Family Office in Malaysia: Discover 3 Powerful Reasons Malaysians Must Know Now
The family office sector has grown rapidly, collectively managing around $5.9 trillion in assets in 2023. Especially in the Asia-Pacific region, with a 44% increase between 2017 and 2019, it highlights its appeal among the wealthy. In Malaysia, this is a new industry as we don’t have a regulatory framework in place. The unity government in 2023 is the first to put concrete efforts into concentrating on this globally growing industry. Here are the reasons why we must know about the family office in Malaysia now:
1) Focus of the Malaysian Government
On September 20, 2024, the Malaysian government, under the leadership of Prime Minister Anwar Ibrahim, announced through Finance Minister II, Datuk Seri Amir Hamzah Azizan, a new Family Office incentive scheme within the newly developed Forest City Special Financial Zone. This initiative aims to attract both regional and international family offices by offering substantial tax incentives. The scheme includes a 0% tax rate for Single Family Office Vehicles (SFOV1) for a duration of 20 years under specific conditions related to asset management, local investment, and operational expenditure. This strategy seeks to draw significant foreign and domestic investments and establish Malaysia as a premier destination for global financial services and wealth management.
Key benefits include:
- Zero Percent Tax Rate: A 20-year tax exemption on income from eligible investments.
- Strategic Location: Offices must be established in the Forest City SFZ, benefiting from its infrastructure.
- Asset Management Requirements: A minimum of RM30 million in managed assets.
- Local Investment Incentives: At least 10% of AUM or RM10 million must be invested locally.
- Operational Expenditure Requirements: A minimum annual operational spending of RM500,000 in Malaysia.
For a detailed guide on the incentive scheme and eligibility criteria, visit the Securities Commission Malaysia’s announcement.
All these developments raise an important question: Is there enough talent to manage all this wealth, both present and incoming, and is the Malaysian market ready to handle it? For now, the answer is no.
However, if you are looking for an international family office, we have good news for you. One of Asia’s top family offices has just set up their office in Malaysia. You can find out more by making an appointment with their consultant now
2) Family Office Opportunity Cost
Eduardo Saverin, a co-founder of Facebook, utilised a family office to manage his assets after relocating to Singapore, which according to the New York Post, saved him approximately $288 million in taxes. This strategic financial management exemplifies the substantial benefits that can be realised through the effective use of family offices, not just in tax savings but also in broader wealth preservation and growth strategies.
Kuok Meng Xiong leads K3 Ventures, an investment firm linked to his family office in Singapore. He is the grandson of Robert Kuok, Malaysia’s richest man. K3 Ventures has made strategic investments in major tech companies like ByteDance (parent of TikTok) and Grab, Southeast Asia’s first decacorn valued over $10 billion. This highlights the innovative role family offices play in tech investments and growth strategies. Malaysia misses out on such opportunities due to the lack of a robust family office sector and dedicated regulatory framework for family office in Malaysia. For more details, refer to the original article on The Ken: The Tech-First Future of SE Asia’s Family Offices.
Another example is Joseph Tsai Co-Founder of Alibaba Group, Tsai’s family office purchased the Brooklyn Nets of the NBA for $3.5 billion in 2019. By 2024, the value of the investment has increased to $3.85 billion. This represents a $350 million increase in just five years, showcasing a successful example of strategic investment management by a family office if you are considering similar strategic financial management, you might find it beneficial to explore how to set up an offshore trust in Malaysia
3) Asia’s Wealth Landscape & Talent Gap
By 2027, there will be roughly 210,000 ultra-high-net-worth-individuals (at least US$30mil or RM141mil worth) in Asia, up by 39.8% from 2022.
| Name | Net Worth (2023) | Description | Country | Industry | Family Office Name | Major Investments | Philanthropic Activities | Year Established | Education | Awards/Recognitions |
|---|---|---|---|---|---|---|---|---|---|---|
| Sergey Brin | $94.5 billion | Co-Founder of Google | Singapore | Technology | Brin Family Office | Real estate, technology startups | Brin Wojcicki Foundation | 2005 | Stanford University | Marconi Prize, National Medal of Technology |
| Mukesh Ambani | $93.4 billion | Indian billionaire businessman | Singapore | Energy, Retail | Reliance Family Office | Oil, telecommunications | Reliance Foundation | 1981 | Institute of Chemical Technology | Business Leader of the Year |
| Liang Xinjun | $4.2 billion | Chinese billionaire, co-founder of Fosun Group | Singapore | Investment | Fosun Family Office | Healthcare, real estate | Fosun Foundation | 1992 | Fudan University | Top 10 Chinese Entrepreneurs |
| Ray Dalio | $19.1 billion | American hedge fund investor | Singapore | Finance | Dalio Family Office | Hedge funds, real estate | Dalio Foundation | 1975 | Harvard Business School | Philanthropist of the Year |
| Jack Ma | $23.2 billion | Founder of Alibaba Group | Hong Kong | Technology, E-commerce | Lakeside Partners | E-commerce, fintech | Jack Ma Foundation | 1999 | Hangzhou Normal University | Asia’s Heroes of Philanthropy |
| Li Ka-shing | $34.6 billion | Hong Kong business magnate | Hong Kong | Conglomerate | Horizon Ventures | Real estate, technology | Li Ka Shing Foundation | 1950 | None | Grand Bauhinia Medal |
| Joseph Tsai | $8.1 billion | Co-Founder of Alibaba Group | Hong Kong | Technology, Investment | Blue Pool Capital | Sports franchises, real estate | Tsai Foundation | 2012 | Yale University | Business Person of the Year |
| James Dyson | $23.0 billion | Founder of Dyson | Singapore | Technology, Consumer Goods | Weybourne Group | Technology, real estate | James Dyson Foundation | 2013 | Royal College of Art | Order of Merit, Royal Designer for Industry |
Wealthy Individuals Who Set Up Family Offices in Asia
Wealthy Malaysians often park their wealth abroad due to the current talent gap in the country, which affects the growth of the family office in Malaysia industry. Family offices require a unique skill set, blending professional expertise with a personal touch, which is uncommon in other workplaces. KPMG’s report notes that within the family office business in Asia, CEOs earn between SG$158,001 and SG$500,000 (RM1.76 million) per year, excluding bonuses.
