Singapore currently has about 2,000 family offices today, a sharp increase from 400 in end-2020. Singapore is also home to 50% of Southeast Asia’s top family office businesses.
The reasons for Single Family Offices or SFOs coming here include Singapore’s strong rule of law, stable political environment, and competitive business landscape aids Singapore’s status as a hub attracting highly skilled talent and quality professional services such as banking, legal and accounting.
The family offices in Singapore are not just Asian ones, but also hail from Europe and America. They are also drawn to Singapore with its strong track record as a financial and wealth management hub.
What Are Single Family Offices (SFO)
An SFO generally acts as a structure through which families manage their affairs. It acts as an intermediary between the family and professional advisors (lawyers, investment managers, and accountants) to engage in wealth management, tax planning, estate planning, and the management of the family-owned businesses.
Industry research estimates that each SFO typically manages assets in excess of US$100 million, so the total estimated assets under management by SFOs could be around US$20 billion.
In 2021, the MAS and the Institute of Banking & Finance (IBF) launched two skills maps that set out the competencies that employees of SFOs and external service providers, including private banks, tax advisory firms and legal firms advising the SFOs, should acquire.
Some of the work functions include:
– Understand and assist in the family’s wealth management and succession needs
– Support management of assets
– Participate in the administration of the family office
– Coordinate and plan for family’s wealth ownership management and succession needs
– Manage assets
– Administer the family office
These skills maps are used by training providers such as the Wealth Management Institute (WMI) and the SMU Business Families Institute to develop relevant training programmes, with co-funding of training fees provided by schemes administered by MAS.
SFOs can also tap into Singapore ecosystem of over 3,000 startups that are plugged into a global network of over 300 private equity and venture capital managers. There are also more than 190 incubators and accelerators based here.
These opportunities provide family offices options to invest in up-and-coming industries in Singapore such as the fintech sector, which attracted a record high of S$1.2 billion in 2019.
Why Are There More SFOs In Singapore
Apart from Singapore’s stable political and economic environment, and the country is a magnet for talent and provides world-class professional services in sectors that complement wealth management, including banking, legal and accounting. Singapore’s status as a wealth hub and reputation for low corruption is another pull for SFOs.
Singapore is also known as a safe haven for wealthy individuals, with its reputation as a global financial hub and a high level of political and economic stability.
The number of ultra-high net worth individuals (net worth above US$30 million) in the country has risen since 2020, due perhaps to the Covid-19 pandemic and rising geopolitical tensions in other economies.
What You Need To Know To Set Up An SFO in Singapore
The SFO structures in Singapore are typically designed to be exempt from regulation under local securities law. This avoids the need for the SFO to obtain a licence or become registered to provide fund management services to the investment vehicles held by a high net-worth family.
An SFO that is either licensed to provide fund management services, or is exempt from licensing, is considered to be a fund manager for the purposes of Singapore’s fund tax incentives.
The Singapore central bank announced new stricter criteria for family offices to receive tax incentives in Singapore and the new rules apply as of 5 July 2023. Applications for funds managed or advised directly by a family office, under Section 130 of the Income Tax Act, must:
– have a minimum assets under management of S$20 million at the point of application and throughout the incentive period
– have at least 2 employees (1 of whom cannot be a family member)
– meet a S$200,000 minimum spending requirement with local businesses
– invest the lower of S$10 million or 10% of AUM in:
- Equities, REITS, Business Trusts, or ETFs listed on MAS-approved exchanges;
- Qualifying Debt Securities;
- Non-listed funds distributed by licensed financial institutions in Singapore;
- Investments into non-listed Singapore operating companies;
- Climate-related investments;
- Blended Finance Structures aimed at supporting sustainable development, with substantial involvement of entities in Singapore
In order to incorporate a company in Singapore, one must file an application on the Accounting and Corporate Regulatory Authority (ACRA) website. You can refer to the ACRA link for more information on the application requirements, such as registration of businesses, incorporation of companies and compliance matters.
All new tax incentive applications must must be accompanied by a screening report issued by:
- Avvanz Pte. Ltd. ([email protected])
- BDO Advisory Pte. Ltd. ([email protected])
- DC Frontiers Pte. Ltd. ([email protected])
- Ernst & Young Advisory Pte. Ltd. ([email protected])
- KPMG Services Pte. Ltd. ([email protected])
- PricewaterhouseCoopers Professional Services Pte. Ltd. ([email protected])
There are also existing class exemptions from licensing for the provision of fund management or financial advisory services to related corporations.
Where an entity in substance only manages funds on behalf of a single family but does not fall neatly within the scope of existing class licensing exemptions, it may apply for a licensing exemption from the MAS under the Securities & Futures Act. You can visit this MAS page for more information
What Business Functions Does An SFO Have
The business functions of an SFO can be divided into secretarial and administrative, investment and financial, business management, and advisory.
Secretarial and Administrative
- Manage daily affairs
- Liaise with professional services on behalf of the family
What do they do: The SFO of this segment help the family manage their daily affairs, which might include tasks like organising travel arrangement and transport for the family, and even making reservations for dinner.
There are also other higher key tasks, including working with the legal side to draft documents or working with accounting professionals to file tax returns on behalf of the family.
Investment and Financial
- Manage daily finances and expenses
- Serve a dedicated wealth management and investment team to the family
What do they do: This SFO segment helps to manage the finances of the family by taking care of the bills and the salary of hired staff. It can also support wealth management and estate planning as shares and assets can be held here before being distributed to the beneficiaries.
Investment teams also can invest in the assets of the family. The benefit of having an SFO run such tasks for the family is that it retains privacy and control for the family as sensitive financial processes and information are kept in-house. The family is the sole client of the investment office and will be able to monitor its financial status more closely while getting a more dedicated quality of service.
Business Management
- Hold shares in subsidiary or family businesses
- Oversee key business decisions and appointments
- Ensure synergies between firms, and prevent conflict of interest
What do they do: The SFO holds shares in subsidiary or family businesses. The business management portion will be tasked to oversee the business and ensure that the firms have no conflict of interest.
Advisory
- Work as an unbiased observer and advisor
- Mediate issues between family members
What do they do: This SFO arm advises the family on business matters as well as helps resolve any issues between family members.
What Are The SFO Jobs Available
There is no indication of a sizeable outflow of talent from the financial sector to SFOs or an adverse impact on the financial sector’s hub status.
If anything, the growth of the SFO industry has been complementary to Singapore’s value proposition as a global wealth management hub.
In a written parliamentary reply on a query regarding the quality of jobs that SFOs create, it was estimated that, as at June 2022, about 1,400 Singaporeans and PRs were employed by SFOs. Two-thirds of the Singaporeans and PRs employed by SFOs under the Sections 13O and 13U tax incentive schemes earned more than S$5,000 per month. More than 400 earned between S$2,000 and S$5,000 per month, and fewer than 50 earned less than S$2,000 per month.
The jobs that SFOs hire for range from investment analysts to relationship managers, fund managers, private equity/venture capital managers, and portfolio managers.
Key professional advisors of family offices with specialised skillsets may apply for an Employment Pass (EP) to work in family offices in Singapore.
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