What you need to know about starting a family office in Asia
As the number of family offices around the globe has skyrocketed in recent years, one particular region that has benefited is Asia.
The region has seen the world’s fastest growth in the number of ultra-high-net-worth individuals, according to the Knight Frank Wealth Report. Many are motivated to launch family offices in Asia because of the region’s strong economic growth, tax incentives and a friendly regulatory environment in some countries and cities.
That growth has happened almost overnight, with 40% of family offices having been established since 2010. Almost half of the region’s offices are in Hong Kong, which has 400 and hopes to add 200 more by 2025, and Singapore, where the number has almost tripled sinced 2020 to 1,100.
Among them is the Landmark Family Office, a private multi-family office that announced the establishment of its global headquarters in Hong Kong this year. The office was drawn there due to its confidence in the city’s regulatory environment and “strong government support for the family office sector,” said Landmark CIO Andrew Sharrock, who previously worked at State Street.
Those factors provided "an optimal ecosystem for our family office setup," Sharrock said. "The family office industry in Hong Kong is developing at a rapid pace, with increasing demand for bespoke sophisticated wealth management solutions for ultra-high-net-worth families and individuals."
Those two cities meet the criteria that ultra-wealthy individuals seek to nurture, manage and preserve their fortunes, say several family office advisers based in the region. Among those criteria are a strong regulatory framework, an established financial services industry, stable and business-friendly government policies, a skilled labor force and a location where the family has existing private banking relationships.
The surge is being driven by Asian families who during and after the pandemic sought to strengthen their wealth management and succession plans to better prepare against future uncertainty and non-Asian families seeking to set up satellite offices “to capture and better support their investments in the region,” said Carrie Ng, who heads the Bank of Singapore’s family office advisory business.
In addition, next-gen members are pushing for their families to set up offices, said Prabhat Ojha, a Cambridge Associates managing director and head of its Asia client business. “We are also seeing an increasing number of instances where the next generation, having spent time in the West or worked in the investment industry, comes back to Asia to take the reins of not only the family business but also to look at what to do with the excess capital that the family business creates,” Ojha said.
In recent years, family offices in the region that relied on their instincts and traditions have sought to professionalize their operations, with more of them hiring professional staff and more carefully evaluating service providers and fees.
WHAT IT TAKES TO START A FAMILY OFFICE
To start a family office in the region requires engaging with lawyers, accountants, tax advisers and regulators — and private banks and multi-family offices can help with the process.
In Hong Kong, a single-family office does not need to be licensed if its services do not include regulated activity, such as seeking profit as an objective, while multi-family offices are likely required to obtain various licenses. The city also has a separate agency, FamilyOfficeHK, set up just to help support family offices setting up in Hong Kong. FamilyOfficeHK helps connect them with regulators, private bankers, trustees, lawyers, accountants and wealth management professionals, said Jason Fong, global head of family office at Invest Hong Kong.
Hong Kong’s competitor, Singapore, is targeting family offices through its own tax incentives and licensing exemptions as well as a low flat corporate tax rate of 17%. It also recently launched the Global-Asia Family Office Circle to “support the development of a vibrant family office sector.”
In a recent speech, Deputy Prime Minister Heng Swee Keat said family offices can take advantage of the region’s focus on sustainability and climate change and “play a leading role in the green transition and facilitating sustainable, inclusive growth.”
Singapore and Hong Kong dominate the sector, but families should undertake their due diligence and hire a third-party expert with a local presence in each jurisdiction to clearly understand the benefits and challenges of each, said Chris Marquis, managing director and global head of private wealth at Vistra, a global business services provider.