A single family office (SFO) is a full-service organization set up to provide integrated services to a family with significant wealth. This paper will examine the benefits of setting up an SFO and explore the considerations, as well as the numerous tools available in setting up an SFO in Singapore. It draws on practices across the region to see how Singapore can continue to attract increasingly sophisticated families to create substance and capacity in the investment and financial services space, leading to benefits for Singapore in terms of scale, international capability, and connectivity of the nation’s financial services hub. In addition, Singapore should continue to see the economic benefits in increasing the professional services cluster that sustains and creates more high-value jobs, while raising the skill levels of Singaporeans. Our firm specializes in family office set up in Singapore, offering bespoke solutions tailored to your needs.
Finally, Singapore should work proactively to put in place the ecosystem that will become the SFO market and at the same time, perform the comprehensive range of services that the SFO requires in a supportive manner. The development of SFO markets and the creation of a world-class, well-regulated environment are essential building blocks for the future of the financial hub and present significant opportunities. It is also critical for the private and wealth management practices in Singapore to attract the assets and business flows that are key to the future development of a key cluster of Singapore’s financial services sector. Navigating the complexities of a family office Singapore has never been easier with our expert guidance and support.
Definition of a Family Office
The term “family office” is generally used to describe services which are typically offered to wealthy families who have assets to manage and have a sizeable ownership in large or small operating businesses or are beneficiaries of large or small trusts. Traditionally, family offices have been single family offices owned by single wealthy families in full or in part to cater largely to a specific wealthy family’s needs. The family’s needs would typically include asset management, wealth creation and management, philanthropy, administration, personnel (ons and retaining human capital), succession planning (implementing trusts or other structures to keep the wealth within the family in a relatively tax efficient manner). We provide comprehensive services for establishing a single family office Singapore, ensuring a seamless and efficient process.
In a broader context, the operation of sophisticated private investments can require family offices to set up an investment management company to provide both fund management and securities dealing. Such investment management companies would typically hold the licenses/authorizations for conducting capital markets services activities, viz. fund management and securities dealing, and the dealing in units in collective investment schemes. However, in recent years, there has been an increase in the number of multi-family offices offering services to a number of families at a cost, and a cost-effective manner to satisfy the needs of the families. The services offered may or may not include wealth generation, asset management and investment management; management (including oversight of holding companies, management companies, general and exclusive and funds), advisory services, clan management, educational services, concierge services, governance services and other related services.
The Rise of Family Offices in Singapore
The institutional landscape of family offices in Singapore has evolved over the years. When the practice of having dedicated family offices for discrete high and ultra-high net worth families was first provided for by the MAS in April 2012, it was estimated that there were 30-40 single family offices in the country. In 2015, the investors and family offices co-invested US$6 billion through 44 deals into Singapore-based companies, representing 18% and 8% growth in the number of deals and value of investments from 2014 respectively. The rising number of super-wealthy individuals resulted in a growing demand for family office services such as wealth structuring, succession planning, real estate management, and concierge services catering to their specific needs. As of end-2017, 200 family offices are established in Singapore, a six-fold increase from the 30-40 family offices reported in 2012.
Supportive government policies such as the longer visa validity for permanent employees of a single family office, as well as enforced steps by the government to aid families in the transfer of wealth from entrepreneurs to the next generation, also saw the growth of family offices in Asia. The Ministry of Finance (MOF) and MAS thus worked together to introduce tax policies on items to incentivize family offices to relocate or set up in Singapore. One such tax advantage was the enhancement of the tax exemption scheme, which allows Singapore incorporated family investment companies that are able to meet certain criteria to claim 200% tax exemption on qualifying local income for up to S$1.5 million of basic income with effect from Year of Assessment 2011. In March 2013, revised guidelines on residency for the purpose of family offices were announced, which became one of the main drivers of converting Singapore Family Investment Companies (SPFIC) to licensed family offices.
Key Factors Driving the Growth
Family offices represent a growing segment of the ultra-high-net-worth community in Asia, and this trend is not surprising. With the expected wealth transfer from the baby-boomer generation to the next, larger wealth will be transferred to the Gen Ys and Gen Zs, or so-called “millennials” within the next two decades. In our region, many next-generation entrepreneurs or successful business families currently residing in Hong Kong or Singapore may be considering passing on this wealth to their children via these neighboring countries. There are four key factors driving the growth of single-family offices in Singapore.
