The authors of this article examine what Asian jurisdictions are doing to curry favor with family offices in Asia – now an important segment of financial business.
What is being done in Hong Kong and Singapore to attract family offices to Hong Kong – rival jurisdictions that have gone through tough times in recent years, yet remain vital financial markets in the region? Singapore has introduced an open-ended company (VCC) regime, to attract wealth managers, for example, while Hong Kong still has a sizeable stock market and location for IPOs – significant liquidity events that wealth managers track.
Offshore law firm Harneys handles these matters. Nicola Roberts, Partner in Singapore, and James Granby, Senior Partner in Hong Kong, discuss what a stake is.
The editors of this news service are happy to share these views and invite readers to respond. The usual editorial disclaimers apply to the opinions of guest contributors. E-mail
In recent years, ultra-wealthy families in Asia have focused more on estate planning and intergenerational wealth management. The rise of family offices is part of this trend, with the number of Asian single-family offices increasing by 44% between 2017 and 2019 alone.
Family offices are a promising growth area in the Asian wealth management industry. While, according to Credit Suisse, around 39% of global wealth comes from Asia, a much smaller proportion of family offices are based in Asia, at around 19%. This disparity is explained by the fact that many UHNWs in the region are still first generation. What is clear, however, is that the number of family offices will continue to grow, providing a huge opportunity for major Asian financial centers.
The governments of Hong Kong and Singapore have sought to capitalize on this trend and position their respective cities as the preeminent center for family offices in Asia Pacific. The two jurisdictions, each with their respective strengths, have signaled their desire to attract family offices and have enacted legislation to enhance their attractiveness in this area.
On paper, Hong Kong could be considered the stronger of these two contenders due to its unique position as a gateway to China. The city consistently ranks among the top cities in the world for density of UHNW individuals, with over 9,500 in 2020. Add to that another 10,000 UHNW families elsewhere in the Greater Bay Area, and the potential for growth is obvious.
Since 2020, the Hong Kong government has introduced a series of measures and initiatives aimed at fostering the growth of family offices. In November 2020, the Family Office Association Hong Kong, an independent family office industry body, was established with government support. This was followed in June 2021 by the creation of a dedicated government team within the InvestHK department to promote Hong Kong as a family office hub. Recent legislative developments have also been designed to attract family offices, including the introduction of limited partnership funds and changes to the taxation of offshore funds.
Most recently, in his February 23, 2022 budget speech, Finance Secretary Paul Chan announced tax benefits for qualifying family investment entities operated by single family offices. While the government has yet to provide further details on the scope of the concessions, which are expected to come into effect in 2022/23, the move underscores a continued commitment to attracting family offices to Hong Kong.
Singapore shares many of Hong Kong’s strengths as a potential center for family offices, including an established financial services sector, a reputable legal system and leading access to professional services. Its government has also openly courted family office businesses considering setting up in Asia: The Singapore government set up a Family Office Development Team in March 2019 to bolster the city’s position as a hub of the Family Office, and this was followed by the launch of the Global Asia Family Office Circle by the Wealth Management Institute in 2021 with the government. Support.
It remains to be seen how successful Hong Kong and Singapore will be in their respective bids to become Asia’s top destination for family offices. Both cities, however, have governments that are poised to support their growing family office industries, which have nearly limitless growth potential over the next decade. The longstanding competition between the two cities, at least in this case, is not zero-sum, and the safest prediction might be that in both places family offices will multiply and become an important part of the business. wealth management activity.
The prospect of future growth for family offices in Asia also presents opportunities for offshore professional service providers. Family funds are often created in the Cayman Islands or the BVI, as both jurisdictions offer structures that facilitate estate planning. In particular, families often find that structures such as the BVI VISTA trust, Cayman STAR trust, and BVI or Cayman PTC structures are desirable because they allow the family to retain effective control of the structure. Offshore jurisdictions also score high for preserving privacy and confidentiality, which can be important for UHNW families.
Offshore jurisdictions such as BVI and Cayman are also at the forefront of cutting-edge developments that may become more relevant to family offices in the future. These include the use of BVI VISTA trusts or Cayman foundation companies to invest in digital assets such as cryptocurrencies, or the use of SPAC structures, also known as “blank check” companies. “.
Family offices in Asia will continue to grow, and this is an exciting development for Hong Kong and Singapore. The willingness of both governments to facilitate and promote such growth through legislation and other initiatives speaks volumes. Offshore structures will remain relevant for existing and new family offices in Asia due to their flexibility and capacity for innovation.