Like anywhere, the potential rewards of making informed and cohesive decisions about investments are impressive in the small island nation of Singapore too. There is however ample historical evidence that this is true of the islands in more than just modern times. The story of the rise of the city is safeguarded in multiple hushed whispers of glory, and by the many picturesque ruins, majestic buildings and daring bridges. Prosperity is not only innate to the national identity, but it also ignites a competitive spirit as well as a plan for a sparkling modern future, reflecting the farsighted Singapore National Trades Union Congress’ (NTUC) “Plaque and Osmium Roadmap 2020”. Bookended by two high-profile public infrastructure projects – the new MRT line and a Brush Park Line – the vision aims towards a nation which is completely carbon neutral while preserving its multi-faceted heritage and a revered open nature. In short, Singapore’s brand of prosperity is the story of people with a mission preserving facets of their wealth and agency as they went on and created more for future generations.
If you are reading this book, chances are that you are thinking about growing your own wealth, that of your family, or of someone that you care about. Most likely, you also feel the effects of wider economic trends on your prosperity at least from time to time. You insert hard-earned dollar bills into piggy banks, deposit money into banks’ savings accounts and – when the banks are charging exorbitant fees – bond them to a pledge to save up some more instead. Institutions and systems dedicated to bringing together savers and investors into productive fruitful partnerships ensure that there is progress for you, and for your loved ones, to always look forward to. Indeed, having an image of financial success in mind, and taking tangible steps towards achieving it, is what sets successful wealthy people apart. And when you are finicky about where and how to put your money to work, you are better off being thoughtful and choosy. Nothing worthwhile was ever easily achieved, and so are the rewards of personal financial success. A slow and gradual maturing of the understanding of the forces that dictate the creation and the preservation of wealth are inevitable, and stepping deep and wide into the waters of these forces – as the experiences of Lisbon, Tearo, and the intrigue over the use of money to charge for bishop ordination spots in Milan, described in the “The Origins and the Journey – the Basics” section – help illustrate may have humbling secrets the young grow up with.
Understanding Wealth Management
Wealth management is important for people who are trying to get the most out of their money through earning interest and increasing the value of their assets. Without the right management and guidance, it is easy to lose more money than to make and save money. It is important that individuals, portfolios, or companies who possess assets that could be invested should set up a serious and long-term wealth management plan. No matter if the assets are millions of dollars or a few hundred dollars, managing wealth is important for everyone.
Wealth management refers to the various financial services, tactics, and strategies that are used to guide client investments to help them generate an increase in their assets. Any individual or family who possesses significant assets needs wealth management in their lives to plan out their present financial situation and future financial objectives. Investment banks, retail banks, and other investment companies offer wealth management services, but many people opt to hire an expert or a wealth management team to manage these services directly.
Importance of Wealth Management in Singapore
It helps to have some grasp of money management; wealth management, however, spans not just money but all animate and inanimate objects that hold potential value. At the highest level, university education is an example of wealth management – most students do not work during the 4 years of their undergraduate studies, effectively consuming more than $120,000 worth of education that they would otherwise have saved up for a rainy day. That is a lot of money to be invested in a highly uncertain industry (i.e., higher education) that cannot guarantee success vis-a-vis the hefty investment outlay. Furthermore, not too many bankers would be inclined to lend $120,000 to an unemployed individual without any previous job experience. Despite these initial monetary setbacks, many parents still believe in the long-term returns of university education which eventually play out and justify this hefty consumption when students successfully enter the workforce. More unified views will crystallize from the expanding group of retired Singaporeans, most of whom have already basked or are basking in prosperity.
Wealth management has been an increasing concern for many Singaporeans since the 1990s, given the government’s heavy push towards self-reliance. Ample support has been put in place to help Singaporeans achieve this self-reliance, especially in such areas as education, housing, pension, healthcare, and financial services. As this support continues, the issue of wealth management is likely to stay relevant to Singaporeans who may well be nearing or basking in prosperity. In fact, wealth management is vital at a number of levels in Singapore. Firstly, it is a requisite for current and future business leaders tasked with growing the nation’s economy. Secondly, it is important for Singaporeans who are expected, through thrift and hard work, to enable Singapore to reach the resource levels required for long-term sustainability.
