The COVID-19 pandemic has prompted ultra-high net worth individuals (UHNWIs) to set up family offices in Singapore to manage their wealth, leading to a surge in the number of such offices in the country.
According to government estimates, Singapore currently has about 700 family offices, up from 400 in end-2020 and up sevenfold from 2017. These families are coming not only from Asia but also from Europe and America, with demand from Asia being particularly prominent given that private wealth in the region has grown faster than elsewhere in the world.
“The pandemic has prompted numerous affluent families to reconsider their wealth management and succession plans to better prepare against future uncertainty”.
Carrie Ng, head of family office advisory at Bank of Singapore
“Besides Asian family offices, an increasing number of non-Asian families are coming to Singapore to either set up family offices or satellite offices to capture and support their investments in the region.”
Several factors give Singapore an edge over other financial hubs such as Hong Kong, Switzerland, and the United Kingdom, according to industry observers. These include having a stable political and regulatory environment, a developed financial services sector and trained workforce, as well as good living standards with established healthcare and education infrastructure. Singapore is also seen as a gateway to Asia, making it attractive to those who desire to be closer to their investments in the region.
Singapore has been providing support for family offices through targeted tax incentives, and the launch of the Global-Asia Family Office Circle network in 2021 allows a “trusted ecosystem” for industry players to collaborate and share best practices, said Foo Mee Har, CEO of the Wealth Management Institute and Member of Parliament.
The growth spurt in family offices can benefit Singapore in several ways, experts said. For one, they add to the assets under management in Singapore, strengthening the country’s status as a global wealth management hub, and contribute to the vibrancy of the local financial services ecosystem. These help to create more jobs in related sectors, such as private banking, legal and tax advisory, estate planning, and professional services, said Foo.
Citing the Bank of Singapore’s experience, Ng said authorities have shown “increased stringency” when it comes to assessing the academic and professional experience of proposed investment professionals hired by family offices. This has resulted in higher demand for local professionals with related expertise, she added.
The number of investment professionals employed by family offices is equivalent to about 1% of the number of people employed by financial institutions last year, according to a written parliamentary reply on Monday by Tharman Shanmugaratnam, Senior Minister and Minister in charge of the Monetary Authority of Singapore (MAS).
So far, the growth in family offices has not resulted in a significant outflow of talent from financial institutions, with efforts being made over the years to grow the sector’s talent pool, he added.
Specifically for family offices, two skills maps that set out the necessary competencies of workers at family offices and external service providers were rolled out in 2021. These skills maps have been used by training providers such as the Wealth Management Institute to develop relevant programs. The Institute said it has had more than 1,200 participants in its family office training programs since 2020. Its goal is to enroll 5,000 people by 2025.
Tougher taxes
The tougher tax rules introduced by MAS last year are unlikely to dent Singapore’s attractiveness going forward, experts added. The rules, which took effect in mid-April, include minimum requirements for capital, local investments, and hiring of talent for family offices to qualify for tax incentives.
Industry observers have noted that Singapore’s stable political and regulatory environment, developed financial services sector, trained workforce, good living standards, and established healthcare and education infrastructure give it an edge over other financial hubs like Hong Kong, Switzerland, and the United Kingdom.
Geography is another reason, with Singapore seen as a gateway to Asia. This is attractive to those who desire to be closer to their investments in the region.
Moreover, Singapore has been providing support for family offices through targeted tax incentives. The launch of the Global-Asia Family Office Circle network in 2021 also allows 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 Member of Parliament.
Mr Stephen Banfield, partner of family office and private clients at KPMG in Singapore, said that the setting up of a family office is often complicated and involves “an intersection of considerations.” “Singapore is a jurisdiction where the ultra-rich will often choose to live in, and establishing a local family office can be part of a migration strategy,” he added. “Often, the ultra-rich are driven by commercial considerations in deciding where to live, so it is usually a more complicated decision matrix, rather than a comparison of tax rates and lifestyle factors.”
The tougher tax rules introduced by the Monetary Authority of Singapore (MAS) last year are unlikely to dent Singapore’s attractiveness going forward, experts added. The rules, which took effect in mid-April, include minimum requirements for capital, local investments, and hiring of talent for family offices to qualify for tax incentives.
For example, applications for funds managed or advised directly by a family office must have a minimum fund size of S$10 million at the point 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 at least two investment professionals. Previously, there were no minimum requirements for both fund sizes and employees.
These new rules reflect the authorities’ intention to enhance the quality of family offices in Singapore and generate positive spin-offs for the Singapore economy, said Bank of Singapore’s Ms Ng. “Instead of dampening the set-up of family offices in Singapore, we believe the growth trend will continue even with the new guidelines,” she said.
The growth spurt in family offices can benefit Singapore in several ways, experts said. For one, they add to the assets under management here, strengthening the country’s status as a global wealth management hub, and contribute to the vibrancy of the local financial services ecosystem. These help to create more jobs in related sectors, such as private banking, legal and tax advisory, estate planning, and professional services, said Ms Foo.
Increased stringency
Citing the Bank of Singapore’s experience, Ms Ng said authorities have shown “increased stringency” when it comes to assessing the academic and professional experience of proposed investment professionals hired by family offices. This has resulted in higher demand for local professionals with related expertise, she added.
The number of investment professionals employed by family offices is equivalent to about 1% of the number of people employed by financial institutions last year, according to a written parliamentary reply on Monday by Mr Tharman Shanmugaratnam, Senior Minister, and Minister in charge of MAS. So far, the growth in family offices has not resulted in a sizable outflow of talent from financial institutions, with efforts being made over the years to grow the sector’s talent pool, he added.
Specifically for family offices, two skills maps that set out the necessary competencies of workers at family offices and external service providers were rolled out in 2021. These skills maps have been used by training providers such as the Wealth Management Institute to develop relevant programs.