Wealth generation and wealth preservation are two separate segments of personal finance with their own sets of challenges. While many may be focusing on wealth generation — ensuring that they are efficiently accumulating assets, wealth preservation is equally important to ensure that the wealth transfers effortlessly, lasting for generations to come.
As families enter the second and third generations, more are aware of the challenges and complexities of wealth, which leads to the need to have a proper structure in place to ensure seamless multigenerational wealth transfer. Affluent families are increasingly recognising the need to have professional and experienced advisers armed with the expertise to provide bespoke wealth preservation and succession planning solutions.
For instance, many have now sought for the family offices to look after their families’ interests to manage their financial and non-financial affairs. This includes family governance, legacy preservation, investment, next generation education and even philanthropy.
In Singapore, the number of single family offices has doubled to 400 as at end-2020 from 2019, according to the Wealth Management Institute. The Single Family office structure offered within the framework of Singapore’s Section 13X/13R tax exemption benefits have gained popularity among Asian families, in terms of the tax certainty which these structures offer.
The optionality of having a separate family office entity with management and control in a tax friendly regime like Singapore, coupled with Singapore’s income tax exemption for specified income derived from designated investments has indeed proven to be an attractive investing vehicle for families who are keen to ensure tax optimisation for their investment returns.
Ensuring effective succession planning
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Traditionally, Asian families avoid discussing succession planning. They might consider it bad luck to think about mortality, preferring to delay difficult conversations regarding their future and estate, says Lee Woon Shiu, DBS Private Bank’s Group Head of Family office, Wealth Planning and Insurance Solutions.
However, to ensure effective succession planning, families will need to ensure that they have developed a cohesive succession plan with their advisers or bankers. “Clients tend to defer difficult discussions on their future, their estate and succession planning, but we emphasise that these conversations should take place sooner rather than later,” says Lee.
While there are various solutions that can be implemented to transfer the assets from one generation to the other, the right solution differs from family to family — there is no one-size fits all approach.
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Once the families are aware of the key considerations and planning tools involved in addressing these needs, pursuing a full-fledged succession plan becomes a natural next step and an option that families may be more inclined to explore.
The transition of social capital
With a strong foothold in Singapore and wider Asia as well as its global reach, DBS Private Bank offers clients international connectivity and expertise to ensure a seamless multigenerational wealth management.
DBS Private Bank also supports wealthy families that want to be a catalyst for positive societal change via venture philanthropy, as the affluent find newer, more collaborative ways to give back to society. This is in contrast to previously, when social capital was commonly deployed via cheque-giving and other philanthropic means.
“In the long run, we can expect social capital to increasingly transition from the passive giving process to more sustainable modes, such as helping beneficiaries to develop skill sets to help themselves and pay it forward,” says Lee.
Actively engaging with the second and third generation of clients, DBS Private Bank creates opportunities for the younger generation of families to engage with the social enterprises supported by DBS Foundation. Its initiatives include providing grants to social enterprises to support them in driving positive societal change, as well as mentorship and partnership opportunities, amongst many others, Lee explains.
“We find that the younger generations not only have aspirations and ambitions, they often also have a vision to do good for society, and that is where we can engage them through these different touchpoints. We’re not just the family’s bankers, but also an institution with a strong social and moral compass. This has actually made a lot of difference for us,” he adds.
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DBS Foundation was established in 2014 to champion and support social entrepreneurship in Asia. Beyond ongoing educational and engagement efforts to introduce clients to what social enterprises do and how they can get involved, DBS has also been working with some clients on a more bespoke basis to see how they can make a greater impact.
Accountable for the long-term
Anchored by the belief that it should be accountable to the clients’ family over the long-term, DBS offers a full array of services and expertise, which includes dedicating itself to its traditional in-bank trustee services. The offering certainly helps DBS Private Bank to provide a more complete service, for both the clients today and the future generations, says Lee.
“Trusts are no longer seen as a planning tool solely for one's demise. These days, clients are engaging advisors to do systematic planning for situations where they or a family member may become incapacitated. This entails conversations around considerations such as planning for in-house caregivers, and specifying limits to which trust funds can be deployed to take care of a permanently incapacitated beneficiary,” he adds.
Wholly-owned by the bank, DBS Trustee Ltd has been providing trustee and fiduciary services in Singapore since 1975. DBS Trustee acts for private family trusts, as well as numerous Real Estate Investment Trusts (REITs) listed on the Singapore Stock Exchange.
Due to the rising interest in cryptocurrencies, DBS Private Bank has also introduced a trust solution for the asset class via DBS Trustee. This enables DBS Private Bank clients to invest, custodise and manage their digital assets in a safe, secure, and structured manner.
The offering is Asia’s first bank-backed trust solution for cryptocurrencies which builds on the DBS Digital Exchange (DDEX). Launched in December 2020, the industry-leading DDEX enables institutional investors and accredited investors to tap into a fully integrated tokenisation, trading and custody ecosystem for digital assets.
Continuing the legacy
As families enter the next generation, it is crucial that they lay out the plans to ensure that a seamless transition can be achieved. Aside from preventing any issues down the road, it is also important to make sure the accumulated wealth can not only be further grown, but also preserved.
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