The family office sector has grown rapidly, collectively managing around $5.9 trillion in assets in 2023. Especially in the Asia-Pacific region, with a 44% increase between 2017 and 2019, it highlights its appeal among the wealthy. In Malaysia, this is a new industry as we don’t have a regulatory framework in place. The unity government in 2023 is the first to put concrete efforts into concentrating on this globally growing industry. Here are the reasons why we must know this now.
1) Focus of the Malaysian Government
In June 2023, Malaysian Prime Minister Anwar Ibrahim announced initiatives to attract more investors, particularly to small and medium sectors of the new economy. Following this, the Ministry of Finance and the Securities Commission will develop policies to encourage the establishment of family offices in Malaysia.
In March 2024, the Malaysian government will introduce a new regulatory framework aimed at attracting family offices, with the announcement scheduled for this year’s budget. This update comes from Datuk Seri Awang Adek Hussin, the chairman of the Securities Commission Malaysia.
All these developments raise an important question: Is there enough talent to manage all this wealth, both present and incoming, and is the Malaysian market ready to handle it? For now, the answer is no.
However, if you are looking for an international family office, we have good news for you. One of Asia’s top family offices has just set up their office in Malaysia.
2) Family Office Opportunity Cost
Eduardo Saverin, a co-founder of Facebook, utilised a family office to manage his assets after relocating to Singapore, which according to the New York Post, saved him approximately $288 million in taxes. This strategic financial management exemplifies the substantial benefits that can be realised through the effective use of family offices, not just in tax savings but also in broader wealth preservation and growth strategies.
Another example is Joseph Tsai Co-Founder of Alibaba Group, Tsai’s family office purchased the Brooklyn Nets of the NBA for $3.5 billion in 2019. By 2024, the value of the investment has increased to $3.85 billion. This represents a $350 million increase in just five years, showcasing a successful example of strategic investment management by a family office if you are considering similar strategic financial management, you might find it beneficial to explore how to set up an offshore trust in Malaysia
3) Asia’s Wealth Landscape & Talent Gap
By 2027, there will be roughly 210,000 ultra-high-net-worth-individuals (at least US$30mil or RM141mil worth) in Asia, up by 39.8% from 2022.
| Name | Net Worth (2023) | Description | Country | Industry | Family Office Name | Major Investments | Philanthropic Activities | Year Established | Education | Awards/Recognitions |
|---|---|---|---|---|---|---|---|---|---|---|
| Sergey Brin | $94.5 billion | Co-Founder of Google | Singapore | Technology | Brin Family Office | Real estate, technology startups | Brin Wojcicki Foundation | 2005 | Stanford University | Marconi Prize, National Medal of Technology |
| Mukesh Ambani | $93.4 billion | Indian billionaire businessman | Singapore | Energy, Retail | Reliance Family Office | Oil, telecommunications | Reliance Foundation | 1981 | Institute of Chemical Technology | Business Leader of the Year |
| Liang Xinjun | $4.2 billion | Chinese billionaire, co-founder of Fosun Group | Singapore | Investment | Fosun Family Office | Healthcare, real estate | Fosun Foundation | 1992 | Fudan University | Top 10 Chinese Entrepreneurs |
| Ray Dalio | $19.1 billion | American hedge fund investor | Singapore | Finance | Dalio Family Office | Hedge funds, real estate | Dalio Foundation | 1975 | Harvard Business School | Philanthropist of the Year |
| Jack Ma | $23.2 billion | Founder of Alibaba Group | Hong Kong | Technology, E-commerce | Lakeside Partners | E-commerce, fintech | Jack Ma Foundation | 1999 | Hangzhou Normal University | Asia’s Heroes of Philanthropy |
| Li Ka-shing | $34.6 billion | Hong Kong business magnate | Hong Kong | Conglomerate | Horizon Ventures | Real estate, technology | Li Ka Shing Foundation | 1950 | None | Grand Bauhinia Medal |
| Joseph Tsai | $8.1 billion | Co-Founder of Alibaba Group | Hong Kong | Technology, Investment | Blue Pool Capital | Sports franchises, real estate | Tsai Foundation | 2012 | Yale University | Business Person of the Year |
| James Dyson | $23.0 billion | Founder of Dyson | Singapore | Technology, Consumer Goods | Weybourne Group | Technology, real estate | James Dyson Foundation | 2013 | Royal College of Art | Order of Merit, Royal Designer for Industry |
Wealthy Individuals Who Set Up Family Offices in Asia
Wealthy Malaysians often park their wealth abroad due to the current talent gap in the country. Family offices require a unique skill set, blending professional expertise with a personal touch, which is uncommon in other workplaces. KPMG’s report notes that within the family office business in Asia, CEOs earn between SG$158,001 and SG$500,000 (RM1.76 million) per year, excluding bonuses.
