EY Nandini Navale on Managing a Family Office: Goals, Setup, Cost, Hiring, Operating, Reporting, Record-Keeping & Fraud
Introduction – Family offices manage assets of the wealthiest people in the world. In 2022, there are around 2,600+ billionaires, 220,000+ (Capgemini) / 392,000+ (Altrata ~ formerly Wealth-X) UHNWs and 20,000+ family offices worldwide. Billionaires and UHNWs setup family offices, with assets ranging from $300 million to $3 billion, and some with more than $10 billion assets. Newer family offices are also setting up family offices with $20 million to $100 million.
Exclusive Interview – We speak to Nandini Navale, EY Partner of Wealth & Asset Management based in Singapore, on setting up & managing a family office, key issues in family offices including tax, regulation, fraud, outsourcing of family office operations, and talent shortage of family office professionals. Nandini Navale is EY Partner of Wealth & Asset Management, and as a fund’s services expert, advises fund managers and family offices on fund formation, structure and operations. She advises family offices with setup, and manages their operations (executing the blueprint of bespoke entity structures; implementing legal, tax, succession, governance and legacy planning advice; secures assets & investments, timely reporting and compliance). EY provides consulting, assurance, tax and transaction services. EY exists to build a better working world, helping to create long-term value for clients, people and society and build trust in the capital markets.
” Primary driver for families tends to be net return, hence a detailed cost benefit analysis … … is crucial consideration of longer-term benefits such as wealth preservation, investment opportunities and succession planning equally vital “
Nandini Navale, EY Partner of Wealth & Asset Management
Based in Singapore, Nandini Navale joins the EY organization as a Partner with the financial services practice at Ernst & Young Solutions LLP. She focuses on EY’s wealth and asset management clients, i.e. venture capital, private equity funds and family offices. As a fund’s services expert, her mainstay is advising fund managers and family offices on fund formation, structure and operations. She assists with fund management licenses and grants from the MAS, and regulatory compliance. Leveraging on her broad industry experience as a counsel and compliance officer with added responsibility of operations with a Singapore-based PE fund, she has been instrumental in guiding fund managers through the life cycle of funds (concept, launch, exit, distributions, de-registration). Additionally, she advices family offices with set up, manages their operations (executing the blueprint of bespoke entity structures; implementing legal, tax, succession, governance and legacy planning advice; secures assets & investments, timely reporting and compliance). EY provides consulting, assurance, tax and transaction services. EY exists to build a better working world, helping to create long-term value for clients, people and society and build trust in the capital markets. Enabled by data and technology, diverse EY teams in over 150 countries provide trust through assurance and help clients grow, transform and operate.
Key Highlights (See below for Interview)
On Setting Up Family Office
- Family Office vs Private Investment Company vs Investment Holding Company – Family office, a private investment company and an investment holding company are all entities set up with different objectives
- Family office – Typically a corporate structure established to manage the financial affairs and assets of a wealthy family or multiple families. The primary objective is to preserve, grow and transfer wealth across generations in a systemic manner.
- Private Investment Company – Entity that pools capital from individuals or investors to make investments and its primary objective is to generate returns by actively managing and growing the invested capital.
- Investment Holding Company – Primarily holds assets or shares in one or multiple companies and it is typically formed to hold a portfolio of investments.
- Why setup family office – Usually driven by a combination of factors, such as asset protection, legacy and succession planning, philanthropy, transparency & stewardship, and governance in managing family businesses, distribution of family wealth, re-domiciliation for lifestyle for the settlor or future generations
- Why setup family office in Singapore – Singapore is an attractive destination for family offices with its well-developed private wealth services and sound financial and economic ecosystem that offer a range of sophisticated investment options to grow and consolidate family wealth
- Cost to setup family office in Singapore – Establishing and maintaining a single-family office (SFO) is an expensive proposition. Monetary Authority of Singapore (MAS) stipulates a minimum fund size of S$10 million (to be increased to S$20 million in 2 years) to qualify for the available tax incentives as an SFO. The SFO must also have at least 2 investment professionals, account for operating expenses, advisor fees, etc.
- Goals of family office – Primary driver for families tends to be net return, hence a detailed cost benefit analysis (cost of hiring investment professionals and support staff, fees to advisors, bankers or trustees, operational cost, etc.) is crucial consideration of longer-term benefits such as wealth preservation, investment opportunities and succession planning equally vital.