Overview of Singapore’s Financial Landscape
In a rapidly changing regulatory and economic environment, many financial services firms face unprecedented challenges. As Asia continues to grow and benefit from cross-border economic activity, especially trade and investment flows, many wealth management organisations are expanding and enhancing their services in the region. The business is a compound of entrenched Singaporean banks where the personal banking business is a small part of the entire firm’s income, and specialised wealth management companies. Significant private-banker activity can also be witnessed among Universal Banking Groups that belong, amongst the others, to French, Swiss or British Financial Groups. Based on the September 2010 issue of “The Asian Banker”, Singapore and Hong Kong have been the leaders in the region for a few years in this particular sector and exhibit the greatest growth. There is a constant need for the banks to differentiate and develop new products to compete in the diverse and growing external and domestic markets. Balancing technology with a personal touch is essential in obtaining and retaining market share.
According to the Global Financial Centres Index 11, Singapore is the fourth most important financial centre worldwide and the most significant in Asia. It is the regulatory and compliance standard setting for the region. The MAS is proactive in ensuring that its policies and laws remain at the forefront of global best practices. Singapore is now the third-largest FX centre in the world after the United Kingdom and the United States. In the Asian time zone, it is the largest. Trade finance conducted by banks in Singapore represents about one-third of the global financial markets. Singapore is the largest cross-border lending market in Asia. It is the third-largest banking centre in Asia. According to Mercer’s 2011 Worldwide Cost of Living Survey, Singapore has one of the lowest levels of inflation in the Asia-Pacific, Europe and North America.
Key Principles of Wealth Management
The impact of psycho-social wealth management aspects involves decisions that have taken a toll on family relationships, leading towards subsequent social value conflict. It is not accidental that development is so central a concept in the wealth asset management in Needville Family Office industry. The process of creating a strategic investment plan forces family members to consider their collective goals, ambitions, and risk tolerances, regardless of age, maturity, and connection status. Inter-generational understanding and knowledge may deepen as they use the plan to evaluate their financial situation. Clarification of investment goals and values, the development of family communication processes to address these goals and values, a well-stated discipline strategy in investment plans (spending rules), and a clear business structure that embodies the trust of family members and eliminates suspicions all help bring relevance into the management process.
With the increasing availability of a wide array of financial products and services, each addressing different aspects of personal finance, financial services, and investment management, amidst consideration of psycho-social aspects of wealth, a case is made for a theoretical comprehensive study that integrates the key elements in the context of a small plural society. It is the objective of this study to articulate the process and clarify the key principles in the formation of a sensible financial plan, using fundamental financial data, recognizing their relevance, and seeking concordance with the aforementioned psycho-social aspects in the context of the associated wealth management practices.
Setting Financial Goals
Defining our desired standard of living is the starting point of setting financial goals. Our standard of living can be represented as the sum of our current annual consumption, cash flow today (reflecting our current standard of living), and the annual increase in this consumption that is triggered by an annual future increase in our desired standard of living. As such, setting our financial goals involves determining the amount of wealth at a point in the future that can sustain the current annual consumption, cash flow today, for the rest of our life and accommodate the annual increase of our consumption that is necessary to achieve our desired standard of living. By being specific on our standard of living, setting our financial goals will be precisely articulated as the wealth target in the future.
Setting financial goals: We must first understand why we accumulate wealth in order to figure out how to manage our wealth. We accumulate wealth primarily to fund our desired standard of living, both now and in the future. Our standard of living comprises our consumption of goods and services. The standard of living really represents the purpose of our wealth accumulation. The other purposes of our wealth accumulation are essentially the consequence of or means to the end of funding our standard of living. These include such things as funding our discretionary spending, such as travel, or funding our child’s education. They also include passing on wealth from one generation to another, providing for unexpected financial needs, and funding charitable causes. Recognizing these primary (standard of living) and tertiary (enjoy financial flexibility, fund our radical retirement, the desire not to be a burden to others) and quaternary (support a charitable cause) purposes of wealth accumulation is critical to answering the seemingly elaborate question of how to manage our wealth.
