3 key challenges in establishing single-family offices in Singapore

Eight in 10 SFOs in Singapore need secure infrastructure and IT security.

Despite Singapore's beneficial tax and regulatory framework, setting up a single-family office (SFO) in the country still involves navigating three challenges.

According to the "APAC Family Office Study: Challenges and perspectives across the ecosystem" report by Simon & Kucher, when starting a family office in Singapore, one must "plan for success on Day 2 and not on Day 1."

The first challenge that SFOs may face is that sponsors lack know-how.

 "New family office sponsors lack awareness of the operational scope and complexity of setting up a family office. They are also not familiar with the legal and regulatory requirements which vary across jurisdictions," the report said.

"As such, new sponsors engage and rely heavily on advisors along the value chain. These ecosystem participants play a key role in building and professionalising the industry as they remain the main point of contact and source of knowledge for new family offices," the report added.

Singapore-based SFOs also grapple with the challenge of evaluating the initial costs and advantages of staffing in-house versus outsourcing specific operations to third-party providers.

"Recruiting staff can be challenging in the current job market, particularly with the updated regulations for the employment of Singaporean tax residents in family offices," Simon & Kucher said.

"Outsourcing can be an attractive option, especially for small family offices," Simon & Kucher added.

The report revealed that most SFOs employ three to five total resources, excluding family members.

Lastly, SFOs also struggle to find a scalable and secure infrastructure.

According to the report, the family office often purchases software and systems "without considering the full scope of their data and infrastructure needs," adding that some opt for a low-cost solution that lacks proper security features.

"Another possibility is that they invest in a system that cannot scale or adjust to their evolving needs. This leads to inefficient setups with effort-intensive manual data management, the proliferation of errors, and various vulnerabilities," the report stated.

"Consequently, there is a greater risk to the family's assets and reputation," Simon & Kucher added.

According to the report, 84% of SFOs in Singapore are looking for secure infrastructure and IT security.

"Spreadsheet-driven manual processes and tasks are error-prone and can result in data leaks. Coupled with increasing cybersecurity threats, family offices need digital solutions which protect their data and minimise the risk of data breaches," the report stated.