Why Are the Rich Invading Singapore aka Family Office?
Family offices are becoming an increasingly important part of the wealth management scene in Singapore. These specialized firms offer comprehensive wealth management services to wealthy individuals and families, helping them to preserve and grow their wealth over multiple generations. Singapore has become a growing hub for family office services, with the number of family offices in the country increasing significantly in the past three years.
This is due in part to the explosive growth of wealth in Asia, with the continent now home to more than a quarter of the world’s billionaires, and this number is projected to increase to one-third by 2023. According to Wealth-X’s 2021 Billionaire Census, Asia’s billionaire population increased by 16.5% last year. Singapore, in particular, has become a popular destination for wealthy individuals and families, thanks to its stable political and economic environment, as well as its strong legal system and regulatory framework.
Source: Wealth-X Billionaire Census 2021
It is estimated that 70 percent of families would lose all of their fortune within one generation; thus, a growing number of families are turning to professionals for assistance in order to protect their wealth for future generations.
Because of this, there has been a significant increase in the number of single family offices (SFOs) and multi-family offices across the region (MFOs). When compared to the latter, the former provides comprehensive wealth management for a single client family, while the former serves several families and, in a manner analogous to that of traditional advising companies such as hedge funds, provides economies of scale through cost-sharing among customers.
Just what is a Family office?
A family office is a private company that provides a range of services to a single wealthy family or a group of families. These services can include investment management, tax planning, estate planning, and more. The main goal of a family office is to help the family preserve and grow their wealth over multiple generations.
There are two main types of family offices: single-family offices (SFOs) and multi-family offices (MFOs). SFOs offer total wealth management for a single family, and are typically created by families with a net worth of over $100 million. They are designed to provide a comprehensive range of services, including investment management, tax planning, estate planning, and more. SFOs can be set up as a standalone entity or as a subsidiary of the family’s investment holding company. They can also be set up as a trust, partnership, or corporation.
On the other hand, MFOs support more than one family, and are designed to offer economies of scale through cost-sharing among clients. They typically serve families with a net worth of $25 million or more. MFOs can be set up as standalone entities or as subsidiaries of larger financial institutions, such as banks or asset management firms. They can also be set up as trusts, partnerships, or corporations.
The services offered by family offices are diverse and can be tailored to the specific needs of each family. These services can include:
- Investment management: Family offices often provide investment management services, including portfolio construction, risk management, and performance monitoring. They also help families to diversify their investments, and can provide access to alternative investments such as private equity, venture capital, and hedge funds.
- Tax planning and compliance: Family offices assist with tax planning and compliance, including preparing and filing tax returns, and providing advice on tax-efficient investments and structures.
- Estate planning: Family offices also help families with estate planning, including creating wills, trusts, and other legal documents to ensure that the family’s assets are passed on to the next generation in a tax-efficient manner.
- Philanthropy: Many family offices also assist with philanthropic activities, helping families to create and implement a giving strategy that aligns with their values and goals.
- Risk management: Family offices help families to identify and manage risks that may threaten their wealth, such as legal disputes, natural disasters, or market downturns.
- Family governance: Family offices also help families to establish governance structures, such as family councils or boards of directors, to ensure that the family’s wealth is managed in a transparent and accountable manner.
- Lifestyle management: In addition to these services, family offices also provide a range of lifestyle management services, including travel planning, private aviation, and concierge services.
- Succession planning: Family offices help families plan for the transition of wealth and leadership from one generation to the next. This includes identifying and grooming future leaders, creating an action plan to transfer assets, and providing education and training to the next generation.
- Family education: Family offices also help educate family members on financial literacy and wealth management. This includes providing workshops, seminars, and mentorship programs to help family members understand the intricacies of managing wealth.
- Legal and regulatory compliance: Family offices also assist with legal and regulatory compliance, helping families navigate the complex laws and regulations that govern wealth management.
Basically Family offices are private companies that provide a range of services to wealthy individuals and families to help them preserve and grow their wealth over multiple generations. They can be set up as single-family offices or multi-family offices, and the services they provide can be tailored to the specific needs of each family.
