Strengthening Family Office Participation in Singapore’s Financial Ecosystem

Singapore’s Wealth Management Institute (WMI) introduced two new initiatives to deepen the integration of family offices into the national economy and local communities.

Singapore’s Wealth Management Institute has introduced two new initiatives aimed at deepening the engagement of family offices in Singapore’s economy. The WMI is a center for wealth and asset management education and research, established by the GIC (a government-backed wealth management fund) and Temasek.

The WMI has stated that the initiatives come on the back of a surge in demand for participation in WMI’s family office programs and forums. Further, more than 200 professionals have earned their Certified Family Office Advisor credentials under the WMI.

Singapore has become the preferred destination for family offices. The city-state recorded over 1,500 family offices by the end of 2022, managing assets worth just over US$66 billion.

What are the new initiatives?

These initiatives target newly established family offices to help them integrate faster into the country’s financial economy, as well as deepen the capabilities of these family offices in areas such as due diligence, tax, and protection against financial crime, among others.

The Family Office Discovery series

The first initiative dubbed the ‘Family Office Discovery Series’ was developed by the Singapore Economic Development Board (EDB) and the Monetary Authority of Singapore (MAS). The series will focus on orientating newly formed family offices in Singapore and support their closer integration with the Singaporean economy as well as an introduction to the various parts of the investment and social impact communities.

Family offices taking this series will gain access to EDB’s and MAS’ expansive network which will enable them to tap the capital and expertise they bring, as well as open new co-investment opportunities.

Family Office Risk Management and Controls Program

The second initiative revolves around the upcoming launch of the family office risk management and controls program.

The program aims to strengthen the capabilities of family offices to safeguard them against financial crime, and uphold compliance requirements related to tax, capital and exchange control matters, due diligence, and cross-border jurisdiction, among others.

Why establish a family office in Singapore?

It is because of Singapore’s streamlined business setup process, targeted tax incentives, skilled workforce, and robust legal system that the city-state has transformed into Asia’s family office hub.  Further, Singapore’s location at the heart of the rapidly growing economies of Southeast Asia serves as a gateway for new investment opportunities for the family offices of high-net-worth individuals.

A stable political and regulatory environment

Singapore is globally renowned as a business-friendly destination that offers a stable socio-political environment, a free market economy, highly efficient infrastructure, and an attractive tax regime. 

Singapore’s transparent business, tax, and regulatory environment provides easy online access to the information most enterprises require. This significantly simplifies the market research process for international decision-makers during market entry.

A primary advantage of Singapore is its ability to act as a centerpiece for the holding and management of regional assets. Holding companies are a vital component of any international expansion strategy, and Singapore offers investors a stable environment from which to administer operations in more speculative markets in Asia.

The city-state has more than 37,000 international companies and 7,000 multinational companies that utilize Singapore as their regional headquarters. Further, MAS and the Singapore Economic Development Board (RDB) formed the Family Office Development Team (FODT) in 2019 to enhance and lead initiatives that strengthen the country’s standing as a hub for family offices.

Targeted support

Singapore provides support to family offices through targeted tax incentives. These are covered under three schemes:

• Onshore fund tax exemption scheme section 130;
• Offshore fund tax exemption scheme section 13D; and
• Enhanced tier tax incentive scheme section 13U.

These schemes would allow for most of the investment profits managed by a family office to be exempted from income tax. However, each scheme has its own eligibility requirements. 

Strong trade and tax networks

Despite regional players maintaining strong free trade agreement (FTA) networks, they are not as extensive as Singapore’s. Due to these factors, the country will continue to be the default location for businesses seeking to expand into Southeast Asia and neighboring regions. There are two types of FTAs: bilateral (agreements between Singapore and a single trading partner) and regional (signed between Singapore and a group of trading partners).

The country’s 14 bilateral and 13 regional FTAs include some of the largest combined trade agreements in the ASEAN-China, ASEAN-India, and ASEAN-Hong Kong trade blocs—providing Singapore-based businesses with access to preferential markets, free or reduced import tariffs, as well as enhanced intellectual property regulations.

In addition, Singapore has one of the world’s most extensive double taxation avoidance (DTA) networks, attracting international businesses from a multitude of conventional, technology-based, and niche industries.  The country has signed over 90 DTAs, which comprise three types: comprehensive, limited, and exchange of information arrangements (EOIAs).

Gateway to Southeast Asia and global connectivity

Singapore is located within a six-hour radius of any country in Southeast Asia, a region that is expected to be the world’s fourth-largest economy by 2030.

The country’s main international airport, Changi Airport, serves more than 100 airlines flying to over 400 cities in 100 countries. The airport is designed to handle some 85 million passengers annually and a new Terminal 5 development will add capacity by 50 million passengers.

Further, the Port of Singapore is strategically located at the crossroads of East-West trade channels and is connected to 600 ports in over 120 countries. It also handles over 37.2 million twenty-foot equivalent units (TEUs) of containers and 626.2 million tons of cargo annually, making it one of the world’s busiest.

But there are also softer factors that make Singapore ideal for family offices. Singaporeans share various cultural and linguistic connections with ASEAN members, while English is the main working language. The country’s highly skilled labor force is equipped to act as intermediaries for investments in Asia while maintaining the capacity to communicate with investors from abroad.

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