” Family office, a private investment company and an investment holding company are all entities set up with different objectives ”
” Singapore is an attractive destination for family offices with its well-developed private wealth services and sound financial and economic ecosystem that offer a range of sophisticated investment options to grow & consolidate family wealth “
On Managing Family Office
- Regulations – Crucial to consider how the family office will meet its regulatory and reporting requirements … … trusts and offshore entities that also need monitoring and are subject to diverse and constantly evolving compliance aspects and regulatory reporting requirements.
- Hiring people – Finding and retaining skilled professionals including investment managers, financial analysts, regulatory, legal and tax experts, and operations personnel is a real challenge … … While outsourcing has some pitfalls, it also ushers massive benefits that allow the family office to direct its focus towards wealth creation, preservation, philanthropy and other core objectives
- Using technology solutions – Technology solutions can streamline and help with crucial aspects, such as records and document management system. Wealth & portfolio management software enables effective portfolio management, performance tracking and consolidated reporting, providing insights into areas and sectors performing well or requiring attention. Use of accounting & ledger tools proves valuable in maintaining accurate financial records in real time. Robust compliance management system assists family offices in adhering to deadlines and regulatory requirements. Prudent for family offices to invest some of their technology dollars in cybersecurity solutions to protect sensitive information effectively.
- EY family office services – We manage fund and family office operations, compliance & reporting, operations streamline, process set up, and strategic initiatives implementation like estate, succession and will planning. We can manage the fund / single family office, acting in consultation and coordination with the family advisors, CEO / investment team.
- Why outsource – Outsourcing would help businesses with cost reduction and access to specialist advisors for specific work streams and technology solutions.
- Fraud – Educating / training family members and other employees to detect fraud, conducting periodic audits and assessments to address organizational and operational risks, especially cyber risks is extremely important. Given the limited pool of people who may have access to sensitive information, a thorough due diligence of employees and vendors is key, and as best practice one must segregate the roles and responsibilities to reduce the chances of centralization of information and collusion.
- Advice for family offices – Best to seek specialist advice to ensure that the foundation and structure is legally sound, tax efficient, family friendly and commercially viable
” Finding and retaining skilled professionals including investment managers, financial analysts, regulatory, legal and tax experts, and operations personnel is a real challenge “
Interview with Nandini Navale, EY Partner of Wealth & Asset Management:
On Setting Up & Managing a Family Office
Family office is hot topic today. Many billionaires & UHNWs are setting up family offices or being advised to setup family offices. (UHNW ~ Ultra high net worth)
1. What differentiates a family office from a private investment company or investment holding company? What factors should HNWIs consider when choosing a family office setup over a PIC (Private Investment Company)?
Nandini: A family office, a private investment company and an investment holding company are all entities set up with different objectives. A family office is typically a corporate structure established to manage the financial affairs and assets of a wealthy family or multiple families. The primary objective is to preserve, grow and transfer wealth across generations in a systemic manner. Family Offices are bespoke, and the blueprint must cater to specific needs and goals of each family.
- Family office is typically a corporate structure established to manage the financial affairs and assets of a wealthy family or multiple families. The primary objective is to preserve, grow and transfer wealth across generations in a systemic manner.
- Private investment company is an entity that pools capital from individuals or investors to make investments and its primary objective is to generate returns by actively managing and growing the invested capital.
- investment holding company primarily holds assets or shares in one or multiple companies and it is typically formed to hold a portfolio of investments.
A private investment company is an entity that pools capital from individuals or investors to make investments and its primary objective is to generate returns by actively managing and growing the invested capital. An investment holding company primarily holds assets or shares in one or multiple companies and it is typically formed to hold a portfolio of investments. Investment holding companies generally provide capital, potentially generate passive income through dividends, interest, or capital appreciation.
” Family office is typically a corporate structure established to manage the financial affairs and assets of a wealthy family or multiple families. The primary objective is to preserve, grow and transfer wealth across generations in a systemic manner … … A private investment company is an entity that pools capital from individuals or investors to make investments and its primary objective is to generate returns “
2. What are the driving forces behind a family office set up?
Nandini: The vision and objective for setting up a family office are usually driven by a combination of factors, such as asset protection, legacy and succession planning, philanthropy, transparency and stewardship and governance in managing family businesses, distribution of family wealth, etc. Re-domiciliation for lifestyle for the settlor or future generations etc. to places like Singapore can also be a driving force.
- Setting up a family office are usually driven by a combination of factors, such as asset protection, legacy and succession planning, philanthropy, transparency and stewardship and governance in managing family businesses, distribution of family wealth, etc.
- Re-domiciliation for lifestyle for the settlor or future generations etc. to places like Singapore can also be a driving force
Singapore is an attractive destination for family offices with its well-developed private wealth services and sound financial and economic ecosystem that offer a range of sophisticated investment options to grow and consolidate family wealth.
