companies, law firms and accounting firms, and it is most than likely that more senior private bankers will opt to work for a single-family office or a multi-family office rather than a bank.  

As most of Asia’s family-owned businesses are in their first or second generation, meaning most SFOs are now looking at their first transfer of wealth and how they can maintain harmony in the process.  

Having an SFO and transition plan in place helps resolve many potential areas of conflict between family members.

Generally, not all family members would be involved in the family business, so typically points of conflict tend to emerge between the family members who run the business and those who hold an equity stake in the business.  

The latter group often feels frustrated and left out as the former could make decisions at the board level to their advantage; for instance, the board could approve a large bonus to the management team, thus favouring certain family members.

Intergenerational transfers of assets, mainly linked to male-preference primogeniture, favouring the eldest born male over younger or female siblings, is another contentious issue that families seek to avoid by establishing an SFO. 

Historically wealth owners have found it challenging to start a conversation with an external party in fear of creating conflict and disharmony within the family. However, this mindset is shifting, and there is now more confidence in seeking expertise and guidance to resolve concerns around transferring wealth to the next generation.  

The needs of younger entrepreneurs and the second-generation wealth holders have encouraged a healthy attitude shift into the market and are actively creating a precedent for best practice. 

These individuals are already more internationally mobile with many holding more than one passport or multiple tax residencies, truly embracing the benefits of globalisation and what it can offer their wealth. With the increased international mobility comes the need to consider the impact of FATCA and CRS on family structures to ensure international compliance, many realising the value expert advice can provide.

These young wealth holders are bolder in their investment philosophies and increasingly seek sustainable investments and emerging entrepreneurial opportunities in the digital and alternative investment classes including, private equity, artificial intelligence, and healthcare.

They recognise that wealth management is more sophisticated than before, and in the era of social media and public scrutiny, there is less room to get things wrong, so investments need to be right the first time around. 

Likewise, transparency around the governance of one’s family wealth is becoming equally important, ensuring the right legal structures and experts are in place to support the family office. The notion of what success looks like is changing as the younger generation of wealth owners step up to get involved with the family office, and their impact is being noticed.

SFOs are, like other areas of finance, becoming more conscious and seeking benefits beyond immediate or long-term financial gain, realising the importance of reputation and the social and environmental impact of their wealth.  

Their strategic impact and sophisticated approach to wealth are creating modern and forward-thinking SFOs, who are attracted by the lure of Singapore’s equally ambitious and forward-thinking financial market.

Navigating challenges, now and for the future 

Covid-19 has been a wake-up call for many wealthy families and their advisers, encouraging a shift of focus; from establishing new business ventures to protecting the family wealth. The pandemic risks have highlighted the need for a succession plan in place and made families prioritise putting their plans to paper to avoid conflicts. 

As a jurisdiction, Singapore has provided plenty of expertise and stability on this front, receiving international recognition for the government’s rapid and efficient response to the virus. The low infection numbers and deaths have been praised internationally as the country has been hailed as a global leader for its approach.  

This decisiveness has certainly built confidence in the government and the stability of the country’s business and financial sectors, which has largely been able to carry on with business as usual.  

The pandemic has accentuated Singapore’s appeal in a world where wealth owners value transparency, agility and stability, moving beyond the traditional realms of a traditional single-family office.  

The jurisdiction’s diverse and wide-ranging financial expertise, political and financial stability during the pandemic, paired with its competitive investment benefits, are starting to appeal to more UHNW families from around the world. 

With the needs of wealth holders rapidly evolving, it’s important to recognise innovative thinking and service. This is where Singapore offers a competitive edge, enticing further families to seek its benefits for their SFOs.

Alice Quek is the Head of Private and Client Services in Asia for Hawksford Group, in supporting Ultra-High-Net-Worth individuals, families, and intermediaries across the region to support the efficient management of private wealth. 

This article is intended for general information only and is not intended to apply to constitute legal advice. Hawksford accepts no liability for any errors or for any loss, of any nature, to any person by reliance on this article.

Contact Our Trust Specialist in Singapore:

Alice Quek
Alice Quek

Head of Private Client Services, Asia

T: +65 6704 9189 |
View Alice's full profile

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