Singapore’s status as a global financial center is firmly supported by its strong banking system. People from all over the world, from Western countries to Asia’s biggest economies, trust Singapore’s financial system for their banking needs. The country’s three major banks—DBS, UOB, and OCBC—are central to this success. Singapore has become a leading destination in Asia for banking, but that’s not all. The country is also a powerhouse in wealth management, a business so significant that it impacts the entire economy of this small island nation.
But just how big is Singapore’s wealth management industry? According to the Monetary Authority of Singapore (MAS), the assets under management (AUM) in 2022 amounted to a staggering 4.9 trillion dollars. Yes, that’s trillion, not billion. This immense figure underscores the scale of the industry and its importance to Singapore’s economy. Understanding this industry is crucial because it positions Singapore not just as a banking hub, but potentially as the world’s go-to place for wealth management. In the future, people from all corners of the globe may come to Singapore not only to bank but also to entrust their money to skilled wealth managers who can help grow it.
To grasp the importance of this, we need to understand what “assets under management” means and what it signifies for Singapore as a wealth manager.
Let’s break it down. Wealth management is simply about managing someone’s money. A wealthy individual, perhaps from Indonesia or Malaysia, might come to Singapore and hand over their money to a financial expert. This expert, who is well-educated and experienced in finance, would then invest that money in various assets like stocks, bonds, real estate, and other opportunities to grow it.
Singapore benefits from this by earning fees and commissions for managing these investments. Wealth management firms usually charge a percentage of the total assets they manage as a fee, and sometimes they earn additional fees based on the performance of the investments. This business model not only brings in substantial revenue for the firms but also strengthens Singapore’s broader financial ecosystem, which includes legal, accounting, and other professional services that support the industry.
So why is Singapore so well-regarded as a global wealth management hub? A survey by the Asian Private Banker in 2018, sponsored by PwC, asked people to name their top choice for offshore wealth management. Major financial cities like Hong Kong, London, Switzerland, Shanghai, and New York were on the list, but Singapore emerged as the most preferred hub. Hong Kong was second, followed by Switzerland, London, and New York.
The survey revealed that the largest source of wealth flowing into Singapore’s wealth management industry comes from Southeast Asia, making up 58% of the total. This is followed by Mainland China and India. High-net-worth individuals (HNWIs) from Southeast Asia particularly favor Singapore as their offshore wealth destination, a preference that has been amplified by Mainland China’s economic rise and the resulting increase in its HNWI population.
Stricter capital controls in Mainland China have driven many of these wealthy individuals to move their assets offshore, and Singapore’s stable regulatory, political, and financial environment makes it an attractive option, especially compared to Hong Kong. This makes Singapore particularly appealing to HNWIs looking for security and stability for their investments.
Further supporting this, a report by Knight Frank noted that Singapore has become more attractive to wealthy investors, especially after the Covid-19 pandemic. Before the pandemic, Singapore wasn’t in the top 10 most connected cities globally in terms of flights and connections. However, by 2022, Singapore had entered this top 10 list, which is crucial for global investors who require easy travel and good visa and citizenship options.
Moreover, the Economic Development Board (EDB) of Singapore, a government agency, highlighted the growing importance of family offices in Singapore. A family office is set up when a wealthy individual wants to use Singapore as a base to invest their money. By the end of 2021, there were about 700 family offices in Singapore. These offices play a significant role in Singapore’s economy by attracting wealthy entrepreneurs and investors, which in turn boosts the local economy through job creation and investments in various sectors. Family offices also contribute to Singapore’s global reputation as a wealth management hub and often engage in philanthropic activities that benefit the local community.
So, why do investors choose Singapore over other financial hubs like Hong Kong or London? The reasons are clear: Singapore has a strong banking sector, an efficient regulatory framework, and a highly skilled workforce. Additionally, the government offers attractive tax incentives, particularly for family offices that contribute to environmental and social causes.
What makes Singapore truly stand out, especially compared to Hong Kong, is its strategic position in Southeast Asia. This region is one of the fastest-growing in the world, both economically and in terms of population. As Southeast Asia continues to develop, it will create more millionaires and billionaires who prefer to manage their wealth close to home, and Singapore is perfectly positioned to meet this demand.
Mainland China is another key factor. As China’s wealthy population grows, many are looking for safer, closer options for managing their wealth. Singapore, with its stability and proximity, is an ideal choice. Other potential players in the region, like Japan and South Korea, are focused on different priorities, while Australia and New Zealand don’t offer the same advantages as Singapore.
India is also emerging as a major source of wealth for Singapore. The country’s growing economy is producing more high-net-worth individuals, many of whom are choosing Singapore as the best place to manage their wealth. In fact, Indian billionaire Mukesh Ambani, Asia’s second wealthiest man in 2022, opened a family office in Singapore.
Lastly, talent is a crucial element in wealth management. Billionaires want the best people to manage their money, and Singapore is already home to some of the most talented professionals in the field, making it an attractive destination for global wealth management.