Creating a Diversified Investment Portfolio
From a mathematical point of view, diversification reduces unsystematic risk, which is the risk inherent to specific securities and the specific companies in which one invests. It will not protect against a market downturn. However, as demonstrated during the dot-com crash in 2000-2002 and again now until 2007, when the global financial crisis propelled most of the asset classes in a freefall. Regardless of these unprecedented periods that evoke a “flight to quality,” diversification remains a sound investment principle. Maintaining a diversified investment portfolio is the most reliable way to manage investment risk over time. Assets not 100 percent correlated, as they will move differently during different economic periods. Even in a recession, utilities, for example, may still be an attractive investment; people will not stop switching on the lights or running the tap. All stock should they trade in and out of favor in different markets, so that the financial and industrial sectors are partly characterized by different performance.
Diversification will protect an investment. The principle of investing in multiple asset classes, which are not perfectly correlated and may occasionally move in opposite directions, is not a new concept. For years, investment advisers have created or recommended balanced portfolios designed to reduce risk by investing in such a mix of securities of various types, from stocks and bonds to cash and the like. The key to creating an effective portfolio is to select such investments with different return prospects and, therefore, different risk levels. In general, the higher the risk undertaken, the higher the potential returns. A balanced portfolio should include components with high and low-risk prospects but should lean more heavily on those with more stable results.
Risk Management Strategies
Holding a diversified portfolio that covers the main asset types – stocks or equity, fixed interest, property, and cash – represents another fundamental way of reducing overall investment risk. Appreciation in one asset should counter any reduction in prices of other assets, lowering the risk of ‘getting caught’ holding assets that have become illiquid and impaired, an important point to consider in good times as well as bad. Diversification extends to jurisdictions – home risk or having too much money invested in one’s home country is particularly concerning to expatriates with Singapore in-country exposure, though there are tax-efficient strategies for many nationalities.
Risk management strategies can take the form of setting pre-determined rules for selling down when investments slide in value. Prudent investors in direct equities, for instance, will sell before what they can’t afford to lose is gone. It is best to set detailed rules before the market heads south rather than relying on discretion in a time of panic. It sounds obvious, but investors frequently fall into the psychological trap of holding poor performing assets even when it is bankrupting them to do so, simply because they paid more for the exposure in the first place.
Tax Planning and Optimization
Before investing or moving income into Singapore, residents should consider tax optimization. For many centuries, compliant taxpayers have saved largely unrecognized taxes and countless missed opportunities for their beneficiaries. In Singapore, only fewer than 45,000 individuals (circa 1.4%) filed gross total income exceeding SGD500,000 in 2019 – out of which 17,393 exceeded SGD1,500,000 per year, according to IRAS tax statistics. Lower tax optimization contributors include CPF relief. This is a credit intended to help employees achieve their retirement savings while working and reducing the tax burden. The relief is limited to the current Medisave contribution rate, which is vehicle horsepower (IRE NO: 073104) subject to a SGD19,000 expense cap. CPF contributions comprise two types of employee contributions (infocom and minimum share) plus one employer contribution. Employees can work with their employers to opt out of this CPF relief. Doing so may result in no negative net cash impact on the returned income, but lower relief and potentially higher taxable income consumption.
As a more mature nation, Singapore is an increasingly attractive place for the affluent wealthy to live, raise families, train their next generation, and build lasting family legacies. However, one important consideration is the concomitant tax implications of being a resident and investing in or bringing income into its highly regarded jurisdiction. With a top rate at a modest 22% and tax reliefs and exemptions, including an extensive double tax treaty list and other withholding tax reliefs for businesses, trusts, and funds, the right approach, understanding, management, optimization, and mitigation can be employed by a professional. When an individual’s net compensation and other employment benefits will likely exceed SGD160,000, planning and optimization should be an important factor influencing the considerations to remain or move to Singapore because it may equate to prudent effective tax and overall wealth planning elsewhere.
Wealth Management Services in Singapore
More people fall within each service provider’s range of potential clients, hence increasing volumes and thus lowering production costs. Property and organizational jobless who wish to reach this potential market are most naturally first invited to place their monies with its institutions of finance. Second, following cautious investment guidelines, good returns are made available on this capital; these in turn work to encourage increased participation on the part of retail banks and their clients. Third, the wealth managers deliver security. This increasingly allows the financial institutions with which they are connected to make inflows of money from existing and possible new clients higher-frequency and higher-volume exercises. These revenue streams may be either or both direct (from management fees and commissions) or indirect (from other client activity).
