With almost 25 years of tax advisory experience, Teo specialises in fund formation and has structured numerous funds that invest in a diverse range of asset classes, such as hedge, real estate, infrastructure, private equity, venture capital, private debt/credit and digital assets. Besides structuring third-party funds, he is also involved in advising ultra-high net worth (UHNW) individuals in setting up their investment vehicles and management offices in Singapore. Tapping on his expertise in mergers and acquisitions, as well as international tax, Teo has also advised multiple clients in acquiring their investments across the Asia Pacific, Europe and US.
In the last 25 years of your career, what would you say are the key tax considerations relating to fund formation? Any differences depending on the asset classes?
As it is widely believed that a fund is a mere pooling vehicle, any tax should therefore only be levied at the investors’ and at the investments’ level. As a result, in the past, the main tax consideration has always been focused on ensuring that the fund achieves tax neutrality, a concept that is used to describe the non-imposition of taxes on income and gains and withholding taxes on profit repatriation and return of capital. This objective is quite simply achieved through setting up the fund in a jurisdiction with a favourable tax regime or through a tax transparent structure.
However, the key considerations relating to fund formation have evolved tremendously over time. Increasingly, we see added complexities arising from ensuring that the fund structure considers tax implications at the investment level. For instance, if you are setting up an open-ended Pan-Asian real estate fund, the structure must allow the fund to leverage on both treaty benefits and tax-advantaged domestic structures in the target location. These objectives must be balanced with the fund’s marketability, which is also important in determining the fund’s legal form and location.
The level of complexity varies across asset classes. Hedge funds possess relatively flat structures and are generally the least complex while setting up a fund that invests in hard assets such as real estate and infrastructure (including renewables) involves greater rigour. This complexity arises from multiple tax considerations on various levels, as such funds tend to have many layers of structures. Funds focusing on private equity, venture capital and debt possess moderate complexity. Lastly, complications in funds focusing on digital assets largely result from the fact that tax treatment of such assets are relatively untested, and many tax incentive schemes globally typically include only conventional capital market products but not digital assets.
Traditionally, funds are set up in tax-neutral locations such as the Cayman Islands but the fund management functions are often located in a different country such as the US, Singapore, Hong Kong, UK, etc. Are you seeing the onshoring of funds in Singapore and Hong Kong as an increasing trend and if yes, what are the possible reasons?
Such a trend has been observed in recent years and can be attributed particularly to changing policies, perceived risks and innovation in fund structures.
Setting up and maintaining funds in traditional tax haven countries such as Cayman Islands have become significantly costlier due to increased regulations. On the contrary, it is becoming more cost-competitive to set up funds in countries such as Singapore, especially because of government-issued grants to enhance attractiveness.
Furthermore, many institutional investors such as sovereign wealth funds and pension funds are moving away from such a structure because of the potential reputational risks. Certain family offices and UHNW investors are also moving away from such structures, fearing that association with such structures would result in them being targets of tax audits.
From a tax perspective, particularly for the purposes of accessing treaty benefits, if the fund and the holding company are set up in the same country, this could arguably reduce the risks of being accused of treaty shopping. For instance, many Asian-focused funds are set up as Singapore limited partnerships (LP) with wholly-owned subsidiaries in Singapore.
Another contributor is arguably the development of new fund structures offering fund managers and investors more flexibility than before and catering to the various needs of each segment. For example, Singapore fund managers may set up their fund vehicle in the form of a Variable Capital Company (VCC), LP or unit trust.
Could you briefly discuss the key benefits of domiciling funds in Singapore?
Singapore is a leading financial services hub and is regarded as being transparent, stable and a gateway to the Asia-Pacific region. It is renowned for having an open and well-regulated economy that is well-served by a vibrant ecosystem of service providers such as banks, tax and legal advisers.
Singapore is a leading financial services hub and is regarded as being transparent, stable and a gateway to the Asia-Pacific region. It is renowned for having an open and well-regulated economy that is well-served by a vibrant ecosystem of service providers such as banks, tax and legal advisers.
Using Singapore entities within a fund structure is ideal for several reasons. Singapore has a wide network of over 90 double taxation agreements and a flat corporate income tax rate of 17%. It has a measured approach to regulation with agencies such as the Monetary Authority of Singapore (MAS) and the Economic Development Board adopting pro-business policies.
Singapore is also a common law jurisdiction and offers a variety of legal entities and arrangements, such as companies (private limited and VCC), trusts or partnerships. To offer a conducive operating environment to the asset management industry, tax incentive schemes are also available for qualifying funds and asset managers.
