Singapore has solidified its place as a destination for the world’s wealthiest to safely store their assets, and with that migration comes more family offices and relevant services for those entities.
As the world's wealthiest families make the move, family offices in Singapore are on the rise and an increasingly prominent feature of the country's private wealth landscape.
According to CityWire Asia, more than 100 family office applications were approved by the Monetary Authority of Singapore (MAS) in the first four months of 2022 alone.
This comes as the island city-state expected a net inbound migration of 2,800 high-net-worth individuals in 2022, an 87% increase on 2019.
Among the notable newcomers who set up a family office in Singapore are Google Co-Founder Sergy Brin (Bayshore Global Management), Indian billionaire businessman Mukesh Ambani, and American hedge fund investor Ray Dalio (Dalio Family Office).
Despite the negative impacts from COVID-19, as well as current global economic uncertainty and political conflicts, Singapore's economy has shown remarkable resilience. The International Monetary Fund (IMF) noted the city-state's "impressive recovery from the pandemic" and how it has outperformed similar economies, with total output exceeding pre-crisis levels last year (2022 vs. 2021).
How the country has handled these crises have not gone unnoticed. Sivakumar Saravan, Senior Partner of Tax Corporate Services at Crowe, a professional services firm in Singapore, shared his observation:
“The way Singapore has tackled the global pandemic with utmost safety measures and brilliant planning, many HNWIs and families see Singapore as a safe place to locate and grow their wealth."
It is not by accident that Singapore is one of the major wealth hubs not only in Southeast Asia, but globally.
From politics to public safety, from taxation to business, among other examples, there are many reasons wealthy families around the world go to Singapore:
Anurag Mathur, Head of Wealth and Personal Banking at HSBC, shared his take that summarizes the overall sentiment:
"Singapore has got all the ingredients right to attract investment. It's obviously a great place to live, with a stable currency and rule of law. It's an international financial centre and hub for multinationals and talent."
When it comes to family offices looking to move to Singapore, there are favorable policies. With the Singapore Global Investor Program, family office principals are eligible to apply for Singapore permanent residency status, residing and working Singapore, provided that they are able to meet certain conditions, which include having investable assets (excluding real estate) of at least SG$200 million (USD $148.8 million) and at least five years of an entrepreneurial or business track record.
With all the incentives to set up shop in Singapore, and to appreciate the magnitude of how much growth there is, check out these stats:
And when it comes to new wealth coming in, much of the influx comes from Mainland China, Hong Kong, and India, but Southeast Asian countries like Malaysia, Indonesia, and Thailand have traditionally found opportunity in Singapore. Wealthy families in the United States have found Singapore attractive as well.
Harish Bahl, founder of family office Smile Group, talked about the incentives for family offices setting up in Singapore made it attractive to stay:
“Since the pandemic, billionaires from all over the world have been staying on longer in Singapore, including those from China, Indonesia, India and the U.S."
Accompanying all this wealth coming in, Li Li Lim, Head of Global Investors, Family Offices, and Financial Intermediaries at the Bank of Singapore, pointed out other attractive features of the island city-state:
“As a progressive wealth hub, Singapore continues to develop itself as a center that can address UHNW families’ intergenerational transfer, estate, legacy, and succession needs. We foresee Singapore to grow in strength as a global global trust center with progressive laws and in attracting more professionals to practice in the area of estate and trust planning.”
How Singapore's family offices invest will, in many cases, parallel and overlap with investment strategies seen by families throughout Asia and globally.
And like family offices elsewhere, they will have a diversified portfolio, holding their share of public equity, fixed income, and alternative investments like private equity, venture capital, hedge funds, and real estate.
Of course, some developments stand out more than others in their investment strategies.
With mostly "underwhelming" results from public equities markets as of late, private investment deals appear more attractive to the wealthy in Singapore.
Tuck Meng Yee, Founder of Singapore-based family office JRT Partners, said private equity will remain appealing to investors in the coming year:
"The trend for more companies being held private seems to be continuing. The amount of capital that's now available for private investments versus publicly listed investments seems to be growing."
Family offices benefit a lot from Singapore's favorable tax policies, and the government now requires these wealthy families to "give back."
Tax laws enacted last year require family offices to allocate at least 10% or up to S$10 million of their assets to local investments.
Singapore's tax policies on family offices coincide with a general trend among the wealthy, especially among the younger demographic, to allocate more of their investments to ESG.
Additionally, the government continues to review its tax incentive schemes to see how it can encourage family offices to give more and support local charities and non-profit entities.
Deputy Prime Minister Lawrence Wong, who spoke at the inaugural Global-Asia Family Office Summit's owners' symposium last September, voiced support for increased local investments:
"Our basic message is this: If you are a family office interested to give back to the local community in Asia, there is no better place to do it than here in Singapore.”
Just as wealth flows into Singapore increase, so do the job opportunities.
Family office servicing is big business, as accountants, lawyers, bankers, estate and tax planners, and investment and operations professionals are all in high demand.
But the supply in talent does not meet the demand.
Li Li Lim, mentioned above, says the city-state needs to do more to attract talent:
“Despite the much-improved levels of trained staff for the sector, there still aren’t enough investment professionals for family offices in Singapore.”
To try and make up for these shortfalls, Singapore’s Wealth Management Institute has laid out training plans to increase family office talent and competency levels. As of 2020, they had 1,200 participants, and they hope to enroll 5,000 by 2025.
While some jobs will require an onshore and in-house presence, others can be performed by third parties.
Bookkeeping, compliance, IT, and accounting are just a few areas.
Another such example is middle- and back-office servicing.
According to the Hubbis Digital Dialogue and Post-Event Survey, 85% of respondents said family offices should outsource middle- and back-office functions to a third party, assuming it is safe and robust.
Indeed, there are good reasons to do so. Cost savings, access to greater expertise, and the opportunity for family offices to focus more on core competencies are some of the benefits.
And when asked what are the biggest pain points for family offices when up and running, 30% of the respondents said difficulty hiring staff, 27% investment process and philosophy, 25% manual processes, and 18% integrating information from multiple banks and custodians.
Outsourcing serves as a solution to the above pain points, as there are services providers to family offices that handle hiring, investing (via OCIOs, or Outsourced Chief Investment Officers), automating manual processes, and integrating data points into a single hub.
As a provider of services to single- and multi-family offices, Empaxis understands what it takes to serve these entities.
No family office is the same, and each requires a high degree of customized service, of which Empaxis provides.
As family offices increase their allocations to private investments, processing all those statements becomes a manual and time-consuming challenge. Empaxis can automate those manual processes, as one example.
Singapore has a lot going in its favor when it comes to attracting wealthy families around the world.
And similarly, wealthy families have a lot going in their favor by establishing a family office in Singapore. With respect to local laws and regulations, they can run the entity and invest as they see fit.
And as the number of wealthy people increase, there will be increased demand for services catering to this affluent group.
But with family office talent shortages in Singapore, outsourcing and automating workflows are some of the ways to work around the shortages.
At Empaxis, we support single- and multi-family offices worldwide, just as we continue to serve the broader investment management community in Singapore.
Indeed, firms that leverage outsourcing and automation will get the best of all worlds in Singapore.