Wealth Management – Why Singapore?

Wealth Management – Why Singapore?

Introduction

This article briefly describes what “wealth management” is all about, and why Singapore ranks number 2 globally as the preferred offshore wealth hub.

The crux of Singapore’s success: it provides investors with access to pan-Asian and global opportunities, supported by world-class wealth management capabilities.

What Is Wealth Management?

The definition is influenced by two different perspectives:

1) Individual

From an affluent individual’s perspective, wealth management is about solving or enhancing his or her financial situation. In other words, to make sure the individual’s wealth is protected with growth.

At the core of it, risk and liabilities must be managed before considering growth. In some cases, an element of lifestyle management may be incorporated as well.

2) Financial Advisor / Wealth Manager

From a professional’s perspective, wealth management is about delivering a full range of financial products and services to an affluent client in a consultative way.

“Consultative” means wealth managers must be truly client-centered. The service of wealth management may entail coordinating a team of experts to address clients’ needs.

A wealth manager does not necessarily need to be able to provide every single financial product that exists. However, he or she should be widely read and well connected to be able to utilize his knowledge and network to provide solutions for the client. 

Reason #1: Singapore’s Sound Financial Regulation

The Monetary Authority of Singapore (MAS) plays a very active role in ensuring the country has the best regulatory framework and non-physical infrastructure to support the wealth management industry.

In October 2017, MAS released the Industry Transformation Map (ITM) for financial services. The roadmap was drawn up by MAS in close consultation with the financial industry and Ministry of Education (Higher Education and Skills).

The ITM has outlined growth strategies by business lines and programmes for upgrading skills. An agenda was also outlined for continuous innovation and technology adoption, the first of which was the Fintech Regulatory Sandbox.

The Sandbox is a passport for financial institutions and FinTech players to experiment with innovative financial products or services in a live environment. There are less legal requirements but the experiments must operate within a clearly defined space.

Guidelines set by MAS for Sandbox regulate risk as well as ensure the overall safety and soundness of the financial system. The Sandbox is very attractive for its participants as it allows them to test their ideas “without having to apply for a [full] license or a permit”.

The experiments can be run for a period of 6 months. If they are successful after this duration, participants of the Sandbox must then comply fully with relevant legal and regulatory requirements.

MAS stepped up its agenda in August 2019 when it launched Sandbox Express – an improved version of Sandbox.

In the express version, the approval process is shortened but experiments can be run up to 9 months instead of 6 so that participating firms have “more time to overcome business and technical challenges”.

Reason #2: Singapore’s Political And Economic Stability

According to statistics from the World Bank, Singapore ranked third in the world for political stability in 2018. The top score went to Monaco followed by New Zealand in second place.

It is a no-brainer that political stability plays a major role in providing fertile ground for economic stability.  The result is a high-income economy with a gross national income of US$54,530 per capita, as of 2017. 

A 2017-2018 study conducted by the World Economic Forum showed Singapore as having the highest Global Competitive Index score in the East Asia and Pacific region. The Global Competitiveness Report has been measuring competitiveness for over four decades.

A more recent article in July 2019 reported Singapore holding top rank for the world’s most competitive global economies. As quoted by the World Economic Forum, Singapore showed improvement from an already high base and that it ranked first for infrastructure (one of the assessment pillars).

The article also cited that Singapore scored well in the report due to its financial system, macroeconomic stability and market efficiency.

Reason #3: Full Suite Of Wealth Management Services In Singapore

The financial services industry in Singapore is so competitive that there are countless banks – both local and international – as well as asset and wealth management firms offering wealth management services.

The typical client services offered include:

• Investment planning
• Retirement planning
• Insurance
• Trust services
• Special situations
• Family governance
• Debt management
• Philanthropy advisory
• Income protection and asset preservation
• Tax planning
• Estate planning
• Business planning
• Education planning
• Succession planning

Singapore is also armed with a comprehensive suite of wealth management players including trust companies, philanthropy organisations, family offices and ancillary service providers such as tax, legal advisors, consultants and technology platform providers.

The need for wealth management has been rising consistently over the past several years. Survey findings by MAS show the total value of Assets Under Management increased year-on-year from 2013 to 2018.

The compounded annual growth rate was at an impressive 14%, with a value of S$3.4 trillion as at end 2018. 

Reason #4: World-Class Professionals Congregated In Singapore

There are 3 factors contributing to this reason:

1.  A magnet for the best talents

The Asian Private Banker survey reveals Singapore as being the most preferred offshore wealth hub among industry professionals.

2.  Regulations to uphold high professional standards

The MAS has in place the Private Banking Code of Conduct – to further ensure the competency of private banking professionals and foster high market conduct standards.