What about those who want to set up a fund management company in Singapore? What do they need to consider?
First, the fund manager should consider whether the fund management company (FMC) is required to obtain a licence from the MAS to conduct regulated fund management activities in Singapore. There are two self-invoking licence exemptions whereby the FMC either manages a fund that invests solely in immovable assets, such as real estate and infrastructure funds; or provides fund management services to related corporations, such as members of the same group of companies. The second exemption is typically utilised by single-family offices (SFOs). If the requirements for exemption are not met, the FMC would have to apply for a licence with the MAS. They may apply for a Capital Market Services licence, where one key feature is the unlimited assets under management (AUM) (typically for mutual fund/hedge fund managers) or register with the MAS as a Registered Fund Management Company (typically for those who manage smaller funds).
Next, Singapore offers tax incentives such as the Section 13U (Enhanced-Tier Fund Tax Incentive Scheme) and Section 13O (Singapore Resident Fund Scheme) schemes, which provide for tax exemptions on certain income or gains derived by the funds. One key condition of note is that the fund must be managed by a licensed (or exempted) fund manager in Singapore.
Furthermore, FMCs may be eligible for a concessionary tax rate of 10% under the Financial Sector Incentive–Fund Management (FSI-FM) scheme. This is for fund management companies which manage only incentivised funds and commit to, amongst other things, growing their businesses (such as through AUM or headcount) in Singapore over a specified period.
Are there any specific rules governing the taxation of carried interest in Singapore?
No. In the absence of any deeming provisions in Singapore, the tax treatment of carried interest would prima facie follow its legal form. For funds managed in Singapore, it is common for carried interest to be structured as investment returns and paid out as dividends or partnership distributions if the carried interest recipients have invested a meaningful amount of capital to show alignment of interest with investors. Whilst less common, carried interest is sometimes structured as a performance fee payable to the FMC.
In what way is Singapore a favourable location for setting up a family office and what are the types of structures available?
Apart from the key benefits mentioned above, Singapore operates in a time zone which allows for greater convenience and ease of communication when servicing clients in Asia. The multi-racial make-up also brings multilingual capabilities. Singapore has a good reputation and infrastructure with an unbiased, fair court and legal system, a strong regulatory framework and a stable political environment.
The structures typically used by Singapore SFOs include private limited companies, VCCs and/or trusts. These allow flexibility and enable effortless assimilation into various categories of wealth planning structures.
What about someone who desires to set up a multi-family office (MFO) in Singapore? How is it different from setting up an SFO in Singapore?
One key difference lies in the licensing requirements. MFOs require an MAS licence to conduct fund management activities, while SFOs typically qualify for licensing exemption. A huge limiting factor for time-sensitive investments by MFOs lies with the approval process of the licence, which may take up to 9 months.
Furthermore, FMCs may qualify for the FSI-FM scheme, subject to conditions met. The intention of this is to incentivise fund managers to grow their AUM/fund management activities in Singapore. This scheme is more targeted towards MFOs since SFOs’ main objective is generally to grow and preserve family wealth. However, the MAS is prepared to approve FSI-FM applications made by SFOs on a case-by-case basis and if conditions are met.
Tell us about Nexia TS and your mission. What sets you apart from other advisories?
Today, Nexia TS is among the top 10 accounting and advisory firms in Singapore and we have a strong presence in other countries across the region, including China, Myanmar and Malaysia.
Being an independent member firm of Nexia International, we are affiliated with accounting firms in many parts of the world. This means that our clients get to enjoy personalised, comprehensive and good services at competitive rates in Singapore and globally. Our desire for quality has been recognised by clients and the accounting profession.
Here at Nexia TS, we listen to our clients, we think on their behalf and we help guide them on difficult decisions. We help steer companies towards growth.
How has the COVID-19 pandemic affected the M&A sector in Singapore?
Despite the immense challenges brought by the pandemic, the uncertainty has also spurred the M&A market amid a weakened economy. The pandemic has created an entirely new and unchartered paradigm as dealmakers sifted through the slump for opportunities while some companies prefer to best err on the caution to observe the situation before making any moves. The level of disruption currently happening has led to new opportunities for both buyers and sellers. Consolidation might be the best chance for survival particularly because the value of a once stable and well-capitalised company becomes attractive now.
What do you think will be the long-term impact of the pandemic on the M&A sector in Singapore?
