Family Offices in Asia: Positioning Labuan IBFC as a Safe Harbour for Wealth Structuring
Introduction
Family office is an overused buzzword, which often signifies upmarket positioning. To the high net worth individual, he/she “has made it”. To the service provider, it offers a level of service that is higher compared to its competitors.
However, are these perceptions real or a myth, and/or are they misplaced?
However, are these perceptions real or a myth, and/or are they misplaced?
What is a Family Office?
There isn’t a specific, fixed definition for family office - it could either be formally structured or set up in a more informal way. Just like the individual family it serves, no two-family offices are exactly alike. It is, in essence, an organisation that assumes day-to-day administration and management of a family’s affairs. It focuses on several functions such as investment, planning and structuring, concierge and philanthropy, among others.
Types of Family Office
There is no “one-size fits all” solution. It depends on the focus the individual family has on managing wealth, distributing wealth to the next generation as well as managing risks and regulations. Wealth cycle and lifestyle will probably be two of the main determining factors.
If we simplify the understanding of a family office, its functions and services rendered fall into two main categories:
Single family office: It is an organisational structure that manages the balance sheet of an affluent family. There is no prescribed format on how it should be structured, except to meet the needs and preferences of the family. It may even be operated by trusted employees of the patriarch/matriarch of the family in an informal manner under the umbrella of the family business. Although with the maturity of the family’s wealth, there is a trend that the family will formalise an entity to manage their family assets.
Multi-family office: Traditionally, a single family looking to share their infrastructure costs, or a small group of like-minded single families looking to aggregate investment, co-invest in start-ups and share intellectual know-how on investment strategies, will evolve into a multi-family office. The concept of multi-family office is to provide investment services, first and foremost. The multi-family office then evolves into commercial entities which choose to provide services to ultra-high net worth families. Multi-family office provides investment services, structuring and other services that families need for a fee.
Given the above brief introduction, one must therefore be cognisant of the implication of a family office, and what it entails. Once there is a basic understanding on the coverage of a family office, one will then be better positioned to consider establishing a single-family office or engage the services of a service provider, i.e., multi-family office, and pose more pertinent questions to advisors assisting in this endeavour.
If we simplify the understanding of a family office, its functions and services rendered fall into two main categories:
Single family office: It is an organisational structure that manages the balance sheet of an affluent family. There is no prescribed format on how it should be structured, except to meet the needs and preferences of the family. It may even be operated by trusted employees of the patriarch/matriarch of the family in an informal manner under the umbrella of the family business. Although with the maturity of the family’s wealth, there is a trend that the family will formalise an entity to manage their family assets.
Multi-family office: Traditionally, a single family looking to share their infrastructure costs, or a small group of like-minded single families looking to aggregate investment, co-invest in start-ups and share intellectual know-how on investment strategies, will evolve into a multi-family office. The concept of multi-family office is to provide investment services, first and foremost. The multi-family office then evolves into commercial entities which choose to provide services to ultra-high net worth families. Multi-family office provides investment services, structuring and other services that families need for a fee.
Given the above brief introduction, one must therefore be cognisant of the implication of a family office, and what it entails. Once there is a basic understanding on the coverage of a family office, one will then be better positioned to consider establishing a single-family office or engage the services of a service provider, i.e., multi-family office, and pose more pertinent questions to advisors assisting in this endeavour.
Trends
Regional trends show the growth of service providers offering segments/aspects of family office. What exactly are these services providers offering to clients with family office needs? Broadly speaking, it makes sense for service providers to trace the footsteps of the family’s journey of managing wealth.
It usually begins with the need to manage investment more holistically, then provide concierge services for families who are global citizens, followed by succession structuring to preserve the wealth and finally to formulate strategies to distribute wealth to the next generation.
It is safe to say that in Asia, most services rendered by service providers relate to investment management. Therefore, it is not surprising to see more multi-family offices being set up to complement the single-family office.
It usually begins with the need to manage investment more holistically, then provide concierge services for families who are global citizens, followed by succession structuring to preserve the wealth and finally to formulate strategies to distribute wealth to the next generation.
It is safe to say that in Asia, most services rendered by service providers relate to investment management. Therefore, it is not surprising to see more multi-family offices being set up to complement the single-family office.
Misconception
There is a misconception within the industry, that when the service provider provides only one service to an affluent family, when asked, the service provider will say his/her firm provides “family office service”, making it sound more grandiose than it really is. To the experienced service provider, one would be able to assess if this is a comprehensive offering, judging by the firm’s resources and collective experience of the firm’s key personnel.
Let’s develop this further as follows:
Let’s develop this further as follows:
Experience
As a service provider, managing a boutique trust and fiduciary business, and at the same time serving ultra-high net worth clients may be taxing on one’s resources.
In addition, unless one’s firm has a whole array of infrastructure, including experienced personnel, the provision of family office offerings will normally focus on one or two services.
