Political stability top of family office priorities | family offices

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The political stability of a wealth management center trumps all other factors for wealthy individuals and families when choosing a location to park their wealth.

That’s the consensus of three industry observers who spoke to AsianInvestor after considering several factors such as standard of living, health care, education, public safety and even tax policies.

In the end, they agreed that stable governments and the absence of public violence and unrest outweigh all factors – even a zero-tax incentive – when it comes to a family office. moving to a new location like Singapore or Hong Kong.

Kiow Wei Hao

DL Holdings

“When we consider setting up a new location for a family office, a few considerations come into play. Regulation, political stability, taxation, access to a professional network, ease of recruitment, proximity to family and the interests of the family business are all major factors that we look at,” said Kiow Wei Hao, partner at Hong Kong-based DL Holdings Group and managing director of its Singapore office,

“If we had to rank it, I would say political stability comes first, followed by taxation,” he said.

He had, in a previous interview with Asian investorgiven his views on the impact of the wealth tax hike introduced in Singapore in February on family offices.

He said taxation should not be the “single factor” deterring family offices from moving to Singapore as the city has other advantages such as political stability, a strong legal and regulatory framework, ease of travel and the absence of capital gains or inheritance tax.

Additionally, he considers Singapore’s passport to be the “second most powerful” in the Henley Passport Index, a reflection of the city-state’s appeal as a place highly sought after by citizens of the world, including wealthy individuals.

Singapore is actually ranked first along with Japan in the index for 2022 and 2021, down from second place in 2020, a check by AsianInvestor revealed.

HONG KONG PRESERVES ITS WEALTH

A family office investor in Hong Kong, who asked to remain anonymous, gave his views on political stability versus taxation.

“Taxation is a way to buy security. Especially these days with geopolitical tensions, if you have the option of putting money in a low-tax or no-tax jurisdiction but you’re not sure the wealth is fully protected, would you? he asked the question to Asian investor.

He said while a few wealthy families from Hong Kong moved their assets to Singapore following political unrest in 2019 and 2020, many stayed behind due to their important interests such as real estate investments.

For those who moved to Singapore, the decision may have been based on “situational factors”, but portfolio diversification also played a role.

“As you can imagine, these wealthy families have different nests all over the world. So Singapore is definitely one of the places where they would divert their wealth from Hong Kong,” he said.

In a similar vein, some private banks have also changed their domicile over the past year or transferred asset management from their Hong Kong office to Singapore, he said.

POLITICAL STABILITY INDEX

World Economy, a major provider of trade and economic data, ranked Singapore fourth for political stability in 2020, after Liechtenstein, Andorra and New Zealand, in its Political Stability and Absence of Violence Index. /terrorism.

Hong Kong was ranked 90 above mainland China at 114, and the United States was placed 99 in the total ranking of 194 selective countries and territories.

The index reflects perceptions of the likelihood of a disorderly transfer of government power, armed conflict, violent protests, social unrest, international tensions, terrorism, as well as ethnic, religious or regional conflicts.

Based on sources such as the Economist Intelligence Unit, World Bank, World Economic Forum and political risk management agencies, the index is used by investors and business people.

Political stability is deeply linked to the growth of economies. Political stability attracts investment; in times of instability, money usually flowed out of the regions,” Kiow said.

Stephane Chen

Family investor

For example, the race riots in Indonesia in 1998 during the Asian financial crisis disrupted the economy, leading to massive capital flight and loss of investor confidence, said Stephen Chen, a Singapore-based family investor.

Around the same time, in Malaysia, then-Prime Minister Mahathir Mohamad sacked his deputy and also finance minister, Anwar Ibrahim, over management differences, creating a leadership crisis and further damaging trust. of the market.

However, some short-lived incidents did not affect investor confidence due to strong underlying political fundamentals.

“The US Capitol building riots, for example, took the US off its high point (on the index) but Wall Street investors ignored it because they knew the government system would be in place. and that there wouldn’t be much economic damage from the short-lived riots,” Kiow said.

Similarly, the Hang Seng index closed higher at the end of 2019 compared to the start of the year, when the city was rocked by public protests that saw tourism and retail trade deteriorate.

“It’s because Hong Kong is irreplaceable to China and plays an important role in China’s economy,” he said.


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