Businesses must assess the long-term effect on their competitive landscape instead of a bright spot in the bleak economy. Sectors that were clearly impacted by COVID-19 disruptions are travel, tourism and F&B industries. These were considered as “non-essential” when the Singapore Government declared a two-month circuit-breaker in our fight against the pandemic. As a result of safe management measures, most businesses were forced to pivot. Therefore, the consolidation of these companies, or in particular some sectors, will be expected.
What would you say are the typical financial risks associated with a merger or acquisition in the current environment?
In accordance with specific investment needs and acquisition criteria of an M&A deal, the ability to manage and facilitate the process in full length must be carefully executed - from target identification, strategy development, conduct of due diligence, execution and closing of the acquisition deal to bring maximum value. The valuation of the deal whereby largely determined by the willingness of the investor to pay and cash flow play an important part in the decision-making process.
What are the particular challenges of assisting clients with planning their M&A strategy, considering the ever-changing nature of the sector?
Assisting clients with M&A is like fitting a saddle correctly in terms of meeting their expectations, which are sometimes difficult to meet, especially if both parties have different needs and goals. As an M&A adviser, finding the right buyer is key when selling a company to ensure that the business value is optimised for our clients. On top of analysing the market and ascertaining the appropriate valuation metrics, negotiating the terms of the transactions are crucial to building sustainable long-term value for the shareholders.
The COVID-19 virus is a global pandemic. With countries worldwide reporting cases, it is no wonder that it has greatly affected economies on a huge scale and reach. With more and more people confined in their homes, investors are now scrambling to come up with contingency plans to make sure their assets remain safe from it all. Of all the industries, the real estate sector seems to be the most affected. Hotels, restaurants, and retail stores are now empty.
Effect on Commercial Real Estate
In Asia, particularly in the hardest-hit areas, retailers are closing up shop. Retailers are being forced to send their workers home and stop operations. Restaurants, in the absence of customers, are left with no choice but to offer door-to-door deliveries or close as well. With travel bans in place, the usual busy areas of tourist spots are now deserted. With no sales, companies are forced to hold their wages and figure out how they will cover their monthly rent payments.
Rent Relief
Many businesses are now asking their real estate brokers like the Jeff Tabor group to negotiate rent relief and other forms of support to keep their businesses afloat. In Singapore, their restaurant association already requested shopping mall landlords to cut rents by at least 50% for the next three months. Some retailers have already granted relief measures including marketing assistance programs, flexible rental payments, and a rental rebate.
Effect on Residential Real Estate
Many think that the impact of the coronavirus should not extend to residential real estate. However, the effects are now felt within the residential sector as a number of home buyers are skeptical over fears of uncertainty - which is an expected outcome whenever something unusual happens in the markets. Fears about the virus caused the stock market to drop by over 1,000 points.
Real estate agents, however, believe that this is a good time to list their properties on the market. Uncertainty can sometimes equate to opportunity. Those who already have existing mortgages can negotiate to get the best deals possible. Based on the data provided by Black Knight, as many as 11 million homeowners can move to save more money through refinancing.
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Preparing for the Worst
Some of the malls in Singapore are slowly opening up shops despite the few numbers of buyers trickling in. Many believe that they have better chances of recouping what they have lost by continuing to operate. Nevertheless, they are still wary and are constantly finding ways just to break even and still provide goods and services. Restaurants are now offering food deliveries to doctors and nurses. Some of them are opening only when healthcare workers need to go out, take a break, and eat out. Right now, it is a give-and-take scenario.
The Bottom Line
Uncertainties can happen in the market. As we are experiencing, one crucial factor can affect the economy on a grand scale. In this case, the coronavirus or the COVID-19. With no known cure yet, real estate investors, home buyers and sellers have nothing to do but wait and see what comes of the virus and the real estate industry. For now, people should expect the worst and pray that their assets don’t turn into liabilities. COVID-19 could very well be the next Great Recession that we should brace for.
In this article, we provide some tips that could help improve your credit score, allowing you to easily qualify for a car loan or personal loan. So, without wasting any time, let's look at some tips on how you can improve your credit score.
Rectify the mistakes from your credit report
There is no doubt that sometimes incorrect information does severe damage to your credit score. So, you must carefully check your credit report to see if there are any mistakes in it. We recommend checking the report at least once a year because your credit score is profoundly affected by the information found on your credit report. Make sure that you get these problems resolved promptly; otherwise your credit score will be severely affected by these errors.
