It will be fair comment to say that the Wealth Management industry and Estate Planning in Singapore has grown solidly over the last few years. Singapore has positioned itself as an attractive jurisdiction for wealth management, offering clients from all over the world access to a wide range of global investment opportunities. As a city state, it is today a highly convenient location for people to converge, set up their businesses and engage in business collaborations. Singapore’s infrastructure, highly ranked legal system, its economic and political stability provides the ideal location for a whole host of professionals to offer their services to both domestic and international clients. This augurs well for wealth managers and their intermediaries, corporate and trustee service providers and advisers from the legal, tax and accounting fraternities.
Growth of Wealth and Wealth Transfer
Where are the wealth and growth coming from?
The World’s Billionaires
Wealth today is no longer confined to the royalty, aristocracy and gentry. Bill Gates is now worth USD86 billion (in 2004, his worth ws USD 46.6 billion). Along with other entrepreneurs who have amassed fortunes in rapid time, they are all self-made and did not inherit their money. The US continues to be among the riches in the world with 585 billionaires. The bar for admission is now raised to USD1.55 billion.
2016 was a record year for the wealthiest people on earth, as the number of billionaires jumped 13% to 2,043 from 1,810 in 2015, the very first time that Forbes has pinned down more than 2,000 ten-figure-fortunes. Their total net worth rose by 18% to $7.67 trillion, also a record. The change in the number of billionaires – up 233 since the 2016 list was the biggest in the 31 years that Forbes has been tracking billionaires globally. There were 195 newcomers. Mainland China had the most with 76. The US was second with 25.
HNWIs are defined as those having investable assets of USD1 million or more excluding their primary residence, collectibles, consumables, and consumer durables.
The Asia-Pacific region now leads the world with the largest amount of HNWI wealth. According to the Asia-Pacific Wealth Report of 2016, published by Capgemini, Asia-Pacific HNWI wealth grew 9.9 percent in 2015 to USD17.4 trillion. The HNWI in Asia-Pacific population grew by 9.4 percent to pass 5 million individuals. China and Japan drove more than 90 percent of Asia-Pacific’s HNWI wealth growth.
Wealth in Singapore
According to the same Capgemini report, the HNWI Population in Singapore is 103,000 with assets amounting to USD527 billion. Although the population of HNWIs in Singapore declined by 3.5% in 2015, there have been growth trends over the last few years. As a comparison, the HNWI population in 2009 was 81,600.
Just beneath the HNWI segment, there is largely under-served segment of the population, possibly as many between 300,000 to 500,000 individuals, referred to as “the mass affluent” with investible assets from $300,000 to $1 million. According to one estimate the total assets of this mass affluent segment amount to over USD 400 Billion. Recent research by the Economist Intelligence unit showed that this wealth segment – with households of financial assets between USD100,000 and USD2 million – has expanded faster than any other wealth sector since 2010, including the high net worth segment and mass market. And it is forecast to grow even faster in the next decade.
Global Phenomenon in the Transfer of Wealth
The conditions are therefore ripe to address the succession of wealth as globally, many of the HNWI and mass affluent segments are from the baby boomer generation, now in their 50s and beyond. Commentators often say that we are now experiencing the age of the greatest transfer of wealth! This generation will see the largest transfer of money in the history of the world. According to a study from consulting firm Accenture, baby boomers have started to pass along their life savings to their heirs, and this process will continue over the next few decades. In the US, some USD30 trillion will be transferred from one generation to the next. In another study by the Center on Wealth and Philanthropy (CWP) at Boston College, it estimates that nearly USD60 trillion in US wealth will change hands over the next 55 years. The trust is expected to feature in much of the wealth transfer. Fillings of trust returns in the US are third most frequently filed income tax returns after individual and corporate returns.
It is expected that in Singapore as with the rest of the Asia-Pacific region, there will be a similar pattern of wealth transfer in the next few decades. With Singapore’s position as a wealth management centre there are great opportunities for the trust and related industries to provide services relating to the transfer and succession of multi-generational wealth not only to Singaporeans but clientele from the Asia-Pacific region. These clients will look for professionals to advise them on preservation of their family wealth and legacies. They will have a need for lasting and robust structures for succession of their family businesses and overcome the old adage: “wealth does not pass through three generations”. Asian families will also want to emulate those known old American and European families that have transitioned their family wealth successfully into a new generation each time.