How To Set Up A Singapore Family Office

The pandemic has prompted many affluent families to reconsider their wealth management and succession plans to plan better against future uncertainties. 

With that, comes parking their money in…you guessed it, (Crazy Rich Asian) Singapore.

Singapore currently has about 1400 family offices, up from 400 in end-2020.

In May 2022, the Monetary Authority of Singapore (MAS) said it had approved more than 100 applications to set up family offices in the first four months of the year. The reasons for the SFOs coming here include Singapore’s strong rule of law, stable and competitive business environment and access to professional services such as banking, legal and accounting.

The families are not just Asian ones, but they also hail from Europe and America. They are also drawn to Singapore with its strong track record as a financial and wealth management hub.

Read Also: Singapore Global Executive Programme (SGEP): How Young Talents Can Gain Overseas Experience With Singapore Companies

What Are Singapore Family Offices (SFO)

An SFO generally acts as a structure through which families manage their affairs. 

It aids 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. 

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

The reasons for the SFOs coming here include Singapore’s strong rule of law, stable and competitive business environment and access to professional services such as banking, legal and accounting.

The growth is also complementary to Singapore’s growth as a wealth hub. The number of ultra-high net worth individuals (net worth above US$30 million) in the country has risen in 2020, due perhaps to the Covid-19 pandemic and geopolitical tensions causing other economies to weaken in growth.

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.

Even during the pandemic, Singapore managed to recover quickly from it with it strict controls and healthcare system, according to Bloomberg’s Covid-19 resilience ranking.

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 which 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 April 18, 2022. Applications for funds managed or advised directly by a family office must have a minimum assets under management of S$10 million at the point of application and S$20 million within two years, under the new Section 13O of the Income Tax Act.

Family offices under this section must also hire at least two investment professionals. Previously, there were no minimum requirements for both fund sizes and employees.

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.

There are 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.

Image Credit: EDB

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 outflow of talent from the financial sector to SFOs, it was estimated that the number of investment professionals employed at SFOs is about 1% of the total number of individuals employed by Financial Institutions (FI) in 2022.

There are multiple SFOs that are operating and based in Singapore, including Raffles Family Office Singapore, Aglaia Family Office, Das Family Office.

The jobs 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.

Read Also: What Businesses Need To Know About Singapore’s Anti-Corruption Regulations And How To Implement Best Practices

This article was first posted on 3 May 2023 and has been updated with the latest information.

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