The Billionaire effect has been on the rise since 2018 as for the first time there are 589 billionaires on the record. The report conducted by the UBS/PwC Billionaires Insights 2019, shows that the wealth owned by billionaires has been multiplied by three times i.e. USD 2.2 trillion as to what it was 5 years ago. A major contribution to the increasing number of worldwide billionaires is from China which constitutes one-eighth of the total billionaire wealth. Similarly, Asian countries have been also in the run by producing more and more billionaires each year. This growing billionaire population demands a strict management plan for the assets of rich families and how to facilitate them using Family Offices.
Why set up a family office in Singapore?
Before Family offices, wealthy families used to preserve their wealth through companies or Special Purpose Vehicles (SPVs) to keep their confidentiality intact. This old tradition drove unwanted attention from tax authorities and media as this method brought more challenges for the people. While holding multiple SPVs in several jurisdictions proved to be extremely complex, structured, and not quite efficient for the family’s investment, the family office seemed to be a better and more efficient method to contain wealth along with better tax regimes.
One of the major reasons why the Family Office has taken over the old traditions of preserving wealth is because of the opportunities suited to this feat. For many families, keeping the financial record of their assets is very imperative and therefore they take part in the management and investment planning of the family financial assets. Family members also join the Family office to gain experience in the management department and develop their own expertise.
For a family office to stand its legal and steady ground, setting up a family fund is necessary because it not only provides strength to your family office structure but also ensures facilitation and advisory on your investment plannings.
To hold investments in place, many wealthy families have now driven their entire focus to set up family offices instead of following in the footsteps of older traditions like SPVs. With family funds at their disposal, rich families have the liberty to hold their financial assets in place without having to worry about subsuming SPVs.
Why is Singapore considered to be the best location for setting up a Family Office?
Singapore is the hub of stabilized and lean structures which is why it is also considered to be the most favorable place for setting up a family office and family funds. Singapore:
- Possesses a strong regulatory framework;
- has a well-developed infrastructure along with an established financial services industry;
- has stabilized pro-business Government policies;
- Strictly Supports transparency;
- Has private banking relationships with the families;
- is a pool of talent and skilled labor; and
- Most favorable location to establish the family office and investment teams to operate family substance
With an exceptional regulatory framework, Singapore is best suited for both billionaires and non-billionaires. The system of family office offered by Singapore is easy, efficient, and most importantly accustomed to the legal requirements presented by the authorities.
Key takeaways
Lately, the world has been following strict trends to ensure whether the rich families have their assets aligned or not. Families with assets worth more than $100 Million must find a permanent solution to institutionalization as well as proper management of their assets through robust finance structures in the long term. It is best if families should follow these 3 “Rs” steps: (i) Recall the objectives of their family constitution, and (ii) Recall the existing finance structures (iii) Revisit the process of family governance