FIAM is committed to helping Malaysia fill this talent gap by providing training with the help of international family office experts. Sign up for our newsletter to stay informed about upcoming events related to family office in Malaysia, offshore trust, and inheritance
Understanding Family Offices
A family office is a private wealth management advisory firm that serves ultra-high-net-worth investors. Family offices are distinct from traditional wealth management shops in that they offer a total outsourced solution to managing the financial and investment side of an affluent individual or family.
History: The concept began with the Rockefeller family in the late 19th century, who pioneered this approach to consolidate management of the family’s sprawling empire under a single office.
SFO vs. MFO:
Single Family Office (SFO): Manages the wealth and personal affairs of one family. It offers highly personalized services and confidentiality, with strategies tailored to the specific needs of that family.
Multi-Family Office (MFO): Provides similar services but to multiple families. MFOs can offer cost-sharing benefits and access to a wider range of expertise and investment opportunities, making them suitable for families that may not have the resources to run a standalone office.
Both types of family offices provide customized financial care, but the choice between SFO and MFO depends on the family’s size, costs considerations, and desired exclusivity of services.
Key Features and Options for Setting Up a Family Office in Malaysia before budget 2024
The three primary options for setting up a structure similar to a family office in Malaysia currently are:
1. Private Limited Company (Sdn Bhd):
– Governed by the Companies Act 2016.
– Offers limited liability protection.
– Can be managed by family members or appointed professionals.
2. Trust Company:
– Operates under the Trust Companies Act 1949.
– Manages properties and investments on behalf of the family.
– Treated as separate entities for tax purposes.
3. Labuan Entities (Offshore Jurisdiction):
– Labuan Trusts: No need for registration if a Labuan trust company acts as the trustee. Offers a 3% tax on audited net profits. Learn More
– Labuan Foundations: Separate legal entities holding assets for beneficiaries, exempt from tax on investment income from non-trading activities. Learn More
– Labuan Protected Cell Companies (PCC): Segregates assets and liabilities into different cells, providing flexibility and cost efficiency in managing diverse investments. Learn More
Comparison of family office in Malaysia, Hong Kong, and Singapore
Malaysia currently lags behind Singapore and Hong Kong in establishing family offices primarily due to the lack of a specialized regulatory framework and dedicated tax incentives. To enhance the attractiveness and functionality of family offices in Malaysia, the government needs to address the following key issues:
- Complex Regulatory Frameworks
- Shortage of Experienced Professionals
- Smaller Market Size
- Currency Risks
| Feature | Singapore | Hong Kong | Malaysia |
|---|---|---|---|
| Legal Entities | Private Limited Company, Trust, VCC | Limited Liability Company, Trust | Private Limited Company (Sdn Bhd), Trust, Labuan Entities |
| Regulatory Environment | MAS, ACRA | Securities and Futures Commission | Companies Commission of Malaysia, Labuan FSA |
| Tax Incentives | Sections 13D, 13O, 13U | Tax concessions for investment profits | No dedicated tax incentives for family offices |
| Market Growth | Rapid expansion of SFOs; robust framework | Target to attract 200 family offices by 2025 | Emerging market; initial government initiatives |
| Preferred Structures | Holding company overseeing an investment fund and a family office entity | SFO emphasized; Family-owned Investment Holding Vehicles | Various options, including traditional and Labuan structures |
| Licensing Requirements | Licensing exemptions for SFOs; others require license | License required for regulated activities | General business registration, no specific license |
| Investment Vehicles | VCC (Variable Capital Company) | Typically structured around legal entities like LLCs | Sdn Bhd, Trust, Labuan trusts, foundations, and PCCs |
| Global Competitiveness | Leading hub in Asia due to legal and tax frameworks | Competing closely with Singapore for leadership | Striving to enhance competitiveness |
Conclusion
We must understand and prepare ourselves for family offices before the new regulatory framework announcement in the budget this October. As the saying goes, the early bird catches the worm, and opportunities always favor those who are well-prepared. The future of family office in Malaysia looks bright, whether you’re a wealthy investor or someone looking to work in this growing industry
Unlock the potential of your offshore trust and secure your family’s financial legacy with a complimentary 30-minute consultation valued at RM500
Unlock the pathway to securing your family’s financial future with our complimentary consultation on offshore trust planning. As specialists in wealth preservation, we recognize the individuality of each family, confronting distinct challenges and aspirations.
In your complimentary consultation, we’ll explore your specific requirements and objectives, presenting tailored strategies to protect your assets and facilitate a smooth transfer of wealth to future generations through offshore trusts.
Schedule your free consultation today and embark on the journey to safeguarding your family’s inheritance and financial legacy with offshore trusts.
