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Singapore retains distinctive Asian characteristics, so stop saying it’s like Switzerland
Singapore has enjoyed a meteoric rise as a wealth management centre and has been termed ‘the Switzerland of Asia’ in some quarters. While flattering, this downplays the differences between the jurisdictions and overlooks the complementary roles they play.
Singapore has maintained a strong focus on Asian wealth, with all its priorities and considerations, compared with Switzerland’s European focus. Singapore’s zero-tolerance stance on corruption is a big draw in the region. Asia has a growing number of newly rich families but lacks the banking structures to service them, which is where Singapore’s well-rounded system steps in.
Singapore’s key attraction as a clean and safe jurisdiction for Asia’s newly rich to park their cash differs from the three Ss – stability, security and secrecy – that are the traditional hallmarks of the Swiss industry. Wealth management in Singapore did not evolve from banking secrecy. Although Switzerland’s bank secrecy laws have come under threat and fund outflows from the Alpine state have increased, there is little sign this is why Singapore is seeing a rise in fund flows.
Instead, the driving force behind Singapore’s financial sector development has been regulatory agility. For example, it has been tightening up its tax evasion and money laundering rules. The designation of tax offences as money laundering in Singapore kicked in on 1 July, barely 17 months after the Financial Action Task Force (FATF) recommendations. In recent years legislative frameworks relating to trusts, investment advice and securities trading have been fine-tuned in consultation with the industry.
The island republic takes a targeted approach to promoting the growth of wealth managers and private banks as well as encouraging financial innovation. These efforts, together with Singapore’s geographic location at the heart of South East Asia, has helped it become a magnet for wealth managers and private equity groups eager to tap into Asian growth. Asia is the biggest destination for investments from funds handled out of Singapore, accounting for 70 per cent of assets under management.
On the flipside, Singapore’s explosive growth has led to a crowded market for private banks and advisors. Competition for talent coupled with rocketing real estate costs has made Singapore one of the world’s most expensive places to set up a wealth advisory business. Costs are higher and returns lower than in Switzerland.
So, it is questionable whether Singapore’s strengths make it a direct competitor with Switzerland for traditional European clients. Which is not to say its Asian focus has not paid off. Asia, excluding Japan, posted a 13.8 per cent rise in private wealth last year compared with a 5.2 per cent rise in Western Europe and 7.8 per cent in North America.
Singapore may be doing quite well as a financial centre, but it is not like Switzerland. And that is why the comparisons need to stop.