Till a decade ago, Singapore was mainly a banking hub but things soon changed. Various incentives were granted to financial institutions and finance professionals. Besides financial talent, family offices require legal and accounting support. A licensed trust company will serve as the trustee or co-trustee of a family trust and the wealth protection planning will be put in place for the client. Some multi-family offices project to establish their own licensed trust company. As the trust company does not engage in banking business, the licensed function has been relatively low, which means that the licensed trust companies in the market are more busy with wealth planning and corporate services for personal clients.
Building a financial legacy is usually about preserving and multiplying wealth through different generations. There is usually a business legacy and a family harmony component as well. Hence, different wealth owners usually have different objectives and beliefs on wealth planning. Family Office has a long history in Europe. In the US, Family Office setup is regulated by the Investment Advisor Act of 1940 and hence is more structured in comparison to the rest of the world. Traditionally, Family Office refers to the private office of a wealthy family’s investment office. They invest the family’s wealth to meet the long-term financial goals of the family. As the wealthy family becomes a century family, the family’s employment office may link up to the family’s only investment office, to form the Family Office work style in “heart, brain, and hand” – Po family, Chao family, Kwok family in Hong Kong, Tsai family in Taiwan, etc. Between family and business, usually business lawyers and family lawyers are engaged. They may be the director or supervisor of the business. There are multiple conflicts such as money in family disputes or exceed due to the transfer of family assets. Some family members approve of one type, and some family members resist, and the family assets have been fought. As the long-term planning of the family office, the family assets are professional, stable, and long-term investment, focusing on long-term investment and long-term benefits.
Benefits of Setting Up a Family Office in Singapore
Family offices should create a knowledge transfer plan to empower the second and third generations on wealth management. It is important for the next generation to understand the family’s journey as wealth placement decisions must align with the intended philosophies and values. A family council is often set up, usually within a family office structure, to discuss wealth management strategies transparently and aid in active communication to ensure continuity of the initial family vision. Family members, including future generations, are able to know more about the family business and wealth which prepares them for their potential future leadership role. With this foundation laid, the family can start to build their financial legacy. We emphasize the importance of creating a financial plan that provides diversified private market investment solutions for the wealthy family. It is important to understand the family’s long-term view of wealth and apply a structured approach for their investment portfolio. A clear asset allocation strategy should be outlined, and a timeline established to track the family’s long-term financial goals. The process must involve all priorities, including the family’s current consumption and future investment opportunities. Family office setup in Singapore can provide significant advantages for wealthy families seeking to establish a centralized and efficient platform for managing their financial affairs.
Success makes the first-generation entrepreneur and the subsequent inheritor of the family’s wealth seek profitable investment opportunities for higher returns. They expect their wealth to be managed professionally to ensure its sustainable growth and protection for future generations. This expectation has garnered family offices increasing importance in Asia as wealthy individuals and their families recognize the need to structure wealth management effectively. Dialogue with wealthy families has also shown that this importance is aligned with the desire not to create investment legacies alone, but also financial legacies.
Access to a Strong Financial Hub
Further, according to the 2018 Global Financial Centres Index (GFCI), the most recent, Singapore has seen a rise to Rank three, during the third cycle of Global Financial Centres (GFCI) Center (Z/Yen Partners RSA Ranks). Praiseworthy initiatives to create a new economic Strait Talent Development Scheme, offering generous grants for banking graduates for a period of three years, demonstrate a clear desire to nurture financial and banking talents in this region. Impressive infrastructure development such as the upcoming Kuala Lumpur-Singapore High affordable cost of living, strong government and parent (KL-SG HSR), and other digitally enabled infrastructure projects, add to the readiness index for Singapore as a financial services hub. Furthermore, Singapore’s reputation as a modern and efficient hub city for various conferences and exhibitions is driven by and further strengthens its financial interlocutor reputation. This is evident not just in the banking sector but also in the family office and the high net worth community at large, justifying the city-state’s placement as a natural place of interest for wealth management and family office executives.
