Why the affluent are setting up family offices in Singapore

As a growing number of Asian entrepreneurs, tycoons and affluent families prepare to hand over the reins of the business to the next generation, they are turning to family offices to facilitate succession planning and wealth transfer.

Wealth-X, a research firm specialising in high-net-worth individuals, estimates that US$1.9 trillion (S$2.6 trillion) of wealth in Asia will be passed on to the following generation over the next decade. Campden Wealth, a provider of education, research and networking opportunities for wealthy families, estimates the number of family offices in Asia grew by 44 per cent between 2017 and 2019.

Singapore has gained prominence as the preferred base for family offices, with their numbers in the Republic doubling to 400 last year compared with the year before.

The city-state's many strengths as a hub for family offices include a stable business and political environment, strong rule of law, and a deep pool of financial, investment and wealth management talent. Singapore also provides a favourable tax environment as tax incentive schemes are available for funds managed by family offices based here.

Besides Asian family offices, an increasing number of non-Asian families are coming to Singapore to either set up family offices or satellite offices to support their investments in the region.

History of stewardship

While relatively new in Asia, the concept of family offices can be traced back to 1838, when the House of Morgan was founded to manage the assets of American financier John Pierpont (J.P.) Morgan. The Rockefellers set up their family office in 1882, and today there are thousands of family offices in Europe and North America, with some dating back more than a century.

Many family offices started as small entities managed by a trusted adviser - often the family lawyer or accountant, or perhaps a banker or investment manager - but expanded over time as the wealth grew and the number of family members increased. Families turn to advisers, such as Bank of Singapore, to seek solutions to professionalise their family office set-up to manage their wealth issues.

Today, a typical family office does more than just manage wealth; it also handles other issues such as tax and legal, succession and philanthropy.

Setting up a family office can be a complicated process if there are many beneficiaries and the assets are held by different entities and spread across several geographies. Many wealthy families also have members living in different parts of the world, adding to complexities since tax and inheritance laws differ from country to country.

Family office structures vary depending on the size of the family and different needs. For example, most single-family offices start as an investment management company and outsource the tax, legal and administration services to external providers. As the single-family office grows, some of these functions may be taken in-house. The family office would then deal with other aspects such as issues pertaining to values, governance and purpose.

Besides single-family offices, there are also multi-family offices that manage the wealth of several different families. Multi-family offices offer economies of scale in administration, and have the size to hire many more specialists.

"Families need to invest thought and planning into the set-up of their family offices. Otherwise, the family office may fail to achieve the family's goals of nurturing the next generation, preserving the nest egg and building the family's values," says Mr Paul Chua, global head of Wealth Planning at Bank of Singapore.

"We, at Bank of Singapore, are committed to partner and guide our clients as they navigate this very important journey," he adds.

Benefits of a family office

There are many benefits that can be derived from setting up a family office.

For a start, family offices provide an efficient and transparent structure for the investment and management of the family's wealth. Governed by family constitutions and investment mandates established by the founding members, family offices can ensure visions are aligned and legacies protected - through the generations. This will help minimise disputes among family members, and ensure that the family business continues to prosper.

To be successful, a family office needs the right structure, solid governance, competent leadership and the right outside expertise.

"Setting up a family office is a bespoke process. It brings alignment in the planning of the family's private wealth and its business interest," says Ms Carrie Ng, head of Family Office Advisory at Bank of Singapore.

Bank of Singapore has established a dedicated Family Office Advisory team to discuss and journey with families on their interest in and setting up of their family offices, integrating their family and investment needs and pursuing their wealth purposes.

A part of the Oversea-Chinese Banking Corp (OCBC) Group, Bank of Singapore is headquartered in Singapore with a presence in Hong Kong, Manila, Kuala Lumpur, Dubai, Luxembourg and London.

In addition, Bank of Singapore has a well-established trust company, BOS Trustee Limited, which can act as a trustee for the family's investment fund vehicle. BOS Trustee Limited has been serving clients from around the world since 1938 when it was incorporated as Chinese Bankers Trust Company Limited.