” vision and objective for setting up a family office are usually driven by a combination of factors, such as asset protection, legacy and succession planning, philanthropy, transparency and stewardship and governance in managing family businesses, distribution of family wealth “
3. When does it become practically viable to set up a family office?
Nandini: Establishing and maintaining a single-family office (SFO) is an expensive proposition. From a Singapore regulatory perspective, the Monetary Authority of Singapore (MAS) has stipulated a minimum fund size of S$10 million (to be increased to S$20 million in 2 years) to qualify for the available tax incentives as an SFO. The SFO must also have at least 2 investment professionals, account for operating expenses, advisor fees, etc. (MAS ~ Monetary Authority of Singapore is the central bank of Singapore)
- Monetary Authority of Singapore (MAS) stipulates a minimum fund size of S$10 million (to be increased to S$20 million in 2 years) to qualify for the available tax incentives as an SFO (Single family office).
- SFO must also have at least 2 investment professionals, account for operating expenses, advisor fees, etc.
The primary driver for families tends to be net return, hence a detailed cost benefit analysis (cost of hiring investment professionals and support staff, fees to advisors, bankers or trustees, operational cost, etc.) is crucial. But that alone is not sufficient, as the consideration of longer-term benefits such as wealth preservation, investment opportunities and succession planning are equally vital. A fundamental step is to clearly define the objective of establishing the family office, as it will shape the strategic direction for the overall plan, structure, wealth management focus and other key objectives.
” primary driver for families tends to be net return, hence a detailed cost benefit analysis … … onsideration of longer-term benefits such as wealth preservation, investment opportunities and succession planning are equally vital “
On Regulations, Challenges & Technology
4. What are the regulatory obligations of single family offices?
Nandini: It is crucial to consider how the family office will meet its regulatory and reporting requirements. Typically, in a Singapore scenario, annual reporting to the Monetary Authority of Singapore (particularly, if applying for the available tax exemption and tax incentive), ACRA, and IRAS compliances apply. Additionally, depending on the overall family office structure, there are typically trusts and offshore entities that also need monitoring and are subject to diverse and constantly evolving compliance aspects and regulatory reporting requirements.
” crucial to consider how the family office will meet its regulatory and reporting requirements … … trusts and offshore entities that also need monitoring and are subject to diverse and constantly evolving compliance aspects and regulatory reporting requirements “
5. What are some of the operational challenges in managing funds and family offices? Considering these operational challenges, what are the potential benefits that families can derive from outsourcing?
Nandini: Setting up a fund or a family office is complex and can be particularly challenging, time consuming and resource intensive. The growth of the asset and wealth industry in Singapore has outmatched the availability of local talent, leading to a supply-demand crunch. Finding and retaining skilled professionals including investment managers, financial analysts, regulatory, legal and tax experts, and operations personnel is a real challenge. Additional factors are high operating cost (office rental, salaries, administration and advisor fees and other expenses), a restricted domestic market and the challenges of navigating through the ever-increasing complexity and comprehensive regulatory framework in Singapore.
- Setting up a fund or a family office is complex and can be particularly challenging, time consuming and resource intensive.
- Growth of the asset and wealth industry in Singapore has outmatched the availability of local talent, leading to a supply-demand crunch.
- Finding and retaining skilled professionals including investment managers, financial analysts, regulatory, legal and tax experts, and operations personnel is a real challenge.
- Additional factors are high operating cost (office rental, salaries, administration and advisor fees and other expenses), a restricted domestic market and the challenges of navigating through the ever-increasing complexity and comprehensive regulatory framework in Singapore.
While outsourcing has some pitfalls, it also ushers massive benefits that allow the family office to direct its focus towards wealth creation, preservation, philanthropy and other core objectives. It is value driven and offers an objective and independent approach to the operational management of the family office, thus, creating greater competitive advantage, all the while being cost efficient and resource light.
” Finding and retaining skilled professionals including investment managers, financial analysts, regulatory, legal and tax experts, and operations personnel is a real challenge “
6. Are technology useful for managing family offices? How can technology help family offices?
Nandini: Absolutely! Technology solutions can streamline and help with crucial aspects, such as records and document management system. Wealth & portfolio management software enables effective portfolio management, performance tracking and consolidated reporting, providing insights into areas and sectors performing well or requiring attention. Additionally, the use of accounting & ledger tools proves valuable in maintaining accurate financial records in real time.
- Technology solutions can streamline and help with crucial aspects, such as records and document management system.
- Wealth & portfolio management software enables effective portfolio management, performance tracking and consolidated reporting, providing insights into areas and sectors performing well or requiring attention.