Despite a full array of financial hub options, Singapore routinely enjoys a high ranking as an international financial centre and is widely accepted as a forward-thinking financial hub of choice. Singapore has made a name for itself as globally accepted for its economic strengths, operational capabilities, and infrastructural attributes, and has earned the adoption of high-end service providers, such as the financial services community, which understands Singapore offers strong wealth management capabilities. Singapore International Monetary Fund (IMF) ranking (2018) for GDP per capita has been consistently high. According to HSBC’s 2018 Expat Explorer, HSBC’s annual global survey, it identifies Singapore as the best country for expatriates. HSBC’s survey indicates that top equity professionals working in Singapore can earn a global average of USD 21,800, labour markets remain strong, and the quality of education received by their children. Singapore scores highly on the image, is seen as being economically safe, is politically stable and attractive for those seeking financial services opportunities, with a global financial centre ratings scored even better, according to a March 2018 survey.
Favorable Tax Environment
To completely understand why a Singapore family office is so strong from an expense arranging perspective, the extreme for limiting its obligation and teaming up with Is on the grounds that a FOC falls under the fund business and on any individual level, there is no extra arrangement of meaning involving for fire up testament, embracing and checking of the applications made by speculative stock investments chief executive are Darwin posts and authorizations with the monetary specialists. On the other hand, solidness includes the organization of the structure when a Fire which isn’t NFC Introduce is included, or NFOTC and settle performs the capacities for people that Needed a Family Office as without the tax breaks compliant monetary establishments.
A Singapore family office entices a single family to set up a single-family office because a single-family office triggers a zero present planning business contribution duty charge for Singaporean and changeless inhabitants. A single-family office, which is a Singaporean company, likewise triggers zero capital increase charge and no value-based duty charge. Wealth acquired is charge excluded both for affirmation and … till I state in any case, a single-family office may confront a drawn-out rate. However, in the event that one deals with the expense well ahead of time, a code is simply a code that needs to address – code. Unexpectedly, a Foundation Family Office in Singapore is an expense advantaged body with (Freedom 49(1)(5) and 98C) with income charge and bequest charge exception are the second-just one to a Resilient Family Foundation in Long Island.
Wealth Preservation and Succession Planning
Estate planning, within proper guidelines, ensures that the assets held in the main personal holding company of the ‘family wealth’ are passed down in conformity to one’s unique disposition to beneficiaries known as “the ultimate beneficial owners.” In this way, a strong, family-oriented, responsible approach to managing the family’s physical assets is perpetuated. With each generation, the family should grow in strength; the main personal structure should also grow, helping to become not just the guardian of the assets, but a footstool to launch businesses yet to come. In this way, the family assets have been invaluable, a true success story. We believe estate planning is not just for the rich and famous and it is not about facing the fear of one’s own mortality. Rather, it is about taking a proven, informed, and appropriate plan that has guarded the fruits of one’s life’s work and ensured that what one paid tax for is maximizing the benefits released to the family.
In wealth management, estate planning is a term commonly used to describe the act of making plans for the transfer of a person’s assets before and after his or her death. In the private wealth structure, while this is a matter of necessity rather than choice, several important questions arise: How will my family be provided for? What happens if an heir still only in his teens becomes the new head of the family fortune? Are there strategies to ease the impact of estate duty taxes that are a regular imposition in many countries? And most importantly, asset protection for future generations… how can it be achieved through enhanced use of trusts, wills, and foundation plans? The last decade or so has seen a combination of exuberance in family wealth through property market uptrends and increased inflation causing an expansion in the total collective wealth of many families. As a focus on preserving family wealth for the education, lifestyle, and standard of living needs of family members has arisen, proper estate planning has taken an increasingly important role in family asset preservation and is now a focus for financiers within the Family Office structure in Singapore.