You may consult your national credit bureau, like the Credit Bureau Singapore (CBS), if you want to report the accuracy of any item of information like overdue balances, previous inquiries, and account status. The credit bureau will highlight in your report that the following information is under investigation.
Pay bills on time
A missed credit card bill payment is a dangerous element that damages your credit score in the long run. It will take a lot of time to improve your credit score if there are any missed payments in your report. Banks and other financial institutions will evaluate the risk by carefully analyzing your credit card payments. So, if you want to maintain a high credit rating, you must pay your credit card balances in full every month.
Multiple New Credit Applications Are Also A Threat
The eligibility criteria and requirements are different for every bank. Therefore, we cannot state a particular number of new applications that may harm your credit score. However, your credit score will be severely affected if you've applied for many new credit facilities in a very short period.
Keep Your Credit Active
The lender will also check if you're a responsible user of credit or not. So, if you're not utilizing your credit cards after paying off all your credit card bills, it may have an adverse impact on your credit rating. You must regularly build a history of on-time repayments by using your credit cards after a specific period. The regular use of credit has a significant impact on your reputation.
Keep it Simple
Managing credit is not a problem at all. All you need to do is to keep things simple and smooth. Here are a few habits you must follow in the long run if you want to maintain a good credit score:
- Regularly check your credit report
- Pay all the bills on time
- Stay away from multiple new credit applications
- Keep your credit active
Building your credit health is entirely in your control. So, consistency is key. With the tips below you’ll have no problem pushing your score right back up.
First of all, you need to identify the industry you’d like to start your business in. And then you’d have to conduct proper market research in order to decide whether this idea will bring you fruitful results or not. Moreover, you’d have to talk to a few friends that could help you in pursuing your goals.
Usually, people are afraid of starting a business due to fear of failure. But there is another thing that can become a hurdle, and that’s a lack of money. Some people have enough money in their savings account to fulfill their start-up dream. But many people don’t have enough money to pursue their goals. Fortunately, there are several ways you can fund your start-up.
In this article, we’ll take a look at four of the most useful ways you can fund your start-up. And you won’t have to make any sacrifices if you consider these methods.
Crowdfunding
Start-ups and creative people have been using crowdfunding as a valuable option for years. These individuals don’t waste their time finding angel investors for hundreds of thousands of dollars. They use a creative approach to raise money through smaller contributions from the masses. If you want to launch a product or design without knocking down the doors of venture capitalists, crowdfunding can be the ideal solution for you.
The advantage of using this technique is that it helps in marketing your product way before you officially launch it. You can analyze the feedback and consumer interest to decide if your idea will work in the industry or not. Indiegogo and Kickstarter are the most common crowdfunding websites you can raise funds for your startup business on.
However, you need to understand the terms and conditions of these websites before sharing your idea. For example, Kickstarter only accepts the ideas of individuals that belong to a limited number of countries. Unfortunately, the residents of Singapore cannot avail of this opportunity. However, you can take help from a business partner that belongs to a country that is allowed by Kickstarter.
Grants
Getting a grant can be a great way of funding your business in Singapore. The Singapore government is continuously helping SMEs that are willing to bring change to the industry. The first-time entrepreneurs must consider going for the Spring Singapore ACE grant. For every S$3 raised by the entrepreneur, the Spring Singapore will match S$7 for up to S$50,000. In other words, you’d have to raise around $21,429 if you want to receive the maximum grant of S$50,000.
Spring Singapore will give the grant over 2-3 tranches, and they won’t take equity in your organization. The most remarkable benefit of using this scheme is that it also helps in finding a suitable mentor for your start-up in the first year. Depending on the sector or industry, you can use several other local grants that are particularly designed for start-ups. For clean and high-tech companies, the Spring Singapore offers additional funding schemes while the social enterprises can take advantage of the ComCare enterprise fund.
Grants like these, often offered by governments worldwide, can help in giving a great financial boost to your start-up. However, you must carry out the proper research to find detailed information about any grants available.
Incubators and Accelerators
The chances of obtaining seed funding can be increased if you consider getting into a business incubator or accelerator. The major difference between an incubator and an accelerator is that the incubator starts with organizations that are at an initial level of the development process. On the contrary, the accelerator requires you to work with the mentors for a set period before graduating.
Although there are only a few seed funding programs available nowadays, you can get the targeted resources and support for your startup by joining an incubator or accelerator. The chances of growing a startup business are ultimately increased when you work with successful entrepreneurs.
