KUALA LUMPUR: Malaysia’s generous package of tax incentives designed to woo single-family offices could deliver RM10.7 billion of economic benefits, but incentives alone are insufficient. Malaysia needs to match the incentives with action in three key areas of policy stability, credibility, and ecosystem.
Juwai IQI global wealth office expert Haroon Anwar said, “Malaysia can succeed as an accessible base for smaller and newer family offices, mostly from South Asia and Southeast Asia. This is what you’ll start to see over the next few years: new infrastructure announced to improve connectivity and lifestyle options in Forest City, new banking regulations and tax laws to address the issues of most relevance to family offices, a new visa for expert financial professionals, and ambassadors for Malaysia’s financial system who spread the word about the opportunities offered here.
For those not in finance, SFO stands for single-family office. Family offices are the companies that wealthy families create to manage their money and investments.
Haroon said the reason Malaysia sees an opportunity is that, over the next decade, family offices will go through an unprecedented generational transition. By 2035, 40% of all family offices operating today will have handed their money down from one generation to the next.
“That’s not all. In the next five years, the number of Asian SFOs is expected to surge. Their numbers will climb by 40%, from 2,290 in 2024 to 3,200, and many of them will have just the right level of assets to be attracted to Malaysia,” he added.
The economic benefits of attracting family offices are huge. The RM10.7 billion in additional economic growth will be delivered in part because every family office that sets up in Malaysia will be required to have a local team and spend RM500,000 in the local economy,” he added.
“Malaysia’s value advantage starts with a lower minimum asset standard of RM30 million. While that’s significant, it’s small by global family office standards, he said, adding that the third and probably most important element of Malaysia’s value advantage is the blanket 0% tax rate for up to 20 years, as well as one-off stamp-duty and CGT relief.
He said Malaysia must make improvements in these three key areas if its family office strategy is to succeed.
“First is regulation and policy stability. Because such large sums are at stake, and family offices exist to preserve wealth across generations, we need to provide clear rules on tax and succession. Malaysia must eliminate ambiguity by enacting clear, long-term policies on inheritance, trust structures, jurisdictional matters, and family office taxation,” said Haroon.
To achieve credibility as a hub for family offices, he added Malaysia needs world-class advisers spreading the word and successful case studies to demonstrate what can be achieved here.
“Creating a mature financial ecosystem is the most complex of the three keys to success. An ecosystem is the combination of regulations, lifestyle, financial opportunities, talent, market access, and connectivity. Together, all these factors make it possible to do business at a world-class level.
“The ecosystem in Malaysia needs a ‘Family Office Talent Pass’ to attract global wealth management experts, of which there are too few in the country. We need to deepen capital market products tailored to family offices,” he said.
Haroon believes Malaysia will rapidly deliver on these key areas and successfully compete with the likes of Hong Kong by defining its own niche as the Asian home for small and medium-sized family offices – thus reaping billions of ringgit in economic benefits.