Singapore is rapidly emerging as a 'black hole' attracting super-rich individuals from around the world. In particular, it is dominating existing financial hubs like New York and Hong Kong by drawing in immense wealth through the attraction of 'family offices.' Analysis suggests that this goes beyond mere asset attraction, leading to the creation of high-income jobs and innovation in the financial services industry, thereby presenting a new economic growth model.

According to the UK consulting firm Henley & Partners, the number of high-net-worth individuals with financial assets of over $1 million in Singapore surged by a remarkable 62% from 149,600 in 2014 to 242,400 last year. In the same period, New York saw only a 45% increase, and Hong Kong just a 3% increase. London, affected by Brexit, conversely saw a 12% decrease, presenting a stark contrast. These statistics show Singapore's overwhelming lead in the competition to attract wealthy individuals over the past decade.

This rapid increase is thanks to the Singaporean government's proactive strategy to attract family offices. As of the end of last year, the number of family offices in Singapore exceeded 2,000, an explosive increase compared to fewer than 50 in 2018.

A family office is an organization dedicated to managing the assets, investments, taxes, and inheritance of high-net-worth families. According to UBS analysis, family offices in Singapore employ an average of more than 5 people each, and the Singaporean government mandates the employment of at least 2-3 investment professionals to qualify for capital gains tax exemption.

In 2023, the Monetary Authority of Singapore (MAS) significantly revised its family office scheme, specifying the mandatory number of employees per office and setting a minimum monthly salary standard of SGD 3,500 (approximately KRW 3.75 million). Local financial industry sources predict that since the employees are financial professionals, their actual monthly salaries will likely exceed SGD 10,000 (approximately KRW 10.71 million). The number of directly employed personnel by family offices alone has surpassed 10,000, and the employment scale in related industries such as law firms, consulting firms, accounting firms, and financial companies is estimated to reach tens of thousands. This signifies that beyond mere asset attraction, high-value-added job creation is significantly contributing to Singapore's economic vitality.

Singapore's secret to attracting the super-rich lies in its exceptional tax benefits. Inheritance and gift taxes are exempted, and capital gains tax is waived if a certain amount of assets is managed. However, the Singaporean government doesn't just grant tax exemptions; in return, it demands employment, investment, and donations.

Family offices are obligated to invest in various assets within Singapore. They must invest 10% of their total managed assets or SGD 10 million (approximately KRW 10.7 billion), whichever is lower, into Singapore Exchange-listed stocks, REITs, ETFs, as well as unlisted companies and bonds. This creates a virtuous cycle where family office funds flow back into the Singaporean economy.

Furthermore, there are mandatory expenditure requirements based on the size of managed assets. All family offices must submit an annual expense report showing expenditures of over SGD 200,000, the purpose of which is to encourage their spending activities.

The most unique aspect is the mandatory donation requirement. If managed assets are between SGD 50 million and SGD 100 million, an annual donation of SGD 500,000 is required. If assets exceed SGD 100 million, SGD 1 million must be donated to Singaporean charities. This demonstrates Singapore's clever strategy of minimizing taxation while inducing family offices to serve as a key driving force for Singapore's economic development and fulfill their social responsibilities.

Indeed, Indonesian billionaire Low Tuck Kwong donated SGD 127.6 million to local education and healthcare sectors through his family office in 2023, and renowned American financier Ray Dalio also participates in philanthropic activities beyond the regulations, such as sponsoring youth marine education programs.

The attraction of family offices has had a profound impact on Singapore's service industry structure. Law firms and consulting firms that previously primarily served corporate clients are now transforming themselves to attract family office clients.

In recent years, the importance of the trust sector has significantly increased in Singaporean law firms. This is because a considerable number of family offices prefer to entrust and inherit funds through trusts. Legal consulting for the management of assets and companies owned by family offices has also emerged as a major business area for law firms.

Consulting firms are also strengthening their specialized consulting services for the establishment and operation of family offices. In banks, the 'PL (private law)' sector, which advises on various legal issues for family offices, is rapidly growing, and new business models are continuously emerging, including the appearance of independent trust companies specializing in family offices.

Singapore's case demonstrates an innovative approach that encourages real contributions to the national economy. Singapore's strategy of pursuing sustainable growth by providing tax benefits while mandating job creation, domestic investment, and social donations offers important implications for other countries.

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