Key Considerations for Establishing a Family Office in Singapore
Greater control will likely be the more favored aspect of a single-family office, because of the family’s influence. One, the challenge in multi-family offices is that the number of families tends to have its influence diluted. In succession planning (who eventually takes over your holdings when you’re retired or have passed on), it might be that your family office executives don’t have that same influence on your children or envisioned successors. With your family office as a single-family entity, it means policies are implemented from top to bottom. Second, some families might chafe at investment options that multi-family offices typically afford. This is especially so with niche areas (think: private equity, artwork, race horses), where investments are favored by fewer family members. With a single run, all family members can have their financial budgets set aside to actualize their ideas.
It’s easy to underestimate the importance of picking the right structure – until things go wrong. This is even more so in matters concerning wealth management and legacy planning. Doing the wrong thing here can lead to heavy legal ramifications and uneven distributions. And when your family is undergoing strain, the last thing you want is to have legal or financial problems piling up. With this in mind, here are some key considerations for setting up a family office (single or multi-family is your choice), be it in Singapore or otherwise. There’s no one-size-fits-all solution to family office structure. Many wealthy families find that their needs are serviced best by a combination of services provided by single and multi-family offices. If you’re a maturing millionaire-to-be standing at the crossroads, this post outlines the decisions you’ll have to make before you embark on professional wealth management services.
Legal and Regulatory Framework
Multi-Family Office & Private Trust Companies (PTC) in Singapore Legal and Regulatory Framework. The internal registrar-based family office framework was designed by Singapore for single family offices only and not covered a multi-family office concept due to the international regulatory framework. In 2012, the Senior Minister of State for Law, Mrs. Indranee Rajah, expressed her agreement to study the establishment of a multi-family office (“MFO”) regime alongside the establishment of a private trust company (“PTC”) and foundation company arrangements for the Company (“PTC”) and foundations, as they were not yet part of the “family” office framework. The end objective is to ensure that the wealth management sector in Singapore can oblige UHNWIs families effectively. Easy, efficient, and tailor-made family office service provision and structuring can esteem this distinct client segment in Singapore.
Single Family Office Legal and Regulatory Framework. A Singapore registered single family office is defined as a company providing family office services to at least one Accredited Investor, and it is only allowed to serve the family members who are the accredited investors. The Singapore Government aims to attract more SFO to set up in Singapore with the introduction of the VCC structure. Additional business activities and services outsourced by family offices will be subject to further controls, prudential checks, and licensing requirements by the respective regulatory authorities to minimize potential risks to users of family office services and prevent money laundering or abuse of such services. More stringent controls will be imposed on family office employees who are appointed as signatories and/or are meeting potential beneficial owners of legal entities during onsite agreements or transactions in Singapore. Family office advisory boards need to provide independent views to ensure that the family office is managed effectively and professionally.
The Monetary Authority of Singapore has established an extensive framework that oversees different financial services provided, such as wealth management, fund management, employment of personnel in family members’ private entities, setting up of marketing offices to operate properties and business. And family offices in Singapore serving the family should ensure all advisors, service providers, and employees meet the regulatory requirements when dealing with the family, providing the different services.
Choosing the Right Structure
This is especially pertinent since the conviction of many family offices which cater to a specific ardent clientele mirrors that of the families whose interests they help service. Contrary to the less personalised services offered by third party wealth management alternatives that generally adopt a singular investment approach, the family office often plays an extended role with respect to looking at the broader financial interests of families. With the benefit of relatively fewer clients, the family office is generally more agile with respect to service delivery and is also better positioned to benefit from economies of scale. Hence, the choice of the family office with the right business model is quite pertinent for hiero families to ultimately benefit from tailor-made advice that should potentially lead to a capital protecting and value-accretive investment strategy.