From a bandwidth perspective, managing a handful of ultra-high net worth clientele will be more than enough for each partner of the firm. As such, service providers are better off focusing on their strengths rather than trying to be everything for every client.
Legislation, Regulatory Framework and Ecosystem
Jurisdictions which promote family offices will naturally introduce and enact supportive legislation. In Asia, Singapore is somewhat ahead in promoting family office services, while Hong Kong has also introduced legislation to encourage this trend.
Both jurisdictions provide a wealth management ecosystem comprising banking facilities, fiduciary providers, and investment specialists to support the needs of families. Singapore, in particular, is actively expanding its talent pool to serve the family office sector.
Observations in Malaysia
The recent launch of the Forest City Special Financial Zone (FCSFZ) has created an impetus in the Malaysian family office space, especially regarding the tax incentives being offered which is ably supported by onshore Malaysia’s legislative framework, under the purview of Securities Commission of Malaysia.
In addition, the increased use of Labuan Foundations and Private Trust Companies in wealth management and legacy planning (via the Labuan legislative framework) within the last two years has also created a momentum in the family office space among the ultra-high net worth patriarchs and matriarchs in Malaysia.
With the above two-pronged initiatives and momentum, there are interesting developments in the creation of a wealth management ecosystem of banking facilities, fiduciary providers, and investment specialists within Malaysia, as dictated by the growing demand.
As a service provider, managing a boutique trust and fiduciary business, and at the same time serving ultra-high net worth clients may be taxing on one’s resources.
In addition, unless one’s firm has a whole array of infrastructure, including experienced personnel, the provision of family office offerings will normally focus on one or two services.
From a bandwidth perspective, managing a handful of ultra-high net worth clientele will be more than enough for each partner of the firm. As such, service providers are better off focusing on their strengths rather than trying to be everything for every client.
Legislation, Regulatory Framework and Ecosystem
Jurisdictions which promote family offices will naturally introduce and enact supportive legislation. In Asia, Singapore is somewhat ahead in promoting family office services, while Hong Kong has also introduced legislation to encourage this trend.
Both jurisdictions provide a wealth management ecosystem comprising banking facilities, fiduciary providers, and investment specialists to support the needs of families. Singapore, in particular, is actively expanding its talent pool to serve the family office sector.
Observations in Malaysia
The recent launch of the Forest City Special Financial Zone (FCSFZ) has created an impetus in the Malaysian family office space, especially regarding the tax incentives being offered which is ably supported by onshore Malaysia’s legislative framework, under the purview of Securities Commission of Malaysia.
In addition, the increased use of Labuan Foundations and Private Trust Companies in wealth management and legacy planning (via the Labuan legislative framework) within the last two years has also created a momentum in the family office space among the ultra-high net worth patriarchs and matriarchs in Malaysia.
With the above two-pronged initiatives and momentum, there are interesting developments in the creation of a wealth management ecosystem of banking facilities, fiduciary providers, and investment specialists within Malaysia, as dictated by the growing demand.
Labuan IBFC: Strategic Family Office Gateway
1. Labuan IBFC service providers working with onshore service providers to offer an integrated offering. For example:
2. Partnering with financial institutions to deliver a seamless and integrated ecosystem for banking and investment management across Labuan IBFC, FCSFZ and other onshore regions of Malaysia.
- A Labuan Foundation can be positioned to the ultimate holding entity for two onshore Malaysian entities which have been approved with tax incentives under the provisions of the FCSFZ.
- To provide a full range of services within the family office platform - such as structuring (including cross-border transactions and investments) and investment management, especially dealing with multi-assets portfolios, as we witness this developing trend.
2. Partnering with financial institutions to deliver a seamless and integrated ecosystem for banking and investment management across Labuan IBFC, FCSFZ and other onshore regions of Malaysia.
In summary, as wealth transitions from the first and second generations to the next, family offices are becoming increasingly prominent. There is a rising trend in setting up family offices in Malaysia. Consequently, stakeholders should strive to improve their service offerings to capitalise on this expanding market, and with Labuan IBFC being part of this ecosystem.
Co-authors:
Raymond Wong
Regional Managing Director, Kensington Trust Group
Email: [email protected]
"At Kensington Trust Group, we provide personalised, bespoke trust and fiduciary solutions, alongside access to corporate and fund
administration services - supported by our trusted global network and strategic associations. As needs arise, we collaborate closely with advisors to implement bespoke solutions for mutual clients, allowing you and your management team free to focus on what you do best, while we support you on the how, where and when."
Goh Seow Chee
Managing Director, Aequitas Advisory Pte Ltd
Email: [email protected]
"At Aequitas Advisory, we are more than just advisors - we are trusted partners in your family’s journey to preserve and grow wealth across generations. We specialise in creating tailored solutions to help families preserve and grow their wealth across generations. Our services are designed to address the unique needs of each family, ensuring a seamless transition of both wealth and values."
