As a leading wealth management centre in Southeast Asia, Singapore has seen a significant growth in the number of single-family offices (SFOs) and multi-family offices (MFOs) over the past few years.

In a recent reply to a parliamentary question, Tharman Shanmugaratnam, senior minister and minister in charge of the Monetary Authority of Singapore, said that based on MAS’ estimates, there were about 700 SFOs in the city-state as of end-2021.

In this regard, the MAS has stepped up scrutiny of the country’s cryptocurrency industry while fine-tuning regulation in the environmental, social, and governance (ESG) space, two areas that are of growing interest to family offices.

On the back of recent high-profile failures in the crypto sector, the MAS intends to expand the range of its regulations related to digital assets, and plans to consult on additional proposed measures directed at the crypto industry within this year.

The regulator has also issued new ESG guidelines, scheduled to take effect from January 2023, to address challenges related to financial disclosures and reduce greenwashing risks.

Amid the generational transfer of wealth taking place across Asia, both crypto and ESG-related investments are playing an increasing role in the asset allocation activities for ultra-high-net-worth families.

The Asset spoke with Stefan Ho, head of compliance solutions, Singapore, at global financial services provider Apex Group, to discuss the impact of the recent MAS moves on the operations of SFOs and MFOs.

TA: The MAS has been proactive in regulating ESG and digital assets. How has this affected family offices?

SH: MAS’ clear regulation around crypto assets, safeguards and marketing is seeking to align with a customer-centric focus and maintain integrity in the financial centre, notwithstanding the risks associated with crypto assets.

Greater understanding of the risks and rewards of crypto assets, underpinned with strong regulation, will enable family offices to have confidence to invest in such assets.

The use of distributed ledger technology (DLT) is also part of the focus of Singapore with technology being leveraged to facilitate greater access to investments but within a clear regulatory framework and understanding of the use of such technology. This will, of course, further attract business into Singapore to enable family offices to gain access to investment opportunities through such technology.

The alignment of investments into ESG by Singapore’s family offices is also set to increase, and the anticipated increase in impact investing may be a further draw for more family offices to establish a base in Singapore.

According to the Singapore Economic Development Board (EDB), 68% of family offices in the Asia-Pacific were reported to be engaged in sustainable investing as of 2020.

Traditionally associated with strong patriarchal governance, family offices have seen a shift in the role of women in Singapore and Asia with females of these families taking a more prominent role in the management and investment of the family office.

TA: Are there more plans in the pipeline that can help or hinder family offices in Singapore going forward?

SH: Singapore can attract further family office business through speed and ease of set-up and reinforcing the current tax exemptions available to family office funds as well as incentives such as the Global Investor Programme.

The MAS and the EDB are focused on bringing in top-quality family offices and any future enhancements to regulations or schemes will be to ensure the quality of family offices while balancing the speed of inflows and the integrity of Singapore as a jurisdiction.

To support the development of SFOs and MFOs, the MAS has also ensured that the professional advisers engaged in the sector have a sufficient competence standard, ensuring high-quality accountability and better investment opportunities.

TA: The Dubai International Financial Centre (DIFC) recently announced an initiative to attract family offices. Could this dilute the Singapore offering?

SH: Both DIFC and MAS have put in place specific regulation for SFOs that are registered but not subject to financial services regulation. The recent announcements of the DIFC Global Family Office and Private Office Centre echo the Family Office Development Team (FODT) of Singapore, and it is likely that there may be an increase in synergies across the DIFC and Singapore for family offices that may wish to establish in both locations.

There has been a strong connection of commercial and capital flows between Dubai and Singapore, with both the DIFC and Singapore boasting strong regulatory and legal systems.

Many families and private offices may continue to domicile their private offices in their local jurisdiction, perhaps with some influence from or alignment with Sharia, but we may still see Singapore being host to private offices for families from the Middle East that wish to diversify and be closer to investment opportunities across Asia.

Singapore’s geographical attractiveness lies in the fact that it sits within the Asean and provides an ideal destination for investors seeking to base their operations in a global financial centre within a five- to six-hour flight time from major cities in Asia and Australia.

TA: Are you still seeing demand from ultra-high-net -worth families interested in selecting Singapore as their family office location?

SH: According to recent reports, more than half of family offices are looking to increase their investment exposure across Asia, driving the potential to establish private offices in Singapore. And with geopolitical risks around the world, Singapore is seen as a safe and attractive location for family offices around the world. For example, sources in the market say that there has been a double-digit growth in family offices from China setting up in Singapore.

In addition, the abundance of compelling investment opportunities, a financial market that is highly reputable with strong global connectivity continues to attract family offices. The government’s policy of maintaining a stable Singapore dollar adds to the country’s attractiveness.