In Singapore, residents have a wide range of wealth management services to choose from, differing in terms of the institutions that provide them, the jurisdiction of those institutions, and the specific services that are available. These wealth management services can be catalogued under several key headings, and these in turn can be used as part of a number of models that are designed to help people navigate this important aspect of their wealth. The services offered by providers here are a complex collection of related and interrelated activities, themselves directly aimed at people in possession of accumulated wealth (‘the principal’), and individuals or organizations who support him and his family in a wide variety of ways (‘the principal’s agents’). At an even more fundamental level, the provision of wealth management services in Singapore can most obviously be understood in terms of the alignment between who the ultimate beneficiary of the services are, who is currently providing them, and what links these to each other.
Private Banking
In order to understand the role of private banks in Singapore, we must first understand what private banks do and how the relationship between private banks and clients works. Private banks are financial institutions that focus mainly on relationship management and provide services such as investment advice, asset management, and other financial services such as wealth management services, tax services, and other private banking services for high-net-worth individuals, business owners, and families. Since providing business to individuals is not a unique service, segmentation is a customer’s definition of different bankers and their role in wealth management – categorizations must reflect the differences in net worth, investment preferences, and growth prospects of each customer group. Private banks must be based on measuring differences through interviews and questionnaires.
To capture this growth opportunity, financial institutions from around the world have established operations in Singapore, and local banks have taken advantage of their long-term operation to build relationships with high-net-worth individuals. As of 2020, many retail banks operate their private banking businesses in shops, of which local banks account for around 16%. Companies are trying to gain and maintain market share growth by using breakthrough technology and providing transparent and customer-oriented financial services, from advisors to account maintenance teams. As managers and decision-makers of private global wealth seek secure and interconnected financial centers offering excellent financial connectivity without opening up to privacy concerns, new centers such as Singapore have a position of advantage compared to traditional financial centers.
Singapore has the highest population density of high-net-worth individuals. Although the banking sector is a traditional, systematic, and critical industry in Singapore, the banking practice itself has elevated according to the needs and growth of the individual. There are around 800,000 millionaires in Singapore, so the potential customer group is significant. As a central financial center in Southeast Asia, the influx of wealthy entrepreneurs from the region has made the prospects of the banking industry even more attractive. The acceleration of digitization and technological developments, as well as changes in the demand for banking services, have increased the growth of assets managed in Singapore by 15% a year. The private wealth management giant UBS Group also predicted that the assets of École Polytechnique Laboratoire d’Intelligence Artificielle (EPLG) would account for 18% of the elite group from then on – solid financial opportunities.
Investment Advisory Services
An investment adviser is required to assess the following before making a recommendation to a client. Firstly, whether the financial product is suitable for the client. If the advisory service provider is a licensed financial adviser or bank, it is required to carry out due diligence on the portfolio product and to check whether the portfolio product is suitable for the portfolio customer. Secondly, if the recommendation is consistent with the client’s own investment objectives or relevant financial circumstances, and if the client has the financial ability to bear any risks resulting from the recommendation. Finally, the advice is provided only if the client requests it. The effectiveness and suitability are assessed against the product’s user characteristics. Furthermore, information about the investment advisory service offered by the investment consultant may be provided to the client, including the consultant’s name and whether the consultant acts on its own or on behalf of another person. Information on any material consideration and fee of that person. Finally, the consultant shall provide the client with the bank or its related body’s products, the securities products of any principal that the consultant provides to the client or the bank as a financial consultant.
The Securities and Futures Act provides a formal licensing framework for investment advisory and investment management services, both of which are covered by the regulated activities of providing financial advisory services. The distinction in the Act is that investment advisers engaged in providing investment advisory services to their clients are not in a fiduciary relationship with such clients; instead, they advise their clients as agents rather than as principals. Consequently, the main obligation of an investment adviser is to disclose any existing or potential conflicts of interest in its interactions with its clients.
