Since 2002 private banking and wealth planning in Singapore has blossomed. Helped by the growing HNW class in Asia many predict that Singapore will be in the top 3 jurisdictions within 5 years.
Private banking has benefited from this trend. Singapore’s sound legal and regulatory framework coupled with a pro-business and tax-friendly environment for HNWIs is a catalyst.
The wealth structuring industry, led by international trust companies, lawyers and wealth planners offering services around products such as trusts, offshore holding companies have also benefited with a consequent steady rise in the number applications for trust licenses issued by the MAS and the granting of licenses for foreign law firms by the Attorney General’s office. The influx of international providers has undoubtedly progressed market sophistication.
However, my view is that market demand for sophisticated wealth planning services has yet to catch up to the sophistication of the service providers. One would therefore expect a consolidation of the market in the coming years.
The gatekeepers of Asian business tend to be private bankers who do not readily introduce their clients to complex wealth structures, predominantly because of the lack of financial incentives to do so, and that the banker puts his client relationship at risk, particularly if the process of setting up a structure is time consuming, expensive or frustrating.
The banks are generally more concerned with AUM than trustee fees, so the banks tend to heavily subsidise the costs of a structure and use their in-house trustee but in doing so reduce the value of that structure to their client, and the value of the industry in the process.
The industry itself is also its own enemy by developing simple structures which reduce the involvement of service providers. Such structures typically generate lower fees.
Further headwinds are that contrary to Europe, tax planning is not a driver for the advancement of private wealth and therefore succession is heavily relied on as a rationale for creating structures. However, as those in the insurance business well know, planning for death is a hard and slow sell - rarely is there a perceived urgency to the same extent that a looming tax bill generates.
Likely too, the emergence of widespread automatic exchange of information between States will slow both demand and ease of acceptance of new business.
Therefore, there seem few triggers in the market to change the status quo.