This is a sponsored article from Morgan Stanley.
The world has experienced a significant growth in private wealth in recent years, especially in Asia as the region offers its entrepreneurs and their families exceptional investment and wealth management opportunities. The rapidly changing economic and business environment, coupled with continuing globalisation and interconnectivity, and the reform of tax regimes and regulations, are the common driving forces for UHNW families to explore family offices as a means to manage their increasingly complex affairs. While family offices are well established in North America and Europe, the concept remains nascent in Asia. Working in partnership, Morgan Stanley Private Wealth Management Asia and KPMG have jointly produced a thought leadership report on “The Evolution of Family Offices – from Global to Asia” to provide an in-depth review of Single Family Office (SFO) trends in the region.
What is a Single Family Office?
A family office could be described as the “ecosystem” that a family builds around itself to organise and manage its assets. The functions of a SFO include investing the family’s financial portfolio, leading its business transactions, pursuing its philanthropic interests, or managing its multiple wealth planning structures. A SFO may also provide concierge services to the family members.
Observations and the future of Single Family Office in Asia
While many SFOs in North America and Europe may already be led by its third or fourth generation family members, the situation in Asia is somewhat different. UHNW families in Asia are generally relatively young – led by the first or second generation family members – and many are young entrepreneurs. Typically, they tend to be active in capital market investments and prefer diversified investment strategies. Wealthy families in Asia are also increasingly focused on philanthropy and impact investing. At the same time, these families are gradually becoming more globalised, with some family members based in high tax jurisdictions and therefore in need of effective tax planning arrangements.
Furthermore, choosing the right leader for a SFO is important in ensuring continued success of the business. Depending on the family’s unique needs, some Chinese business owners may consider training non-family members to succeed their business. SFOs that are managed by new generation family members tend to leverage the advantages of IT and digital platforms. Cyber security, data privacy and protection would therefore become key considerations for the SFO. In addition, there is also a continued increase in the number of roles for women in family businesses in Asia, particularly in China.
Due to the growing complexity in the market environment and unique family conditions, the role of SFOs is becoming more and more important for young entrepreneurs in Asia to consolidate and manage wealth, execute their asset management strategy, and assist in succession planning within a centralised office hub.
Asia: an ideal hub for Single Family Offices
The rapid wealth accumulation of families in Asia has led to the region becoming a more prominent hub for SFOs; with the number of SFOs being set up in Asia far exceeding the rest of the world in recent years. Within the region, Hong Kong and Singapore are considered attractive locations for head quartering family offices.
Why Hong Kong?
With its robust regulatory and legal framework, Hong Kong is considered an excellent location for setting up SFOs. The policy initiatives for cross-border wealth management services within the Greater Bay Area further enhances Hong Kong’s position as a favourable location when establishing SFOs. Furthermore, Hong Kong operates a simple and low tax regime, without tax on dividends, capital gains and offshore profits, and with an extensive tax treaty network. In addition, the city has a well-established funds exemption regime. The HKMA and InvestHK have launched a one-stop information site for family offices, while the HKSAR Government created a unit within InvestHK to assist family offices setting up in Hong Kong.
Singapore is one of the leading wealth management and private banking centres for Asia-based families, and in the past few years, it has witnessed a steep rise in the number of SFOs. Regulators have introduced a number of policies to help attract SFOs, such as tax incentives, special fund structures, and residency offers. A Singapore SFO may sponsor employment passes and may even be used as part of an application for permanent residency by UHNW family members under the Global Investor Program, which is administrated by the Economic Development Board.
Leveraging the firm’s global resources and intellectual capital, Morgan Stanley Private Wealth Management Asia provides a unique “one firm” solution to help navigate the needs for our SFO clients – this includes holistic investment and lending solutions, and resourceful external professional and highly experienced in-house wealth planning teams. Establishing and managing a SFO is a journey that does not just involve the first generation but many future generations. It is the firm’s commitment to make our SFO clients a success across generations.
This is a sponsored article from Morgan Stanley.