- Use of accounting & ledger tools proves valuable in maintaining accurate financial records in real time.
- Robust compliance management system assists family offices in adhering to deadlines and regulatory requirements.
- Prudent for family offices to invest some of their technology dollars in cybersecurity solutions to protect sensitive information effectively.
To ensure compliance and avoid inadvertent regulatory breaches, family offices must stay updated with their obligations. A robust compliance management system assists family offices in adhering to deadlines and regulatory requirements. Furthermore, given the increasing prevalence of cyber threats, it is prudent for family offices to invest some of their technology dollars in cybersecurity solutions to protect sensitive information effectively.
” Wealth and portfolio management software enables effective portfolio management, performance tracking and consolidated reporting, providing insights into areas and sectors performing well or requiring attention “
On EY, Family Office Services, Fraud & Recommendations
7. How can a professional services firm like EY help single family offices & funds?
Nandini: EY’s goal is to provide holistic solutions with an integrated approach across all stages – concept, design, structure, launch and life cycle. EY’s seamless solutions also cover strategy, corporate services, payroll and accounting, tax, audit, regulatory, fund formation, managed services and technology solutions. We also manage fund and family office operations, compliance & reporting, operations streamline, process set up, and strategic initiatives implementation like estate, succession and will planning.
EY’s service is bespoke and tailored to meet the specific needs and vision of each business concept to operationalisation. We can manage the fund / single family office, acting in consultation and coordination with the family advisors, CEO / investment team. Outsourcing would help businesses with cost reduction and access to specialist advisors for specific work streams and technology solutions. Businesses would also be able to enjoy the impartial approach of an experienced team, as well as regulatory independence.
” We can manage the fund / single family office, acting in consultation and coordination with the family advisors, CEO / investment team “
8. What would you recommend to family offices, UHNWIs to effectively mitigate potential fraud or conflict of interest?
Nandini: Educating / training family members and other employees to detect fraud, conducting periodic audits and assessments to address organizational and operational risks, especially cyber risks is extremely important. Given the limited pool of people who may have access to sensitive information, a thorough due diligence of employees and vendors is key, and as best practice one must segregate the roles and responsibilities to reduce the chances of centralization of information and collusion.
” Given the limited pool of people who may have access to sensitive information, a thorough due diligence of employees and vendors is key “
9. Any advice for family offices?
Nandini: Setting up and nurturing a fund or a family office can be complex, and it is best to seek specialist advice to ensure that the foundation and structure is legally sound, tax efficient, family friendly and commercially viable.
The foundation of a successful business originates from a well-constructed road map. While the roadmap serves as a guiding principle for the long-term, there is a need to allow flexibility to meet regulatory changes, industry trends, shifting market conditions, key man risks and staff attrition. A strategic plan coupled with an effective execution strategy, an efficient team and the right partner by your side is certainly the secret sauce for success.
” best to seek specialist advice to ensure that the foundation and structure is legally sound, tax efficient, family friendly and commercially viable “
Thank you Nandini for providing key insights into setting up & managing a family office. Nandini Navale is EY Partner of Wealth & Asset Management, and as a fund’s services expert, advises fund managers and family offices on fund formation, structure and operations. EY provides consulting, assurance, tax and transaction services. EY exists to build a better working world, helping to create long-term value for clients, people and society and build trust in the capital markets.
Nandini Navale, Partner, Wealth & Asset Management, EY
Based in Singapore, Nandini joins the EY organization as a Partner with the financial services practice at Ernst & Young Solutions LLP. She will focus on EY’s wealth and asset management clients, i.e. venture capital, private equity funds and family offices. As a fund’s services expert, her mainstay is advising fund managers and family offices on fund formation, structure and operations. She assists with fund management licenses and grants from the MAS, and regulatory compliance. Leveraging on her broad industry experience as a counsel and compliance officer with added responsibility of operations with a Singapore-based PE fund, she has been instrumental in guiding fund managers through the life cycle of funds (concept, launch, exit, distributions, de-registration). Additionally, she advices family offices with set up, manages their operations (executing the blueprint of bespoke entity structures; implementing legal, tax, succession, governance and legacy planning advice; secures assets & investments, timely reporting and compliance).
About EY
EY exists to build a better working world, helping to create long-term value for clients, people and society and build trust in the capital markets. Enabled by data and technology, diverse EY teams in over 150 countries provide trust through assurance and help clients grow, transform and operate. Working across assurance, consulting, law, strategy, tax and transactions, EY teams ask better questions to find new answers for the complex issues facing our world today.
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