multi-family office Management

Establishing a family office in Singapore offers a multitude of advantages, making it an attractive option for HNWIs seeking to manage and grow their wealth.

The country's stable political environment provides a secure foundation for long-term financial planning and wealth management.

Singapore's robust legal framework and efficient regulatory environment ensure that family offices can operate with a high degree of confidence and security.

Another significant benefit is Singapore's favorable tax regime. The country offers various tax incentives, including exemptions under Sections 13O and 13U of the Income Tax Act, which provide tax relief on income derived from designated investments.

Additionally, Singapore does not impose capital gains tax, estate duty, or inheritance tax, making it an ideal jurisdiction for preserving and growing family wealth.

The presence of over 90 double tax treaties further enhances Singapore's appeal by minimizing the tax burden on cross-border investments.

Singapore’s strategic location in Asia also adds to its attractiveness. As a gateway to the region, Singapore allows family offices to manage and monitor their investments in Asian markets effectively.

The country's advanced financial services infrastructure, which includes access to top-tier legal, accounting, and financial professionals, ensures that family offices can operate efficiently and effectively.

Setting up a family office in Singapore requires careful planning and adherence to regulatory requirements. The first step is to determine whether the family establish a Single Family Office (SFO) or become part of a Multi-Family Office (MFO). An SFO manages the wealth of one family, while an MFO serves multiple families.

For SFOs, Singapore offers regulatory flexibility. These offices are generally exempt from licensing requirements under the Securities and Futures Act (SFA) provided they meet specific criteria. However, they must still comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

On the other hand, the management company of MFOs must obtain a Capital Markets Services (CMS) license from the Monetary Authority of Singapore (MAS) and adhere to all regulatory requirements, including ongoing reporting and compliance obligations.

In addition to the regulatory requirements, many family offices in Singapore benefit from using a trust structure. Trusts offer several advantages, including asset protection, tax efficiency, and effective estate planning.

By placing assets in a trust, families can ensure that their wealth is protected from creditors and legal claims, while also facilitating the smooth transfer of wealth across generations. Trusts are particularly useful for succession planning, as they allow families to dictate how and when their assets are distributed to heirs, minimizing the potential for disputes.

To establish a trust, families must draft a trust deed that outlines the terms and conditions under which the trust will operate. A trustee, who can be a Singaporean citizen or a locally incorporated company, is then appointed to manage the trust in accordance with the deed.

The use of trusts, combined with the strategic benefits of a Singapore-based family office, provides a powerful tool for wealth management and preservation.

When setting up a family office in Singapore, families have the option to choose between different types of fund entities, each offering distinct advantages. The two primary structures are the Private Limited Company and the Variable Capital Company (VCC).

Private Limited Company

Traditionally, many family offices have utilized the Private Limited company structure, which is similar to a Limited Liability Company (LLC) in other jurisdictions. The Private Limited Company structure is well-established and offers a straightforward approach to managing family assets.

Variable Capital Company (VCC)

Introduced in 2020, the VCC structure offers greater flexibility and privacy. The VCC allows for easy capital adjustments, enabling families to inject or withdraw capital without the need for formal resolutions or EGMs. Furthermore, the VCC structure supports the creation of sub-funds under a single corporate umbrella, allowing for the segregation of assets and liabilities. This feature is particularly beneficial for families that wish to manage multiple investment strategies.

Setting up a family office in Singapore involves significant costs, and these costs can vary depending on whether the family chooses to establish an exclusive independent management company or utilize the services of an multi family office (MFO) Management Company.

Independent Management Company

Establishing an independent family office involves substantial initial and ongoing costs. The base capital requirement for setting up a fund management company in Singapore is a minimum of SGD 250,000.

Additionally, the family office must employ at least two qualified representatives and back-office staff, with total staffing costs ranging from SGD 300,000 to SGD 500,000 per year. Office space, legal, audit, and compliance costs further add to the annual expenses, bringing the total recurring costs could easily exceed half of a million dollars a year.

While these costs are significant, the independent management company offers several merits, including full control over investment decisions, complete privacy, and the ability to tailor the office's operations to the specific needs of the family.

This level of autonomy allows the family to implement a bespoke wealth management strategy that aligns with their long-term goals.

Multi-Family Office (MFO) Management Company

Alternatively, families may choose to engage an MFO fund management company, which allows them to share the costs of fund management with other families.

MFOs are typically licensed fund management companies that provide comprehensive services, including investment management, compliance, and reporting. By leveraging the infrastructure and expertise of an MFO, families can significantly reduce their setup and operational costs.

The upfront costs for utilizing an MFO platform are generally lower, with families only needing to bear the ongoing running costs of their VCC. Recurring costs can range from SGD 200,000 to SGD 300,000 per year, depending on the Assets Under Management (AUM).

While families may have less control compared to an independent management company, they benefit from the shared expertise and resources of the MFO, which can lead to more efficient and cost-effective management of their wealth.