Estate Planning and Trusts
Singapore does not levy inheritance tax. Consequently, it takes second place on the list of central issues surrounding trusts. The automatic compensation with tax-exempt benefits of the Assurance Value Plan which was paid out until 2015 by the mandatory CPF savings to the surviving spouse and children when collecting pension capital was also valid up until 31 December 2015 if more than half of the monthly CPF contributions or those put into the Savings Account were saved on the Retirement Account (Retirement Account, the predecessor of the Life Retirement Account). From 1 January 2016 onwards, on the other hand, the tontine pension savings will no longer benefit the beneficiaries. To a certain extent, those who are affected can compensate for the fact that the tax-exempt pension would only exceptionally be subject to tax through additional CPF savings. However, they should pay attention to the fact that tontine pension provisions do not benefit if there is a legal guardian or if a person has an existing child care obligation to support the beneficiaries.
“Inheritance tax” is not a term that the wealthy in Singapore are familiar with. There are, in fact, only very rare cases where this tax is to be paid. To the wealthiest, however, in many cases it should be seen as an important risk that may affect their fortune. This is especially true if the capital has been amassed in a country other than Singapore. If it has been accumulated in a country which levies inheritance tax and the investor or his beneficiaries reside elsewhere, the home country with its tax requirements always has precedence.
Wealth Preservation Strategies
In addition to potential conflicts between family members, another serious problem can arise between the surviving spouse and the rest of the family. In some planning models, the lifetime rights vested in the spouse are entirely shielded from taxes, applying to notional or actual income. When the coaches of international rugby teams are about to play an important match, they are likely to urge players to: ‘Play deep. Play well – and don’t do anything silly’. The remarks elicited are more in the nature of a well-known banality. They represent sound advice that is always valid. I have no intention of amending them. However, if readers bear my previous remarks in mind, I am ready to provide more colorful advice to surviving spouses: ‘Have fun. Enjoy your solid social position – and don’t do anything that a court would reckon as silly’.
The Wealth-X 2018 report identifies family wealth legacy as the main cause of wealth attrition in the families of the ultra-high net worth. Perhaps surprisingly, ‘lack of communication’ took second place – underscoring the need for wealth preservation strategies. In the words of some interviewed individuals, ‘We seem to have had a curse in our family for untangling the difficult cases’. To which responses, ‘I am Italian, that’s what we do’. As this amusing conversation indicates, the untangling of family wealth can be a difficult and culturally specific enterprise. Different legal and fiscal systems, not to mention different family traditions, ensure that every wealth situation is unique. Generalizations are few and far between. However, careful and sensitive legal planning is essential in situations when the family includes members of different nationalities with assets in different countries.
Choosing a Wealth Management Provider
Coordination efforts ranging from asset titling, naming the person responsible for payment of estate taxes, income taxation, and the type of will that may be used are vital to making or keeping wealth intact. Focusing on the professional skill set and being in a position to identify the investor’s risk versus need for liquidity and discipline any warnings emanating from a listed conflict of the advisor’s fee/compensation structure creates. Certain financial needs should have a form of collateral. Lending institutions can assist in meeting liquidity needs and in so doing, provide the opportunity for the investor to accumulate additional assets. Expert access can thus provide potential benefits to the investor’s development across his managed accounts and aid in reducing risks that may stem from fraudulent investment operators.
Significant emphasis should be placed on education and a proactive attitude to updates, so professionals engaging in wealth management services can consistently add wealth beyond that which they have already achieved. At the same time, peace of mind for current and future income distribution should be sustained so that volatile markets do not result in financial losses. Part of the solution arises from a focus on the direct needs of the investor. The investor’s liquidity needs should, for instance, be subjected to financial planning, so as to control risks from market liquidation. The aging process should equally be subjected to financial planning, to prevent hospitalization and diminished capability of rational thought as well as potential abuse of trust, power of attorney, and probate. A knowledgeable third party, introduced throughout wealth management, can act as a money manager and account for checks and balances.
– What factors do you consider before making recommendations? – Are there any qualifications required to access your advice? – Who monitors your ongoing consistency of service? – Do you offer income protection and asset protection strategies? – What ultimately ensures that you have provided me with a reliable answer?