Loans
If your friends and family members are unable to provide financial help, you could get help from a bank or licensed money lenders to get a loan. A loan can be the right option if you want to retain full control over your company, as it makes you feel free from giving equity to investors.
OCBC has designed a collateral-free loan program that is available for start-ups. The loan is known as the OCBC Business First Loan. It provides you with access to $100,000, and this loan is particularly available for companies that have started around six months ago. The only problem with this loan is that it can only be approved if you have a guarantor. If you have a completely new and untested business model, you must be very careful about taking out this loan.
Similarly, you must think carefully before taking out a loan if you are not expecting revenues in the short to medium term.
Another useful option to fund your startup is taking out a personal loan. Some banks like Standard Chartered CashOne offer a low minimum income requirement with attractive interest rates. Similarly, the ANZ MoneyLine Term Loan comes with the interest rates of as low as 6.6% per year.
Entrepreneurs can now fulfill their start-up dream with the help of these funding options. You should do some research to find out the funding option that will better accommodate your needs. We recommend going for the options that come with lower risks. Thus, you’d be able to focus on the growth of your business thereon.
Following on from the success of our pilot festival in New York last December, DATAx is proud to present the next instalment of our global series of data-driven festivals, DATAx Singapore, offering 4 stages, 50 speakers & 450 Innovators. As one of the leading players in smart city technology, with autonomous vehicles, smart sensor platforms and applications of artificial intelligence (AI), it’s a rarity that the city-estate doesn’t make headlines in technology news regularly.
Global consulting group McKinsey estimates that 70% of businesses are expected to rely on AI to automate functions by 2030, adding $13 trillion growth to the global economy. Contrary to popular belief, the World Economic Forum has stated that the shifting dynamics between machines and humans will add an estimated 133 million new roles to the workforce.
The total impact of AI for business remains a looming question for many companies; DATAx aims to remedy this uncertainty by preparing business leaders to address topics like machine learning, analytics, data talent and big data.
With a worldwide community feeding into the series, DATAx remains dedicated to connecting delegates with the latest research, cutting-edge technology and the hottest startups to share highlights and breakthroughs in artificial intelligence (AI) and data science reshaping the world.
Luke Bilton, Managing Director of Innovation Enterprise, commented: “While AI has now become a real opportunity, it also brings real 'survival of the fittest' challenges – only fast-moving businesses are most likely to succeed.
“DATAx is a new style of event, designed to arm early adopters with the tools they need to move fast. We are excited to welcome the world's most innovative brands and partners to build something unique.”
In less than 2 weeks’ time, over 500 data leaders, from tech giants, financial innovators, emerging startups, government bodies and many more will gather at DATAx Singapore. Confirmed speakers from leading brands include American Express, Citi Bank, Visa, Boston Consultant Group, IBM, Netflix, Oracle, AIA, Axiata, Dyson, Singapore Exchange Limited, Google and many more.
The agenda features 50+ speakers covering Asia's critical data solutions in business practice. Grasp the chance to access to the unparalleled learning opportunities and get the latest AI and Machine Learning applications in Technology, Finance, Marketing, Smart Cities, across 5 stages.
SESSION HIGHLIGHTS INCLUDE
• ‘Omnichannel Personalisation Like You've Never Seen’, Client Team and Global E-commerce/Data Lead, WPP
• 'Leveraging analytics for more efficient media attribution and allocation', Group VP, Head of Analytics, Axiata
• 'Combining human and artificial intelligence: how creatives and data scientists work in concert at Netflix to craft a personalized experience.' Senior Data Scientist, Netflix
• 'Creating a data-driving go-to-market strategy', Head of Applied Data Science, Dyson
• 'Deep learning and computational grapy techniques for derivatives pricing and analytics', Head of Data Science and Visualisation at Singapore Exchanged Limited
• 'Ready or not: does your organization have a sound data strategy to run successful AI projects?', Big Data & Analytics, ASEAN, Oracle
• 'Organizational cultural changes required for success in Artificial Intelligence', CDO, Head of Science, Visa
• 'Machine learning and AI in American Express risk management', VP, Fraud Risk Decision Science, American Express
Don't miss out: Click here to register
Whether you’re looking for a (last-minute) summer holiday destination, a cultural city break or a foodie weekend getaway - Malta has it all! With history that spans 7,000 years, unique prehistoric temples, medieval towns and some of the oldest architectural designs in the world, on top of its breath-taking landscapes and clear blue waters, the small Mediterranean island is richly packed with things to do, see and discover.
