Singapore’s low taxes, political stability, and wealth management ecosystem make it the perfect base for family offices. We look at what it takes to build a successful one
A family office is a highly customisable entity that addresses the unique needs and circumstances of the family, with services reflecting factors such as assets under management, complexity of assets, need for philanthropic management, and level of next generation development, says Tommy Leung, co-head of Global Family Office APAC, UBS Global Wealth Management. Still, families should only proceed after calculating the operating costs of such a venture, advises Faye Ong, Head of Office Advisory Asia, at Citi Private Bank. Upon deciding to do so, issues to consider are the objectives of the family office and the legal structure.
A trust structure, for example, caters to succession planning, while a fund structure suits the management of complex and diversified assets. “The jurisdiction of choice for the family office is also important,” says Esther Fung, Senior Wealth Planning Specialist, VP Bank, Singapore branch. Families should consider the jurisdiction’s political and economic stability, infrastructure such as a favourable regulatory landscape, and a well-established ecosystem for family offices. It is no coincidence that affluent individuals are setting up their family offices in Singapore.
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ENSURING SUSTAINABLITY OF THE FAMILY OFFICE
Adhering to a good governance framework is vital to the longevity of the family office, says VP Bank’s Fung. Joseph Phua, who heads his family office, Turn Capital, adds, “A key capability in building a successful family office is the strong communication ability of its main operators, so as to communicate with and understand the needs of the family.
On the end of the family, it’s setting clear guidelines of goals and methods (risk tolerance etc.), and trusting the operators to achieve the goals.” This can be done through the following:
- Having a mission statement and cultivation of family value(s) at all levels of the family. Moreover, holistic estate and succession planning are integral aspects for a functioning family office.
- Defining roles and responsibilities of various family members with accountability and their continuous commitment. The decision process needs to be transparent.
- Putting in place procedures to address major decisions, disagreements and disputes to avoid disgruntled family members or beneficiaries; for instance, how to allocate benefits and provide avenues for non-lineal heirs to participate in the family and/or family office affairs (for example, through setting up a family council).
- Flexibility in the structure to cater for unexpected events such as changes in law, regulations, personal circumstances (for example, a member/branch of the family may move to a high tax jurisdiction).
- Working with external stakeholders, such as professional advisors and investment managers, to ensure the attainment of professional standards and best practices. Backoffice process flows, such as centralised administration and information management, need to be observed, whether they are managed internally or externally.
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