The high net worth (HNW) market in the ASPAC region has seen substantial annual growth of almost 8% recently, and it’s expected to reach 21 million by 2024. ASPAC markets are witnessing increasing wealth, both domestically and globally. Notably, they hold the world’s second-largest concentration of HNWIs, following North America.
This somewhat silent expansion of wealth brings many new challenges for high-net-worth individuals (HNWI) and ultra-high-net-worth individuals (UHNWI) in Asia, especially those considering setting up a single-family office in Singapore. It’s not just the management of said wealth either, but the effective succession of that wealth to the children and grandchildren of those individuals.
When dealing with such large sums of holdings, a traditional fund manager may simply not be equipped to handle the wide and varied needs of HNWI and UHNWI. Beyond wealth management, there are other things to consider — planning, budgeting, charitable donations, wealth succession, and investment education for future generations are just a few of the things to consider.
Enter, of course, the much more efficient and all-encompassing family office — the favoured wealth management vehicle for forward-thinking HNWI and UHNWI. The benefits of a home office for HNWI and UHNWI are many, and you can read about them in our article How a Family Office in Singapore Can Ensure Your Children’s Ultra High-Net-Worth Future.
If you’ve made the decision of setting up a single-family office in Singapore, there are, however, a few things to examine for your personal situation, so let’s go over those considerations now.
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What Are Your Ultimate Goals for Your Family Office?
To make this consideration akin to a mission statement may seem rather trite for HNWI and UHNWI, however the endgame for a family office should be clear and well-defined — after all, the whole point of a family office is to secure your legacy for generations to come.
A family office is to be your unified foundation for every strategic decision from next year to the next generation — it will ultimately define what you want your family to represent for decades to come. So, for this reason, it’s highly recommended that you explore the values your family holds dear, and how you would like to foster those values for future generations.
Do you foresee a legacy in finance, property, or emerging technology? It doesn’t have to be finance-related either — perhaps you have a passion for the outdoors and wish to create a charitable foundation that will protect the environment for fellow citizens of your grandchildren’s generation.
Once you have your mission determined, you can make strategic decisions with measurable goals that will literally define your name in the history books.
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What Assets Will Fall Under Your Family Office’s Mandate?
As a HNWI or UHNWI, your assets will be broad and varied and could include everything from property to private planes, to precious stones. Each class of asset will require specialist advice and management — for example, property assets may be subject to local inheritance taxes or other restrictions.
The beauty of setting up a single-family office in Singapore is that you will have a dedicated team of lawyers and tax experts who have knowledge and capability in each and every one of your asset types. Once you have classified the assets you want to be injected into your family office, your team can tailor a plan specifically for those assets with your overarching goals in mind.
For example, it may be decided that it would be far more advantageous to put your non-bankable assets like property or fine art into a private trust within your family office. This is not a one size fits all arrangement, everything is entirely bespoke for your needs.
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Can You Structure Your Family Office with tax exemptions?
There is no skirting around the fact that a major goal of setting up a single-family office in Singapore is to wisely manage your tax responsibilities, and Singapore has a range of tax-related incentives to help you do just that.
Singapore’s tax incentives for family offices now include Sections 13O and 13U, replacing the older 13R and 13X schemes. These require minimum spending on local investments and the hiring of at least three local investment professionals to qualify for exemptions. These initiatives enable companies to practically eliminate tax liability on specific types of income.
To qualify for tax incentives under Section 13U, a family office must hire at least three investment professionals, one of whom cannot be a family member, and meet specific local spending requirements based on assets under management.
The Monetary Authority of Singapore (MAS) has revised the regulations for family offices seeking tax benefits under Sections 13O and 13U of the Income Tax Act.
Under the new guidelines, a fund managed or advised directly by a family office must meet minimum assets under management criteria and adhere to stricter requirements regarding the employment of investment professionals and the allocation of funds towards local investments, among other criteria. This is part of Singapore’s initiative to enhance the professionalism of the family office sector.
Your family office service provider will help you structure your fund correctly, as well as manage all interactions and approvals from the Monetary Authority of Singapore (MAS).
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What Is Your Plan for Succession?
As we mentioned earlier, a family office is, above all, designed to ensure your legacy for generations to come. Many HNWI and UHNWI, however, often worry that there is no clear plan for succession of wealth, and that their children will not have the tools or experience to diligently manage their wealth in the years to come.
Appropriately, a family office provider can not only establish family governance guidelines through a family constitution, but it can also facilitate education for progeny to manage their wealth wisely, ensuring it will be passed down in turn to their children.
The end goal being a clear plan of succession to ensure family harmony, and having children and grandchildren who are well prepared to continue the family’s legacy.
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It’s Not All About Money — Really
Somewhat tongue in cheek, but as wealth grows to such staggering levels, many HNWI and UHNWI believe that their legacy should not solely be about finances and wealth.
If you wish to undertake philanthropic endeavours, a reputable family office service provider will be able to connect you to a network of established philanthropy partners. Whether you want to donate a large sum to an established charity, or create your own non-profit organisation, a family office provides a host of options to make sure future generations see your family name in a positive and nurturing light.
Beyond philanthropy, a family office can provide you and your family with a full lifestyle advisory service. Put succinctly, a lifestyle advisory can assist your family with everything from travel arrangements to personal protection — think of it as a full-time concierge that can do the heavy lifting for every part of your life.
Where to Go Next for Setting up a Singapore Family Office
A family office should always be set up in a way that is completely bespoke to your family’s needs. This means that your family office provider will need to provide a consummate, intergenerational wealth management plan with a full complement of staff ranging from lawyers, to accountants, bankers and human resource specialists.
InCorp understands the gravity of securing your life’s work for your children. This is no simple service but rather a genuine dedication of our skills to design your ultimate legacy.
If you have any questions at all about what setting up a single-family office in Singapore could look like for you and your family, contact us to see how we can assist you.
FAQ
- To set up a family office in Singapore, you will first need to consider the following:
- What are your ultimate goals?
- What assets will be managed under your family office?
- What is the best structure for your family office?
- What is your succession plan?
- What else can you do beyond protecting your wealth? (philanthropy etc.)
- Here’s a brief overview of what you will need to ensure your family office qualifies for the scheme:
- Your family office must hire at least three local investment professionals
- Your family office must invest at least S$50 million
- Your family office must have local spending of at least S$200,000 per annum
- Singapore is an ideal location for many HNWIs mainly because of:
- Stability in government policies
- Attractive tax regime
- Safeguarding family’s confidentiality
- Leading financial hub
- Established fund management companies/fund managers
- Strategically located
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