Family Office
The aggregate wealth of billionaires at end 2018 is over a third higher than five years ago, with a margin of $2.2 trillion USD. The billionaire population has increased by 38.9% with 589 individuals who became billionaires for the first time. Amongst these, entrepreneurs from China have quickly risen to become the world’s second largest billionaire group and nearly one-eighth of global billionaire wealth is from China. Given the growing wealth in Asia, it is not surprising that Asian families are planning ahead and starting to institutionalise the management of their family wealth. The topic of setting up a family office has now moved from dinner conversations to actual set ups.
Why set up a family office?
Traditionally, families have held their investments through holding companies or special purpose vehicles (SPVs). Many times, this was driven by the need to maintain confidentiality, the perceived simplicity of setting up in offshore jurisdictions, and to achieve ring-fencing through separate SPVs. Increasingly, families have found that the use of complex structures involving multiple SPVs in different jurisdictions makes management unwieldy and inefficient. It also brings about challenges of tax reporting and increasing negative attention from the media and tax authorities.
There could be many reasons for setting up a family office but one we see increasingly is that families are looking to in-source the fund management function or at the minimum be more involved in the management of their financial assets. Many times, the investment team may also include the next generation family members who not only want to manage their own wealth but also gain experience and build a track record with a view of managing third party wealth in the future.
The setting up of a family office is typically coupled with the setting up of a family fund. The set-up of a family fund institutionalises the holding structure for the family’s assets, facilitates succession planning and creates a more efficient and transparent structure.
In today’s world, simpler and lean structures are generally more favoured. Hence, wealthy families are increasingly moving towards setting up a “super” holding company (or a family fund) which houses all their financial assets and SPVs. In many cases, the SPVs are entirely subsumed within the family fund thereby leaving fewer or no SPVs.
In today’s world, simpler and lean structures are generally more favoured. Hence, wealthy families are increasingly moving towards setting up a “super” holding company (or a family fund) which houses all their financial assets and SPVs. In many cases, the SPVs are entirely subsumed within the family fund thereby leaving fewer or no SPVs.
How is Singapore poised for this trend?
Singapore has increasingly become the jurisdiction of choice for the set-up of a family office and family funds. It meets the criteria that many families are looking for, including:
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has a strong regulatory framework;
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has an established financial services industry and well-developed infrastructure;
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has stable and pro-business Government policies;
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is highly regarded for transparency;
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where the family has existing private banking relationships;
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where there is availability of skilled labour force and talent pool; and
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where the family office and the investment teams can be established and operate (in other words, where substance exists).
The trend of family offices is only expected to grow and Singapore is well poised to be home base for these family offices. The simplicity, efficiency, clarity of succession and cost reduction associated with setting up a family office isn’t just for billionaires.
Factors to consider when establishing a Family Office
Each High NetWorth (HNW) family will have specific needs and objectives for establishing a family office. There is no generic family office structure and each family office has to be customised according to the requirements of the family, taking into consideration the various factors, such as:
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the objectives for setting up the family office
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the types of assets that will be injected into the family office
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the investment strategy and mandate for the family office
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the regulatory requirements and tax incentives available
To promote the asset management industry and encourage the establishment of family offices, Singapore has introduced various tax incentive schemes that are available to both the family office and the investment fund.
How we can help you
As a full-suite corporate business solutions provider, we have the expertise to support family offices and help HNWIs and their families to use Singapore as their base to manage their wealth.
The services we offer include:
Setting up and Implementation
We will discuss with you your needs and objectives before proposing a structure that best supports the family office’s future immediate and future plans. We will explain the requirements and key considerations so that you are able to make informed decisions when selecting the optimal structure.
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Advice on the appropriate structure for the family office
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Advice on the regulatory requirements
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Assist in tax planning, migration and re-domiciliation matters
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Set up of corporate entities of the family office
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Assist in obtaining tax incentives and liaising with the relevant government authorities
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Transfer pricing analysis for the management services rendered by the family office
Ongoing Operations
We have dedicated teams that are well-equipped to support you in all aspects of the day-to-day needs of the family office. These include:
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Annual tax filing for trusts, funds and the family office
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Annual tax filing of individual tax returns for family members and employees of the family office
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Attending to queries from the tax authorities and other government authorities
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Annual declaration for tax incentives
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Assist in tax reporting matters in respect of Common Reporting Standards and FATCA
Ad hoc Consultancy
We provide support to help you assess new investment opportunities and the optimal acquisition structure. We also provide transactional advice so that you are aware of the different implications and are able to make well-considered decisions.
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Transaction advisory
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Financial and tax due diligence
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Cash flow forecast and projections
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Valuation
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Tax advice on the following areas:
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Cross border tax planning
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Structuring – choice of location and types of investment vehicles
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Treaty analysis
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Asset transfers
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Repatriation and distribution of income/ profits
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In-country tax analysis
We regularly work with preferred service providers and therefore, to the extent your family office requires services not offered by us, we are able to work with our partners so that you are able to enjoy an integrated “one-stop-shop” service.