To The Moon

SEP 19, 2023 05:00 PM

THE Covid-19 health crisis is mostly in the rear-view mirror, but the Bank of Singapore’s (BOS) wealth and trust planning business continues to reap a silver lining.

Wealth planning and structuring activity have intensified among BOS’ ultra-high net worth (UHNW) clients, causing a significant uptick in the establishment of trusts.

BOS expects the number of UHNW clients who set up trust structures in Singapore to more than double this year. In the first six months alone, the number of trusts, established through its subsidiary BOS Trustee, has exceeded the whole of 2022.

The average assets under management (AUM) in trusts is also three to four times larger than the average trust’s AUM in 2022.

The value of assets in trusts set up in the last three years alone comprises almost 20 per cent of BOS’ entire trust portfolio.

Paul Chua, BOS global head of wealth planning, said the pandemic raised clients’ awareness of the need to address their estate and succession issues. But travel restrictions delayed planning.

Paul Chua, BOS global head of wealth planning, says planning on succession, estate and trust matters is typically done face to face.

“There was a fair amount of concern among families and, therefore, post pandemic, the activity levels of families dealing with their wealth plans have increased significantly. Planning on succession, estate and trust matters is something which needs to be done face to face.’’

“Typically, it may take up to nine months to conclude planning, and that’s when we saw a real uptick in trust structures to address clients’ concerns.’’

A larger proportion of the trusts is set up by larger UHNW clients. For the trust business, this proportion of UHNW clients has risen by 40 per cent. In BOS’ definition, UHNW clients are those with a net worth of at least US$250 million.

BOS Trustee, established in 1938, is one of Singapore’s oldest trust companies. It was formerly known as OCBC Trustee.

Senior wealth planner Guo Jiawen said: “Clients are triggered to think about their succession and legacy planning, because they’ve seen unexpected deaths happen during the pandemic. We also see a trend that the next generation sometimes initiates or pushes the parents to start planning, because they see potential issues.’’

Typically, clients who decide on a trust are older business owners. But there is also an emerging group of young, wealthy entrepreneurs in their 30s, who may be single or do not have children.

Guo said: “In Asia, we do have a lot of young wealth. Because they may have studied overseas, they are quite exposed to trust structures. And because they come into such great wealth within such a short period of time, many tend to be quite motivated to set up their own trusts.’’

Risk management may be an objective for young entrepreneurs. “Many are serial entrepreneurs. They may be so successful in their first business, and they think – what’s next? If they start another business again, it entails risk and personal guarantees. They want to set aside something as a safe nest egg, protected in case the next venture doesn’t go well.’’

BOS has three main planning hubs in Singapore, Dubai and Hong Kong, with around 11 wealth planners who have law or taxation expertise.

Wealthy clients have gravitated towards Singapore as a trust jurisdiction for a number of reasons, including a well-established legal system based on common law; social and political stability; a reputable regulatory framework; and a competitive tax regime.

A trust structure is a legal arrangement where assets are entrusted by the settlors to the trustees.

In contrast to a will, which takes effect after the lifetime of the testator or the person who made the will, a trust is typically set up, funded and operational during the lifetime of the settlor. The trust proffers estate planning and asset protection benefits, including the avoidance of probate and flexibility for distribution to beneficiaries.