The capital Valletta is brimming with grand architecture, hidden restaurants and picturesque back streets, but drive 8 kilometres inland and you’ll find yourself in the chic residential area where Corinthia Palace Hotel is located. Peppered between traditional Maltese houses, the hotel is far removed from the island’s touristy areas, whilst remaining perfectly connected.
The General Vibe
Opened in 1968, the 147-room hotel is the original flagship of Corinthia Hotels – a collection of five-star hotels worldwide. Stepping into the spacious marble foyer, you’re greeted with a glass of fresh orange juice and the instant feel that the staff will do their best to help you with any request. The rooms are traditional, elegant and they all come along with a balcony overlooking the hotel's extensive gardens.
The Restaurants
With three restaurants to choose from – Asian, fine dining or a relaxed al fresco restaurant serving summer favourites, Corinthia Palace Hotel caters to most tastes.
With a menu that is a colourful mix of dishes from Thailand, Japan, Singapore and China, the award-winning Rickshaw restaurant takes you on a gastronomic journey to the Far East. From pork, cabbage and water chestnut gyozas, through to Singaporean frog porridge – the food is exotic, innovative and absolutely mouth-watering.
For an authentic Mediterranean meal cooked with sustainably sourced, local produce, or a quintessentially British afternoon tea, cosy up in the elegant Villa Corinthia restaurant, housed in a stunningly restored century-old villa.
If you’re spending the day lazing around the pool, have lunch in Corinthia Palace’s al fresco venue - the Summer Kitchen. Set within the hotel’s lush gardens and overlooking the pool, the restaurant serves anything from fresh salads, grilled fish and meat, through to scrumptious pasta dishes and pizza cooked in their brand new wood-burning oven.
The Athenaeum Spa
With its stunning outdoor pool that calls for a relaxed afternoon of soaking up the sun with a good book and a cocktail in your hand and a spa that offers everything from a Jacuzzi and a sauna through to a steam garden, Corinthia Palace is the kind of hotel that you’ll probably struggle to leave after breakfast. The extensive list of treatments and procedures at the Athenaeum Spa includes manicure, pedicure, bridal and evening make-up, tanning and ‘healthy glow’ treatments, as well as rejuvenating massages, anti-ageing, body exfoliation and detoxifying body wrap therapies.
And if you get a sudden burst of energy after a day of relaxation or like to start your day with a workout, the gym at Corinthia Palace boasts state-of-the-art cardio equipment, a resistance area and a studio with morning and afternoon classes, including pilates, yoga, and more. Private training sessions and tennis lessons with a qualified coach are available too in the hotel's own tennis court.
Rates at Corinthia Palace Hotel start from €180/night withbreakfast for a double room and from €330/night with breakfast for a suite. For more information, please go to: www.corinthia.com/palace
Despite a well-developed electronic payment infrastructure, cash remains a dominant payment instrument in Singapore with 58.7% of transaction volume made at POS terminals in 2017, according to leading data and analytics company GlobalData.
In addition, more than 75% of transactions made at hawkers and wet markets are carried out in cash. This can be primarily attributed to the limited acceptance of electronic payments among small-sized merchants such as street vendors, food stalls and hawkers due to the high cost associated with POS terminals.
Singapore has for a long time been at the forefront of the payments innovation. Acceleration of electronic payments in the country has been one of the key objectives of the government’s Smart Nation Vision and in this regard, the country has invested substantially in building long-term infrastructure for cashless payments. Overall, the POS terminal penetration (number of POS terminals per thousand inhabitants) in Singapore stands at 35, compared to its Asian peers: Australia (39), Hong Kong (22), Japan (18), China (21), Indonesia (4) and India (2). In Singapore, card-based payments accounted for 32.8% of total payment transaction volume in 2017, increasing from 24% in 2013.
Singapore has a very high concentration of small and medium-sized enterprises (SMEs). According to the Department of Statistics, Singapore, there were 220,100 business enterprises in the country in 2017, with 99% of them being SMEs. To encourage adoption of electronic payments among SMEs in particular, the government along with other payment participants is increasingly considering QR-based payments as a viable alternative for cash.
Kartik Challa, Payments Analyst at GlobalData, comments: “The economic rationale for QR codes is stemmed from the difficulty banks had in persuading smaller merchants to begin accepting payment cards. The QR-code based payment acceptance eliminates the need for a significant expenditure, as merchants can now either display a printed QR code on their stall or download the merchant app on their mobile phones to accept electronic payments.”