One can choose from a range of options in choosing an optimum operating structure for the family office, including setting up an independent, purpose-built platform, a broader multi-family office or even a composite solution. Considering the background of their resources and their investing predilections, among other determinants, selecting an appropriate framework becomes all the more important for any family looking to get certain customary services. Having clarity over the criteria—be it the need for a specific professional or investment belief, the engagement in liquid or non-traditional markets—can help enhance the chances of effectively securing the most suited family office.
Talent Acquisition and Retention
The conundrum of matching a family’s single family office interests with those of private banking interests presents families with a commercial and talent alignment challenge, given that employees of banking institutions under the Private Banking Licensing Exemption (PBLE) regulations are not allowed to accept stakes in the arrangement. However, family offices that are independent are able to use share-based and stock grants to structure the employee incentives and attract and retain talent. A commercial salary with a deterring drawback could offer the family a decisive competitive edge in talent and wealth creation over banks. Due to the growing business, the family office could soon become enshrined with ever-expanding and transformative knowledge that could surpass private banking. In essence, the family office can create new offerings over private banks from within.
As the family office expands, it is essential to increase capacity, hire a team, or partner with third-party service providers. Most family offices agree that attracting and retaining good talent is essential to the long-term success and viability of a family office. They should be motivated by a shared philosophy with the family office, and their financial interests should be aligned through performance-based compensation to drive the best outcomes for the family. Without alignment, motivated team members may leave to create their own businesses, thereby reducing the family’s strategic advantage – a cohesive and knowledgeable family office team.
Technology and Cybersecurity
Both MAS and the Personal Data Protection Commission in Singapore (PDPC) issued 2019 in-depth publications to guide businesses on how to mitigate both cyber risks and data protection obligations. When the terms Internet of Things (IoT), voice command, blockchain, and cryptocurrency are already part of our everyday talks, it’s crucial to take proactive measures to secure the family members’ information and transactional privacy. A family office in Singapore should also invest in emerging technologies and practices that can confine potential damages such as deep learning, artificial intelligence, Internet of Things, and blockchain to fortify the cybersecurity posture. Extensive cybersecurity protection can provide potential flexibility to engage the delegated investment manager to solicit income-generating recommendations and to effectively manage various portfolios for wealth preservation, investment, and philanthropic needs.
Technology and Cybersecurity. A family office should establish technology platforms and secure their networks and devices appropriately to ensure data confidentiality, integrity, and availability. Access to data, systems, and applications must be restricted to authorized persons only. As Singapore is the world’s second most prepared country in terms of cybersecurity strategy, among countries with the lowest commitment to secrecy jurisdiction, leading the Asia, according to the Global Cybersecurity Index (GCI 2015). With effect from 1 August 2018, the amended MAS Notice SFA04-N12 covers even single-family offices with at least SGD 200 million of assets under management are to focus on system security, business continuity planning, and audit requirements under the Code of Practice.
The implementation of all the operational and strategic plans, processes, strategies and activities of the family office will depend in large part on every Gill, Dick, and Harry who works in it. Thus, it is of paramount importance that the family office plan can effectively attract, employ, grow and keep the most suitable talents. The most important consideration when setting up the physical attributes and assets of the family office will depend on the availability of appropriate space and other facilities to comfortably accommodate its operational needs. Preliminary thoughts also need to be given on the choice of the family office’s system and communications infrastructure. Furthermore, the design of the office space, together with the furniture and equipment used, should tie in with the family’s corporate identity and values, mitigate the risk of identity theft, and maintain the sensitive nature of their activities.
Creating a family office is a personal yet strategically important decision for wealthy families to make. High-net-worth and ultra-high-net-worth families need to ask themselves: across generations, how robust and structured should the management and administration of the family’s businesses and assets be as part of its overall financial and investment planning? Should we set up a family office? What is the best family office structure to suit the particular needs and resources of our family? Irrespective of whether the family office takes the form of a single-family or multi-family office, clients should work hand-in-hand with trusted wealth planning advisors, as the private banker and when companioning them in selecting a private or independent multi-family office service provider.
