Fertile ground

Singapore relies heavily on business from Indonesia and its ASEAN neighbours. It's often the case that it is a difficult and time consuming process to check the legitimacy of the wealth derived from emerging economies. By their nature, wealth derived from infrastructure, heavy industry, large land projects, and government contracts can pose difficult problems for compliance officers. In addition, some of these countries have been categorised as high risk by the OECD because of the prevalence of a bribery culture and the imposition of western standards on countries where certain forms of corruption are merely seen as part of doing business, which will always create difficulties. By and large, Singapore has seen a slow-down both from trust companies and private banks in the on-boarding process, although for those international businesses which have 'group' standards, the impact is less arduous.

Licensing of corporate service providers

Currently the provision of certain basic corporate services does not require a licence in Singapore. However, operating a trust business does. There have been murmurs of late that this creates an imbalanced environment, as well as a rather odd framework for those trust companies that also provide non-regulated corporate service work. It has an impact on the standards for anti-money laundering (AML) and oversight, for example. I wouldn't be surprised to see an overhaul of the licensing of corporate services accordingly. This would of course have a profound effect on the very many small corporate service providers in the Singapore market, and on the costs of doing business.

Legal entrants

There remains heightened interest in law firms seeking to make a presence in Singapore, both on and offshore, with Decherts and Harneys setting up in high profile moves. In truth, one must assume any further entrants will need to do so as defensive measures to prevent an erosion to their client base, as the offshore market is now well served by existing players. The Caribbean, in particular, is a hotbed of competition which is having an effect on pricing.

Meanwhile the trend for Singapore firms is to regionalise by opening offices or forming strategic alliances with regional partners. Firms like RHTLaw, Taylor Wessing, Rajah & Tann and many more, have a large and growing network of alliances in jurisdictions such as Indonesia, Vietnam, Malaysia etc. This is an important step to see off the competition from the large British and US firms but also pays dividends for Singapore as a hub for ASAEN business.

Malaysia recently deregulated its legal services industry and although there is yet to be prominent moves into Malaysia by foreign firms, the door has not been firmly opened to permit that.

Family governance and family offices

This year has seen a distinct increase in the chatter about family governance and family offices, with a number of fiduciary services companies entering into the market, and pitching their specialist services. The family governance talk is mainly led by British law firms, jostling for position. The Singapore branch of STEP has introduced a business families special interest group, and included the STEP certificate in advising business families which is aimed at increasing the knowledge around this topic with family governance principles at its core.

In truth, it appears that there is more talk around this kind of work than the actual work that is being done, as most Asian business owners shy away from the very complex (and expensive) structuring that is being suggested by proponents of family governance. However, for very high-net worth families, this is important work and for those advisers that have a core competence in providing such services, it can be lucrative. As the industry continues to search for ways to add value to the commoditisation of the fiduciary offering, this is an important step.

Family offices are sprouting up at a very fast rate in Asia, outgrowing their counterparts in Europe and the US. For many, they are no more than investment management services, but two types of family offices are developing; those who are from the investment background, and those from a fiduciary background. I am yet to see the complete package and as such, both for advisers and service providers alike, this is fertile ground.

Marcus Hinkley is a group partner and head of the Singapore office for Collas Crill

He writes a regular blog about Asia for Private Client Adviser

Copyright & permissions