Why US HNWIs Should Set Up Family Office In SingaporeBy Atin Bhutani
There is no question that the wealth of the world continues to grow, even amidst the rise of unprecedented and unexpected events of the 2020s. In 2019, the number of billionaires rose by a whopping 38.9%, and with this rise in figures, Asia became one of the major magnets for wealth. A growth of almost 7.9% in the regional high-net-worth sector has resulted in a rise in the number of family offices in Singapore.
This growth has also been accompanied by a rise in the number of high-net-worth individuals (HNWI) and ultra-high-net-worth individuals (UHNWI). These groups of people are looking to secure their financial interests and at the same time guarantee their legacy by working to ensure the succession of their wealth for the affluence of their grandchildren and children.
What makes Singapore an eye-catcher for family office setup?
Conventionally, Hong Kong and Singapore have been the leading financial hubs within the region of Asia and thus have become the preferred location for wealth and asset management. In the case of Hong Kong, its geographical proximity to the mainland of China has contributed towards it becoming the ideal destination for offshore Chinese wealth. However, in the near recent past, the political situation within the country that has resulted in broader instability has driven a huge number of wealthy families and HNWIs towards the direction of Singapore.
We cannot ignore the fact that Hong Kong is the gateway to China, and therefore it continues to be an important wealth and financial management center. However, more and more wealthy families are increasingly seeking to spread their risks and diversify their wealth to other locations, with Singapore being the major location of choice.
Due to the ongoing uncertainties in Hong Kong and the continued rise in affluence within the region, Singapore as the location of choice for wealth and asset management for wealthy families and HNWIs is still expected to rise much further.
The major contributing factor that underpins Singapore’s attraction as one of the key centers for the wealthy and the rich is that the region has a very stable political environment that is known for its strong rule of law. This regional stability instills confidence among the wealthy and the rich and appeals to them as a haven where they are free to park their assets and wealth.
Singapore also has a business-friendly environment that is contributed to it in part by the presence of free trade agreements and double tax agreements.
Stable and pro-business government policies
The government of Singapore has brought into effect policies that are designed to ensure that the asset and financial management sector remains transparent and well regulated. The Monetary Authority of Singapore is always introducing new initiatives in addition to fine-tuning the schemes that are already in place to promote wealth and asset management industries. For instance, the introduction of the Variable Capital Company to allow for greater flexibility to fund and asset managers to start-up investment fund structures within Singapore.
An Attractive Tax Regime
Singapore has a competitive tax regime that has served to enhance its attractiveness. Within this tax regime, it does not impose capital gains or inheritance tax. There also exist several other tax incentives that are designed with the asset and wealth management sector in mind to provide incentives to various asset managers to domicile within Singapore the wealth and the assets that they manage.
Singapore is a common law jurisdiction, therefore it has put in place various trust laws and has worked to promote the trust industry. The result is that trusts are now being used widely for succession planning and inter-generational wealth.
Well Established And Developed Infrastructure In The Financial Services Industry
Singapore is now the location of choice for HNWIs as it has grown its reputation as being a jurisdiction where it is now possible to engage in real commercial substance owing to its pro-business environment and developed infrastructure.
The region has a strong ecosystem of asset managers, banks, accountants, lawyers, and other service providers of a professional nature. The city is a world-renowned cosmopolitan city with a host of first-class amenities. Singapore also boasts a skilled and readily available workforce. All these serve to reinforce and increase the attractiveness of Singapore.
The region also has in place various policies that are designed to attract foreign investors and foreign talent who would desire to move to Singapore and take advantage of the vast growth opportunities. Singapore also has in place a Global Investor Programme where applicants who qualify are granted permanent residence.
Ease of Operating a Family Office
Because of the emergence of wealthy families and HNWIs seeking to launch family offices within Singapore, the number of family offices that are being established within the region has increased sharply. For instance, the vacuum machine manufacturer and tycoon, as well as other popular billionaires responsible for the chain of hotpot restaurants have all launched and established single-family offices within Singapore.
Traditionally, wealthy families domiciled their assets and investments within special purpose vehicles or holding companies. These kinds of setups resulted in many challenges in terms of efficiency and management.
However, the advent of the family office serves to address many of these bottlenecks. The family office as an organization offers to wealthy families specialized and tailored services in a variety of aspects such as trust and estate planning, investment management, risk and compliance management, lifestyle services, succession planning, governance, and tax and financial planning.
The idea behind single-family offices is that dedicated staff is employed to service and attend to the requirements of one single family, while at the same time coordinating and integrating all matters of the wealth of the family.
There does not exist a one-size-fits-all single-family office structure. Instead, each single-family office structure is designed with the specific needs of the family in mind. For instance, some single-family offices focus more on legacy building, whereas others are focused on investment management, family education, philanthropy, wealth transfer, etc.