This month’s comment comes from Mahesh Kumar. Mahesh Kumar is a Singapore-based partner at Withers Worldwide, a leading international law firm. He advises clients on establishing family offices, funds and cross-border corporate and investment structures.
What trends are impacting UHNWIs in Asia?
Mahesh: UHNWIs are conscious of potential tax hikes targeted against the wealthy, as governments around the world try to fund stimulus packages in a post-pandemic world. The G-20 are already working towards introducing a global minimum tax on corporates.
Several UHNWI's have been exploring structuring options beyond tax havens. They are concerned with perception and reputation issues, uncertainties arising from measures such as economic substance norms and public registries of beneficial owners in some of these countries. We now live in a world where there is considerable overlap between tax planning, risk mitigation and reputation management.
While reviewing their investment structures and strategies, wealthy families have been searching for a non-tax haven jurisdiction that is stable, business-friendly and respected while still being tax efficient. Singapore checks all these boxes.
Why is Singapore favoured amongst wealthy Asian families?
Mahesh: Singapore has emerged as a leading wealth management hub, with assets under management in the island nation crossing $3.5 trillion in 2020. Singapore is favoured not only among the wealthy in Asia-Pacific, but also among high-net-worth families (including several iconic billionaires) in the US, UK, EU and the Middle East who have established an investment base in the country.
Apart from being a major financial centre, travel and trading hub, Singapore also serves as regional or international headquarters for a large number of global conglomerates and unicorns. Singapore is also considered a preferred base to establish family offices. It offers a licensing exemption for single family offices and tax exemptions for investment holding vehicles managed by Singapore family offices that meet certain criteria. The country also offers interesting residency options to the wealthy including employment passes and permanent resident status for qualifying individuals based on economic commitments.
What are the primary wealth trends in Asia at the moment?
Mahesh: Diversification continues to be a key risk management tool and a means to secure higher returns. UHNWIs in Asia are now increasingly exposed to alternatives, private equity, venture capital, angel investments and other emerging asset classes like cryptocurrencies. Several UHNWIs in Asia have been enhancing the infrastructure, governance and in-house investment expertise of their family offices.
They often use multiple investment holding vehicles to ring-fence asset classes and also to segregate between business operations and family wealth. The use of fund and family office structures and other strategies such as insurance wrappers have also become popular in Asia.
Are some western wealth trends being adopted in Asia?
Mahesh: While establishing investment holding structures and family offices, UNWHIs often create family trusts to address objectives such as succession planning, asset protection and confidentiality. Wealthy families in Asia are now using more sophisticated trust structures to hold both financial assets and shareholdings in operating businesses.
Private trust company structures are also becoming more popular among those who seek greater involvement in the trust governance, especially when the asset base includes operating businesses. Elaborate governance strategies like family constitutions are also becoming more popular in Asia.
UHNWIs in Asia have also been actively embracing ESG principles in their investment strategy and as the underlying philosophy of their trusts and family offices.
About Mahesh Kumar
Mahesh Kumar is a Singapore-based partner at Withersworldwide, a leading international law firm. He advises clients on establishing family offices, funds and cross-border corporate and investment structures.
About The Lede
This article was originally published in The Lede, Transmission Private’s monthly newsletter that tracks the future of reputation management. Featuring interviews with leading private client advisers from the worlds of law, finance, and accountancy, sign up today to receive the newsletter in your inbox every month.