The rise of family offices has been particularly noticeable in Singapore and Hong Kong. These two cities are among the top financial centres in Asia, and the World Bank's latest global ranking lists them as the second and third easiest places to conduct business.
Authorities in each jurisdiction have taken steps recently to attract family offices. Singapore is targeting single-family offices through various means, including tax incentives and licensing exemptions. In October 2021, for example, Singapore-based Wealth Management Institute introduced the Global-Asia Family Office Circle (GFO Circle) with the support of the Singapore Economic Development Board and the Monetary Authority of Singapore. GFO Circle’s goal is to “support the development of a vibrant family office sector and strengthen Singapore's position as a global family office hub in Asia.”
Hong Kong, meanwhile, announced it intends to strengthen the connection between family offices and private banks and other specialised services that cater to family offices. In late March, it hosted "The Wealth for Good in Hong Kong Summit." The summit's goal was to generate interest among family offices, private banks, and professional services firms for UHNW individuals in China, the region and beyond.
Officials there also introduced new tax concessions that allow single-family offices to be exempt from the 16.5 percent corporate tax on profits derived from specified transactions involving securities, futures, foreign exchange and other investment vehicles. Additionally, investors and their families can now accelerate obtaining residency in Hong Kong via the Capital Investment Entrant Scheme (CIES).
Singapore's rise as a family office hub
According to official statistics, the number of family offices in Singapore increased from roughly 400 in late 2020 to around 1,100 at the end of 2022. Several factors led to the 175 percent surge, which solidified Singapore's position as a prime destination for family offices. These factors include its low, flat corporate tax rate of 17 percent, favourable government policies, business-friendly geography, stable political and regulatory climate, well-developed financial and professional services sector, international connectivity, established common law jurisdiction with an independent judiciary, and high standard of living, with strong healthcare and education systems.
Singapore has also benefited from what the International Monetary Fund calls its “impressive recovery from the pandemic.” Its economy surpassed pre-crisis total output levels in 2021 and is outperforming similar economies. Because of its successes, affluent individuals and families now more than ever consider Singapore a secure location to build and grow wealth. Projections indicate that over 13 percent of Singapore’s population of 5.5 million will be millionaires (in US dollars) by 2030.
Hong Kong's position in Asia’s family office landscape
Hong Kong has over 400 family offices and aims to attract 200 more by 2025. To achieve its goal, the Hong Kong government has implemented strategies designed to entice wealthy family offices to establish operations in the city. These strategies include Hong Kong’s CIES migration programme, which targets UHNW families, improving regulatory frameworks, and providing appealing tax incentives and benefits for family offices.
Hong Kong’s role as a gateway to mainland China’s dynamic economy could also be a decisive factor in establishing family offices there. High-speed rail, air and highway transportation services provide extensive connectivity between the city and mainland China's leading metropolises and provinces. Plus, Hong Kong is a pivotal city in China's Greater Bay Area (GBA) Outline Development Plan, which aims to connect 70 million people and nine Chinese cities.
Hong Kong's secretary for financial services and the treasury, Christopher Hui, articulated the strategies and explained why he views the city as an ideal destination for family offices.
“We see huge opportunities for family offices in Hong Kong,” said Hui, noting that the city is home to nearly 80 of the world’s 100 largest banks and 70 of the top 100 global money managers. “The development of family offices is very much in line with Hong Kong’s DNA as a comprehensive international financial centre. One thing to highlight is the importance of family offices being durable, because families are built to last. On that front, Hong Kong has exhibited similar qualities as being highly resilient and versatile.”
Challenges faced by family offices in Singapore and Hong Kong
Singapore and Hong Kong have been successful in attracting family offices, but each jurisdiction poses challenges for prospective offices. For instance, compared to other financial centres, Singapore's domestic market is small, which means that local talent in virtually all areas — including advisory and financial services — is at a premium.
As for Hong Kong, a recent report cited in the South China Morning Post notes that the city is expected to lose 1,000 high-net-worth individuals in 2023, though it does not speculate on the reasons. This number is down from 2022, when 2,400 HNWIs departed Hong Kong, which most experts believe was due in part to Covid restrictions.
As with any family office or other organisation considering expanding into a new jurisdiction, due diligence is essential to understanding and mitigating risks. Most UHNW individuals considering establishing a family office in Asia will almost certainly consider both Hong Kong and Singapore, given each jurisdiction’s longstanding status as a business-friendly, politically stable environment, not to mention the recent family-office tax incentives offered by each. When conducting due diligence, an individual or family should hire a third-party expert with a local presence in each jurisdiction to obtain a balanced, cleareyed understanding of the benefits and challenges of each jurisdiction in relation to their own situation and goals.
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