3.  Support for professional development

As the financial sector continues to transform with evolving business models and wider integration of technology, it is important to have professionals equipped with new skills and competencies.

MAS and the Institute of Banking and Finance (IBF) have programmes and schemes that support this need. Among them are:

• Financial Specialist Scholarship (FSS) that helps develop specialist leaders in a variety of fields in Singapore’s financial services sector;
• SkillsFuture Study Award for the Financial Services Sector for professionals to develop and deepen their skills through a wide range of programmes;
•  Technology in Finance Immersion Programme (TFIP) which helps individuals gain experience in new technology areas – Artificial Intelligence, Cloud Computing, Cybersecurity, Data Analytics and Full Stack Development – within the financial services sector;
• Professional Conversion Programmes that re-skill mid-career professionals, managers, executives and technicians.

Reason #5: Singapore’s Developed Capital Market And Ecosystem

Singapore is currently the third-largest financial exchange centre in the world. Apart from Hong Kong, Singapore is said to have the most developed capital markets within the ASEAN and Pan-Asia regions.

To support this very active market, Singapore has a whole range of capital market entities to provide financial services including:

• trustees,
• fund managers,
• financial advisers,
• REIT managers,
• corporate finance advisers,
• credit rating agencies and
• dealers.

Even with this ecosystem in place, the Monetary Authority of Singapore is constantly upgrading its financial infrastructure to prepare for current and future needs.

The Singaporean Government provides full support by offering attractive incentives to venture capital managers and leaders. These include protection of intellectual property, allocation of public money for early investments and the reduction of regulatory “red tape”.

On top of that, it is quick to align with trends that gain increased interest in the APAC region, specifically in socially conscious values which affect investor behaviour.

Investors in the region have been demanding more Environmental, Social, and Governance (ESG) and Socially Responsible Investing (SRI) products from asset managers. To cater to this demand, Singapore recently produced the first international green bond.

Strategies are in place to make the island a full-service Asian infrastructure financing hub. This will improve the bankability of Asian infrastructure projects by crowding in private capital through innovative market mechanisms and infrastructure investment benchmarks.

Singapore will also build private market funding platforms and turn the country into the Asian centre for capital raising and enterprise financing. This will enable Asian growth companies to gain better access to a wider network of investors.

Earlier in the year, the Variable Capital Company (VCC) framework was launched by MAS and the Accounting and Corporate Regulatory Authority (ACRA). It is a new corporate structure which can be used for a wide range of investment funds.

The flexibility and attractive perks of the VCC have already seen positive reception from the market. Up to 20 investment funds, including those from new Family Offices, were re-domiciled as VCCs during the launch itself.

To make the VCC even more attractive, MAS had also launched the VCC Grant Scheme which co-funds applicants of the VCC up to 70% of their expenses (legal services, tax services and regulatory compliance services).

Reason #6: Family Offices In Singapore

Between 2017 and 2019, Singapore has seen a 5-fold increase in the number of Family Offices. This astounding growth reflects the rising numbers of affluent families in Asia that are consolidating their wealth in Singapore through formal structures, i.e. Family Offices.

To support this trend, MAS and the Institute of Banking and Finance came together to form the Family Office Advisor Skills Map. It was co-created in 2019 with the financial services industry, legal and tax advisors, in consultation with SkillsFuture Singapore.

Launched in July 2020, the Map will enhance the capabilities of Family Office Advisors. It sets out updated skills and competencies that these professionals should possess, such as wealth planning administration and corporate governance.

Reason #7: Singapore Is The Top Stopover Point In Asia

All the world’s airlines either transit in Singapore or land here. Nearly 7,400 flights used its two airports every day before the Covid-19 pandemic interrupted global travel.

In 2019, this small island holiday destination received a whopping 19.1 million visitors, earning the country S$27.7 billion in tourist spending. Many of these tourists use Singapore as a stopover point before hopping over to the next vacation point in Asia or Australasia. This trend is so popular until stopover-holiday packages are now a norm.

More importantly, Singapore is also the top stopover point for business travellers. It is strategically located in Southeast Asia and it has the most highly rated international airport in the region. On top of that, Singapore is well-known for its highly efficient and comprehensive transportation system.

International and local connectivity also makes this country an attractive place for businessmen and investors to set up shop or to make investments.

CONCLUSION

Asia’s growth continues to be strong, driven by a growing middle class, rapid urbanisation and the expansion of Asian enterprises. The prospects for the financial sector are good and this will generate a demand for financing and risk management solutions. Technology is also transforming the way financial services are produced, delivered, and consumed.

With new initiatives like the VCC structure, the Monetary Authority of Singapore has already prepared the country’s infrastructure to cater to the growing and evolving wealth management industry within its borders and beyond.