Understanding Family Offices
A family office is a private wealth management advisory firm that serves ultra-high-net-worth investors. Family offices are distinct from traditional wealth management shops in that they offer a total outsourced solution to managing the financial and investment side of an affluent individual or family.
History: The concept began with the Rockefeller family in the late 19th century, who pioneered this approach to consolidate management of the family’s sprawling empire under a single office.
SFO vs. MFO:
Single Family Office (SFO): Manages the wealth and personal affairs of one family. It offers highly personalized services and confidentiality, with strategies tailored to the specific needs of that family.
Multi-Family Office (MFO): Provides similar services but to multiple families. MFOs can offer cost-sharing benefits and access to a wider range of expertise and investment opportunities, making them suitable for families that may not have the resources to run a standalone office.
Both types of family offices provide customized financial care, but the choice between SFO and MFO depends on the family’s size, costs considerations, and desired exclusivity of services.
Comparison of family offices in Singapore, Hong Kong, and Malaysia
| Feature | Singapore | Hong Kong | Malaysia |
|---|---|---|---|
| Legal Entities | Private Limited Company, Trust, VCC | Limited Liability Company, Trust | Private Limited Company (Sdn Bhd), Trust, Labuan Entities |
| Regulatory Environment | MAS, ACRA | Securities and Futures Commission | Companies Commission of Malaysia, Labuan FSA |
| Tax Incentives | Sections 13D, 13O, 13U | Tax concessions for investment profits | No dedicated tax incentives for family offices |
| Market Growth | Rapid expansion of SFOs; robust framework | Target to attract 200 family offices by 2025 | Emerging market; initial government initiatives |
| Preferred Structures | Holding company overseeing an investment fund and a family office entity | SFO emphasized; Family-owned Investment Holding Vehicles | Various options, including traditional and Labuan structures |
| Licensing Requirements | Licensing exemptions for SFOs; others require license | License required for regulated activities | General business registration, no specific license |
| Investment Vehicles | VCC (Variable Capital Company) | Typically structured around legal entities like LLCs | Sdn Bhd, Trust, Labuan trusts, foundations, and PCCs |
| Global Competitiveness | Leading hub in Asia due to legal and tax frameworks | Competing closely with Singapore for leadership | Striving to enhance competitiveness |
Malaysia currently lags behind Singapore and Hong Kong in establishing family offices primarily due to the lack of a specialised regulatory framework and dedicated tax incentives. While Singapore and Hong Kong offer clear and supportive legal structures, regulatory guidance, and fiscal benefits tailored to the needs of family offices, Malaysia has not yet developed similar incentives or regulatory clarity. This deficiency makes it challenging for potential family office establishments to navigate the legal and fiscal landscape, thereby affecting Malaysia’s competitiveness as a desirable location for family offices in the region.
Conclusion
We must understand and prepare ourselves for family offices before the new regulatory framework announcement in the budget this October. As the saying goes, the early bird catches the worm, and opportunities always favor those who are well-prepared. The future of family offices in Malaysia looks bright, whether you’re a wealthy investor or someone looking to work in this growing industry.