When navigating the waters of wealth management Singapore, it would be most expedient to engage a reliable financial coach. Questions you should then pose to a potential wealth management provider with whom you wish to work include the following:
Evaluating Reputation and Track Record
Jurisdiction-specific images of private banks are made around perceived ability to find and promote competencies locally relevant for wealth management. This often requires the private bank to have been operating for a long time in the jurisdiction, so as to have developed for the staff an intuitive understanding of local wants. People usually go to private banks that they think know how to advise them on international investment opportunities. Frequently, they are a lot less agnostic about local ones. Trust in international investment advisory does not automatically imply an ability to source and manage local resources. Local-vs-international is often a question of long-term reputation (and derivatives such as the relationships that employees have built), and locality of decision-making. In Singapore, the three private banks that we gave positive notices to had all been three, four or five decades old. Our negative notices were given to banks that had been present here for less than five years.
Evaluating reputation and track record. Creating wealth, and preserving it, is a process that stretches over time, often many years, sometimes multiple generations. Wealth management services are built on making it easier to navigate this journey, so that you can spend more time on things that matter, and less time on the mechanics of discipline and diligence. Delegating financial management to someone else is a big step. To be able to sleep at night, it is necessary to have the peace of mind that comes from understanding whether your partner in wealth management is competent and trustworthy. With few exceptions, private banks have one national reputation, not separate corporate images for each of the jurisdictions where they operate. SocGen was a case in point. As is UBS, HSBC, and Citibank.
Assessing Expertise and Specializations
The suitability of non-traditional providers should be judged on more subjective assessments of problem-solving techniques and investment results, which can be quantified but must also be oriented with the client’s broader wealth management objectives to provide tools that can help mold a desired lifestyle.
Regulatory shifts around the world have been catalysts for a new generation of providers that have chosen fiduciary mandates to capitalize on the product-neutral approach they allow, as a knowledge-based approach can often yield better outcomes. Suitable providers have joined distinction organizations such as holistic financial planning societies, and individual credentials from popular bodies like those that administer certified financial planner and chartered financial analyst designations are also proving to be preferred.
Years of experience and credentials should factor into this evaluation, yet more recent shifts in the financial industry are prompting new considerations. Wealth management has become increasingly complex, and the plethora of investment vehicles and financial products has caused clients to question whether investment advisors, who are often in the business of selling products, are really operating as true wealth managers.
For an individual desiring to spend less time on the technical aspects of his or her wealth, the breakdown should be proportionate to the individual’s personal expertise and time constraints. For instance, an individual whose professional life entails critical examination of large sums of information would likely appreciate more opportunities for wealth enhancement discussions than someone whose personal threshold of financial topics may lead to the conclusion that an analysis is not worth the amount of effort required for reading it.
When wealth management clients decide to engage a professional, the process typically involves more than a simple online search for the best candidate. So, evaluating multiple candidates is both a best practice and a preferred method. Once the candidates have been selected for review, the client should find out each candidate’s specialized areas of expertise. Contrasted within wealth management, two important areas can be wealth protection, exemplified by knowledge of legal and insurance considerations, and wealth enhancement, exemplified by knowledge of investing and tax considerations.
Understanding Fee Structures and Costs
With high-net-worth individuals in Singapore spending only 4 average hours per year on their wealth, it is no surprise that so many continue to treat wealth management as a pastime activity. I frequently refer to the chaffinch as the primary psychological enemy when I write about wealth management, which must also bring adequate “value.” Slowly the realization dawns on me that the title margarit pop of the brazen links and its impact on investors’ material does not cover the whole truth: the unsuitable fee structure for wealth management services exacerbates investors’ grief. Whether it’s the hidden costs of the fund managers as early as 2004 or the costs of over-activity of Wealth Management Services as early as 2013, I have previously written about the negative impact of these unethically high costs on the investor. However, I have never looked closely at the cost structures of concentrated wealth management.
Navigating Prosperity: The Essentials of Wealth Management Singapore, a new publication by Gallup and Merrill World. In Navigating Prosperity, a first-of-its-kind leading research study, co-authored by Gallup and Merrill, it provides powerful insights into the lives of 1,461 of the wealthiest people in Singapore, their dreams, their concerns, and their hopes for the future of their families and communities. However, whether and how these masterminds about wealth and investing see wealth management is that it is an infrequent activity. Research from TIP Wealth Management and First Republic Private Grape suggests that American multimillionaires spend 57 hours per year on financial management—that is less than 1% of their time.