In November 2017, the Singapore Payments Council announced the development of a common standard for Singapore Quick Response Code (SG QR) payments, designed to work across all schemes, e-wallets and banks. Unlike the existing NETS QR system, which focuses on domestic market, the new system will accept electronic payments through both domestic and international payments. The SG QR, developed by an industry taskforce co-led by the Monetary Authority of Singapore (MAS) and Infocomm Media Development Authority, will be deployed throughout 2018. Furthermore, as part of the process, the existing NETS QR will also be integrated into the new system and will be replaced with SG QR at all merchant locations.
Singapore's banks have also agreed to update their mobile payment apps/wallets to support SG QR. To expand the scope for SG QR, the Association of Banks in Singapore agreed to bring in banking P2P service –PayNow under the purview of SG QR. All seven participating banks of PayNow service, Citibank Singapore, DBS Bank, HSBC, Maybank, OCBC Bank, Standard Chartered Bank, and United Overseas Bank – enable their customers to transfer funds via SG QR.
Challa concludes: “The SG QR system is an important milestone, and to win over merchants, payment solution providers need to support the large number of e-wallets, offer quick payment settlement process and pricing benefits. Similarly, incentivizing consumers is a key factor to pique consumers’ interest in the new payment system. With the SG QR making a good headway, cash payments in Singapore are likely to soon become passé. Once again Singapore is at the forefront of innovation in payments, and other markets in Asia and globally are likely to follow the suit.”
(Source: GlobalData)
Henny Woon Loong is the Chief Trust Officer for Wealth Planning in DBS Private Banking. He has oversight of all existing trust client relationships, as well as trust policies, documentation, pricing, product development and business acceptance. Henny heads the Wealth Planning team in Singapore, which provides personal trust, estate planning and liquidity planning services to clients of DBS Private Banking and DBS Treasures Private Bank. Here he tells Finance Monthly more about it.
What more can you tell us about DSB Private Banking – what are the company’s history, mission and values?
DBS Private Bank is a unit of DBS Bank, a leading financial services group in Asia, headquartered and listed in Singapore. The bank's capital position, as well as "AA-" and "Aa1" credit ratings, are among the highest in Asia-Pacific. We’ve been named the Safest Bank in Asia for seven consecutive years by Global Finance.
Our deep knowledge of the region, complemented by an extensive Asian network across 18 markets, and an open architecture platform, allow us to offer innovative Asia-centric solutions and services to meet the needs of our clients, both at a personal and corporate level. Our recent acquisition of Société Générale’s and ANZ’s private banking businesses in Asia, has significantly increased the scale of our wealth management business globally and expanded our suite of products and services to better serve our clients’ needs.
In DBS, we take a holistic approach to private banking. Growing our clients’ wealth is important. But so is protecting that wealth when our clients transfer their wealth to the next generation. This is what we call Wealth Planning.
What are the different types of Trusts in Singapore, and how can they be beneficial? What are the best options for protecting assets and wealth from political, social, economic or personal uncertainty? How can tax liabilities in Singapore be planned for and dealt with efficiently to mitigate their impact?
Singapore is a reputable international trust centre. Trust companies here are licensed and supervised by the Monetary Authority of Singapore (“MAS”). The judiciary in Singapore is highly respected and the industry is supported by legal, tax, and financial services firms, both home-grown and international. Our trust law, built on well-established English legal principles, was modernised in 2004. In Singapore, discretionary trusts with investment powers reserved to settlors are very common. These trusts may be revocable or irrevocable, depending on the clients’ objectives.
To provide a conducive environment to foster the growth of wealth management, qualifying trusts administered in Singapore are able to utilise a number of tax incentive schemes. Before these schemes sunset on 31st March 2019, MAS will conduct a review to assess their usefulness and relevance.
What are the typical challenges that clients approach you with in relation to the management of their finance and trust planning? What challenges are often faced where trusts are concerned?
Trusts are a core element of many wealth plans. Families have used trusts for centuries to preserve their wealth and make long-term financial provisions for their heirs. This basic need for succession planning has not gone away, and indeed may be even more critical in today’s dynamic environment.
5 or 10 years ago, perhaps the single biggest concern for many clients about using trusts was the loss of control. What has changed since is a heightened awareness of tax amongst our clients. As you know, the financial world is today characterised by increasing transparency, encapsulated in the now-familiar alphabet soup of FATCA, CRS and AEOI.