First, regulatory certainty and supporting infrastructure are important considerations for families looking to set up their family offices in Singapore. The Monetary Authority of Singapore provides a continually evolving, comprehensive and clear regulatory framework to enhance Singapore’s position as a choice wealth management hub. Moreover, Singapore has a robust “ecosystem” of specialist service providers, including professionals who understand private trust companies, which are increasingly used as the corporate entity at the top of the single-family office structure, because they offer flexibility and the confidentiality of not having to disclose the names of the family members in the public registry.
Benefits of Establishing a Single Family Office in Singapore
In Singapore, the structure and benefits of a Single Family Office (SFO) are well-recognized and prized. An SFO offers a tailored solution for wealthy families, providing more control and privacy than setting up a domiciled fund or using existing trust and estate structures. Family members have greater say and can synchronize their own investment, advisory, and operational strategies. They can also enjoy the economy of scale from third-party professional services commonly associated with a Multi Family Office (MFO), or a global service provider. This compares to a family investment company or hybrid holding structure which combines controlling stake, nominated board member rights plus right of first refusal for multiple generations.
Beneficiaries can administer their global family wealth portfolio under a Singapore tax framework that champions stable wealth preservation planning over 10, 20, or 100 years. They can focus on channeling selected philanthropic funds towards impactful projects (having considered tax incentives, transparency, governance, legal, regulatory, and financial risks to protect their lasting legacy) thereby creating their differentiator on how capital is deployed and earned. Singapore also offers financial services infrastructure and professional expertise within a diverse business-friendly ecosystem. Well-positioned as a central global hub, Singapore is a magnet that attracts reputable service providers as well as established family office networks. With continued growth, a well-connected family office facilitates effective and efficient family governance, leadership, succession planning, family business education, and family values inheritance.
Tailored Services and Expertise
A single family office can provide a wealth of tailored services ranging from lifestyle management and estate planning to philanthropy advisory and educational services for the younger family members. Custodial services, strategies on how to monetize assets, private placement, and financial planning are also commonly offered. The SFO or your wealth planner could define the service level and offer flexible solutions. Expertise in multiple asset classes, business management, and investment management are rare in the single family office business. This is an elite group of professionals who can partner with you and manage your interests across the different sub-segments. Extremely high achievers, many of these professionals come with relevant working experience at large financial institutions. They have extensive backgrounds in investing, management, and operation of businesses. The family office can be some of the most trusted advisors to the ultra-high net worth family. They are vested in the success of the family office and have developed their expertise as investors over time.
Furthermore, as the family office is aligned with the family, the family office works on the principle basis of the family’s requirements. This culture is broadly also the unique selling point of the family office. The waiting period has been too long for the ultra-high net worth individuals who have been trying to find reliable and efficient partners for their interests. With the single family office, the ultra-high net worth families have created the partner of choice that can help them realize their goals. The industry has responded with new funds, asset allocation models, data, information, and customer services targeting the needs of the fast-growing class of UHNW investors. Single family offices invest primarily in real estate, private equity, liquidity, and public stocks. With the online technology, there are now web tools and services designed to cost-effectively support the direct investment objectives of the single family office.
A SFO, and in particular one set up in Singapore, brings a differentiated offering that serves the specific requirements of a group of wealthy families. This is besides the immediate benefit of having an entity which meets the needs of the families and where individuals have more control over their own financial futures. The ability to provide a unique governance structure, akin to the traditional family office but serving a greater number of families with similar family values and objectives must not be underestimated. While the cost of setting up an SFO may be an initial deterrent for some, on the increase in complexity and governance, second or third generation family offices may consider going down this route. At the same time, building the family office ecosystem also requires the input and collaboration of all related professional services. It is equally important for them to service the Asian family office space to support its growing presence, scale, and relevancy in global asset flows. Only then can they fully secure the wealth and the qualities of the empire the families have built with look for potential wealth-based issues that can readily be resolved as they arise.
In summary, as families grow and change in structure and complexity, setting up a family office is not only a sign of success. Through succession planning and by going the SFO route, an entity can effectively provide the wealth stewardship that families want for generations. By using the SFO platform as the infrastructure for growth, the wealth, the family, and the ethos of the entities can be successfully passed on to the next generation.
