IN THE fast-evolving landscape of the modern world, volatility and uncertainty have become the norm.
How should affluent families deal with this new world, characterised by its brittle, anxious, non-linear and incomprehensible – or Bani – nature? What strategic shift is required to continue to thrive?
Cultivating the right mindset
While the attributes of a Bani world may seem daunting at first glance, with the right mindset, affluent families can navigate the challenges to uncover new opportunities.
Resilience, flexibility and adaptability are essential to riding through the sudden and unexpected disruptions that could shake our fundamentals and destabilise us.
To stay ahead of the curve, one needs to focus on asking the right questions, acquiring new knowledge and constantly pushing the boundaries of one’s understanding.
Adopting an innovation mindset, by being open to new ideas and creative problem-solving, will be vital to navigating the complexities of new and evolving threats.
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Whether the aim is to invest in emerging technologies, diversify across asset classes and geographies, or evolve the family business, embracing innovation will allow one to remain ahead of the game and thrive in the new world order.
Time to rethink and review
Against the backdrop of increasing volatility and uncertainty, affluent families should review and stress-test their wealth-preservation and succession-planning strategies with a fresh lens.
This is particularly critical for international families holding multi-jurisdictional assets and residences.
For families seeking safety, security and stability for their assets and family members, Singapore continues to be an attractive base. As at end-2023, the number of single-family offices in the Republic was 1,400.
Single-family offices remain a popular option for affluent families seeking a holistic platform to consolidate their assets and centralise their risk management, advisory and administrative functions.
Having all of these aspects managed centrally helps ensure alignment with the family’s long-term goals, as well as facilitate wealth preservation and transfer to the next generation.
Alternative wealth-planning solutions
However, amid stricter scrutiny and restrictions faced by the sector and the rising cost of operations, affluent families should also be open to alternatives, such as trusts or insurance solutions, or even a bespoke family investment fund under a Singapore variable capital company (VCC) structure, to consolidate their wealth.
According to the Monetary Authority of Singapore, approximately 21 per cent of the 969 VCCs established as at October 2023 were used by external asset managers or multifamily offices.
With assets and liabilities legally segregated between sub-funds, the VCC is an ideal structure for a multifamily office; families can hold their assets under their customised sub-fund, with full assurance that they will not be affected by the investment performance or liabilities of the other sub-funds under the same VCC.
Last year, DBS launched the world’s first bank-backed multifamily office leveraging the VCC structure. Given the recent change to the qualifying terms and conditions of tax-incentive awards for single-family offices in Singapore, a multifamily office can be a credible alternative for affluent families which have no desire to deploy human capital in Singapore, yet seek a safe haven for their assets.
By setting up a customised family investment fund under a VCC, these families will be able to access the full suite of investment services through a single platform handled by the VCC manager.
With the manager providing the necessary fund management infrastructure and support – including administration of the VCC and its sub-funds – and ensuring compliance with all regulatory and other reporting requirements, families are freed from the burdens of establishing and operating their own family-office structure to focus on growing their wealth.
Where the VCC has been awarded a tax incentive, these families will also enjoy certainty of Singapore tax treatment and a tax exemption for all specified income derived from designated investments made by their family investment funds.
Given the flexibility of the VCC as a fund vehicle, we have successfully incorporated the structure as part of customised solutions for our clients, to address their business or other tax and/or regulatory concerns.
This is also aligned with DBS’ philosophy to integrate, innovate and impact; we see our role in wealth management extending beyond the conventional silos of corporate banking versus private banking, to include holistic engagements throughout the entire wealth journey.
For example, the VCC could serve as a platform for family businesses to consolidate corporate funds of their related corporations, to access corporate wealth-management services. Having these funds managed holistically within a single investment fund can also enhance oversight, simplify operations, and allow these companies to reap economies of scale for their investment activities.
Despite its challenges, the Bani world can also bring about new opportunities. Accepting ambiguity and uncertainty as the new norm, as well as being agile and adaptable, are essential.
The writer is group head of wealth planning, family office and insurance solutions, at DBS Private Bank
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