What makes DBS Private Banking’s Wealth Planning departments unique?
Wealth planning is more than simply a conversation about trusts. Indeed in some cases, a trust is not necessary or even advisable. It all depends on each client’s circumstances and objectives. To take an example, trusts may not work for some European clients and alternative structures such as insurance may be more appropriate. In DBS, the wealth planners are not the sales force for our trust company; our job is not to sell trusts. We are very clear that our role is to make sure that our clients get the right advice.
So our wealth planners engage our clients on wider issues that may affect intergenerational transfers of wealth. We are working with many clients to set up single family offices, primarily to ensure there is continuing professional management of their investments after their lifetime. We also find an increasing number of clients who want to make charitable and philanthropic objectives as a key family value, maybe even the key family value, that they want to instil in their descendants. Our clients are also keen to address foreign taxes that apply to their overseas investments, as well as family members who move outside their home country. At the end of the day, every client has different needs and objectives.
Website: https://www.dbs.com
Email: hennyliow@dbs.com
Alex Zeeh is the Chief Executive Officer of S.E.A. Asset Management in Singapore and Chairman of the Board of S.E.A. Alex has more than 20 years of industry experience both in investment banking as well as in private banking. He gained his work experience in the USA, Switzerland and Germany before moving to Singapore. Alex and his colleague Gallen Tay (Chief Investment Officer of S.E.A. Asset Management) look after the funds’ investments and monitor its asset allocation.
What are the key sectors that S.E.A Asset Management provides asset management services to? What are the unique challenges of each sector from an asset management perspective?
S.E.A. primarily manages two Luxembourg UCITS compliant SICAV funds besides segregated accounts. Our specialty are Asian small midcap equities as well as Asian short duration high yield bonds. To discover under-researched and overlooked equities that have quality management and strong market positions or niche products is always a challenge. Bonds require even more in-depth research including company visits and thorough scrutiny of financial reports given that many of the issues we look at do not bother to obtain credit ratings and hence often secondary research is not an option. And with Asian credits you need to do a lot of fundamental analysis. That is why our approach to credit selection is fundamentally driven. We buy to hold until maturity so repayment ability at maturity is the top priority. We try to avoid defaults at all costs and have had none so far. However defaults can still happen for reasons beyond our control so we maintain a high level of portfolio diversification to lessen potential impacts and still achieve positive absolute returns on an annualised basis. Investors like alternative investments as they tend to be uncorrelated to more traditional asset classes.
As a thought leader, what strategies do you implement to ensure that your clients’ goals and objectives are achieved?
Clients struggle to protect their capital, let alone get decent returns given low or even negative interest rate environments in many parts of the world. I personally believe that large parts of the world’s economy will continue to linger in a “lower for longer” interest rate environment. Often the low rates have driven them into long-dated investment grade bonds or even high-yield bonds. The risk is now that US interest rates rise and investments in longer dated bonds - including high-yield bonds - will suffer price declines that may not be compensated by coupon payments anymore. The only choice they have is to retreat into short duration bonds that are protected from rate hikes in terms of price volatility. This is where our short duration high-yield strategy comes into play. We target 6-10% net returns p.a. which is achievable less so from credit spread tightening but more from oversold bond price levels and high coupons as well as special situations. With such high absolute return potential we do not add FX risk and always hedge non-USD currencies back into the fund’s reference currency. Underlying fundamentals in Asian economies are also good. Over the past 10 years many Asian economies have seen rating upgrades from the major credit rating agencies and have achieved investment grade while many developed nations have dropped dangerously close to being downgraded to non-investment grade ratings.
What cost improvement initiatives does your company offer and work on with your asset clients?
Regulations and costs involved with implementing them are on the rise not only in Singapore. This impacts us as well in areas such as AML/KYC or outsourcing only to name a few. We are trying to keep compliance costs as low as possible without compromising strength of internal policies and procedures. We do so by outsourcing to highly competent external providers to keep non-core know-how outside of the firm as we want to run a lean cost structure. This is the most efficient way to do what we are best at in-house and keeping costs for clients in check.
What lies on the horizon for S.E.A. Asset Management in 2017?
We are continuing to increase the assets under management from internal sources and seeders to reach a more significant level of at least 50 mln USD on an individual fund level at which smaller institutions, wealth managers and family offices can make allocations when we have our first three years track record completed.