Singapore Government Welcomes The Rich
The Singapore government has been actively attracting investors to set up family offices in the country. This is due to the country’s strong reputation as a hub for wealth management, with a stable political and economic environment, as well as a strong legal system and regulatory framework. Singapore is ranked as the second most competitive economy in the world, and it’s the second largest foreign exchange centre in Asia. These factors, along with the country’s tax-efficient and business-friendly environment, make it an attractive destination for wealthy individuals and families looking to set up a family office.
Family offices in Singapore are able to provide tailored and comprehensive wealth management services to meet the unique needs of their clients. They have access to a wide range of investment opportunities, including private equity, venture capital, and hedge funds, as well as traditional investment options such as stocks, bonds, and real estate. They also have a team of experienced professionals who are well-versed in the legal and regulatory requirements specific to Singapore, which ensures compliance with all relevant laws and regulations.
Significant Role of the Rich to Singapore
Furthermore, Family offices in Singapore have been able to play a significant role in the growth of Singapore’s wealth management industry in recent years, as they provide a wide range of services such as investment management, tax planning, estate planning, philanthropy, risk management, and more. According to a report by the Monetary Authority of Singapore (MAS) in 2020, the number of family offices in Singapore has grown by more than 30% in the past three years. This is a testament to the growing demand for family office services in Singapore and the country’s attractiveness as a destination for wealth management.IV. The Benefits of Family Offices in Singapore
Family offices in Singapore can provide a number of benefits for wealthy individuals and families, such as privacy, control, and continuity of wealth. They can also help to protect and grow wealth over multiple generations, and provide specialized services such as succession planning and philanthropy.
Investing in a Sustainable Future
Sustainable investing is becoming an increasingly important trend in the wealth management industry, and family offices are well-positioned to drive and accelerate sustainable development. A recent survey by the Family Office Association Hong Kong found that 85% of family offices are expected to raise their allocation to environmental, social, and governance (ESG) or impact investing. Family offices can create value and impact through blended finance and unlock pools of capital from different players to motivate other investors. This makes them more similar to institutional investors and give them access to innovative financing models that can make their investment capital catalytic.
In Singapore, family offices are increasingly recognizing the importance of sustainable investing and are incorporating it into their investment strategies. They are taking a more holistic approach to seek value alignment and leave a legacy by embedding sustainability and impact into family businesses, investment portfolios and philanthropic activities. This not only helps to create long-term value for the family, but also contributes to the overall development of the community and society.
One example of a family office in Singapore that is actively pursuing sustainable investing is the KOP Limited, which manages the wealth of the Khoo family. The company has a dedicated sustainability team that focuses on identifying and investing in companies that have a positive impact on the environment, society, and governance.
Family offices in Singapore are playing an increasingly important role in the wealth management scene. They are able to provide tailored and comprehensive wealth management services to meet the unique needs of their clients, and are increasingly incorporating sustainable investing into their strategies. As the number of family offices in Singapore continues to grow, they are likely to have a significant impact on the country’s real estate market and overall development.
Giving Money the Philanthropic way
As the family office evolves to look beyond investment, one key focus area will be philanthropy, and we anticipate this to gain prominence in the next few years. Family offices in Asia have increasingly devoted a portion of their assets to philanthropy. This trend was evident during the pandemic years from 2020 to 2022, which saw an uptick in charitable giving, including donations and volunteering. We expect this trend to continue. Within this space, we are seeing a trend of more women setting up family offices and being in charge of their own philanthropic initiatives.
Women already control $11 trillion in assets and by 2025, an estimated 60% of billionaires will be women. As this trend evolves, we note that women tend to donate to a higher number of charities versus men – meaning that while the amount may be lower, the impact is spread out further. (According to Business Times – Singapore Family Office Scene set to soar in sophistication)
Conclusion
Family offices are becoming an increasingly popular choice for wealthy individuals and families in Singapore. These specialized firms provide comprehensive wealth management services, including investment management, tax planning, estate planning, and more, to help preserve and grow their wealth over multiple generations. Singapore has become a growing hub for family office services, thanks to its stable political and economic environment, as well as its strong legal system and regulatory framework. With the continent now home to more than a quarter of the world’s billionaires, and this number projected to increase to one-third by 2023, the demand for family office services is expected to continue to grow.
