According to Knight Frank, the forecast growth of the HNW and ultra-high-net-worth (UHNW)’s population in Asia will be the fastest worldwide.
This can be supported by the increase in its UHNW population – 7.2% from 2020 to 2021 to 170,000, which is predicted to rise to 225,000 by 2026. Likewise, the high net worth (HNW) population in the Asia Pacific hit 7.2 million in 2021, representing a 4.2% annual increase.
In Southeast Asia, family offices are becoming increasingly popular as more and more wealthy individuals and high net worth families look for asset management methods and protect their interests.
These offices can provide a wide range of services. They can also be a great way for families to stay together and keep communication open.
Let us delve deeper into the growing establishment of many family offices in the region.
What is a Family Office?
A family office is a professional investment management firm that provides services to a single wealthy family, or on behalf of the ultimate principal.
The firm engages industry experts, from investment professionals to legal and insurance veterans to manage financial and legal affairs for the family.
Family offices often provide estate planning, tax advice, succession planning, and other consulting services. They may even perform lifestyle management, which includes travel arrangements and catering to their lifestyle requirements.
What Are the Types of Family Offices Available?
- Single family offices with one principal (serve a single family)
- Multi family offices (serve a few families and multiple family members for economies of scale)
Are Family Offices or Hedge Funds Better?
While both are wealth management tools, family offices offer a full suite of financial planning services. On the other hand, hedge funds only help to invest money.
What Are Some Benefits of Setting Up a Family Office?
Why are family offices attractive to those looking to manage their family wealth?
By having a dedicated team that is focused solely on managing the family’s assets, family offices can improve decision-making and execution.
Family offices can help to streamline operations and reduce costs.
Family offices can provide a higher level of privacy and confidentiality than traditional investment firms.
Family offices can give families more control over their investments and better alignment of interests between investors and managers.
This is a boon because of the rising preference of wealthy families wanting to be more involved in managing their financial assets.
Simpler Structures Over Complex Traditional Vehicles
It was customary for wealthy families to hold their investments via holding firms or special purpose vehicles (SPVs). However, the complexity of these traditional vehicles made management difficult and troublesome.
Today, simpler structures are family office principals’ preferred choices, and the typical creation of a family fund alongside a family office helps to house all financial assets and SPVs.
This leads to a simpler, more efficient, and transparent holding structure.
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Why is the Number of Family Offices in Southeast Asia Growing?
There are several factors that have contributed to the growth of family offices in this region.
First, there has been a dramatic increase in the number of high-net-worth (HNW) individuals in Southeast Asia in recent years.
Second, the economies of many countries in the region are growing rapidly, providing new opportunities for investment.
And third, the regulatory environment is becoming more conducive to private wealth management.
Let us look at how each of these factors is driving the growth of family offices in Southeast Asia:
A Significant Increase in HNW Individuals in SEA
The number of high-net-worth individuals (HNW) in Southeast Asia is growing rapidly, providing a fertile ground for family offices.
This growth is being fueled by rising incomes and rapid economic expansion in countries such as Indonesia, the Philippines, and Thailand.
In addition, the development of new wealth management products and services is attracting more investors and affluent business families to the region.
The growth of family offices in Southeast Asia is likely to continue as more wealthy families look for ways to manage their wealth and protect their interests.
Rapid Economic Growth
In Southeast Asia, the rapid economic growth is fueling the influx of family offices. This is due to the increase of high-net-worth individuals in SEA and the development of new wealth management products and services.
In addition, many of the region’s HNW individuals are young and have benefited from the region’s strong economic growth over the past few years.
As a result, they have more disposable income to invest in, which is fuelling the growth of family offices.
Conducive Regulatory Environment
Some countries in Southeast Asia have developed a more conducive regulatory environment for private wealth management, making it easier for family offices to operate.
For example, in Singapore, there are no restrictions on the amount of money that can be managed by a family office, and there are a number of tax incentives available for investors.
The Philippines has also developed a number of regulations to support family offices, including the recently-introduced Family Office Act.
This act sets out the rules and regulations for family offices in the country and provides a number of benefits such as reduced taxes and simplified reporting requirements.
Other countries in the region are also developing similar regulations, which is likely to further spur the growth of family offices in Southeast Asia.
Is Singapore Ready for the Rise of Family Offices?
As a leading financial hub in the region, it is no surprise that there is a rapid increase in the number of family offices in Singapore.
In the first 4 months of 2022, the Monetary Authority of Singapore (MAS) had already approved over 100 applications to set up family offices.
There are a number of reasons why Singapore is an attractive choice for family offices:
Related Read: Why Singapore is Chosen for Family Office Set Up »
A Robust Regulatory Framework
First, the country has a well-developed financial sector with a robust regulatory framework. This provides a safe and secure environment for family offices to operate in.
High Industry Standards
Second, there is also continuous improvement of the wealth management industry’s standards to meet the ever-evolving needs of the family office ecosystem.
Business-Friendly Government Policies
Third, Singapore has a pro-business government that is supportive of private wealth management. This creates a conducive environment for family offices to do business.
High Levels of Transparency
Fourth, Singapore has a high level of transparency and is considered to be one of the most corruption-free countries in the world. This ensures that family offices can operate with confidence and trust.
Strong Rule of Law
One of the reasons why family offices are flocking to Singapore is because of the country’s strong rule of law.
This means that there is a high level of certainty that contracts will be honoured and businesses will be treated fairly.
In addition, Singapore has a well-developed legal system that is based on common law principles.
This provides families with a high level of protection and allows them to resolve disputes in a timely and cost-effective manner.
The Availability of a Skilled Talent Pool and Labour Force
Lastly, Singapore has excellent infrastructure and a skilled labour force that is capable of meeting the needs of family offices. This helps to ensure that family offices can run smoothly and efficiently.
Overall, Singapore is an attractive destination for family offices due to its strong financial sector, pro-business government, high level of transparency, and excellent infrastructure.
Related Read: Why The Tightening Criteria for Family Offices is Good for Singapore »
Southeast Asia is a Strategic Destination for Family Offices
It is clear that Southeast Asia is a winning destination for setting up family offices, particularly Singapore.
They will continue to provide valuable services to their clients and help drive economic growth in the region. Set up your family office in Singapore now with InCorp’s incorporation experts!
FAQs in Setting Up a Family Office in Singapore
- You can appoint a corporate service provider like InCorp to help you ease the set up process.
- The last official figure released in 2020 was 400.
Singapore is an ideal place for family office set up because of reasons like:
- Pro-business policies and government
- Strong rule of law
- High levels of transparency