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Lawyer Vikna Rajah on the rise of family offices in Singapore and how he advises them

A leading legal advisor to family offices and taxation matters, lawyer Vikna Rajah shares some of his most interesting insights in this field.

Vikna Rajah never set out to be a lawyer. One of the leading legal practitioners in trust and private client matters, Vikna actually majored in accountancy in university because he was “always good in numbers”. Then, in his second year, he took a company law module that he found far more engaging. He took as many legal modules as he could and pursued a second degree in law at the University of Bristol after graduation.

As multiple families flock to Singapore to set up family offices – as of October 2020, there are about 200 single-family offices in the city-state managing approximately US$20 billion in assets – Vikna’s expertise in numbers and love for the law is coming in handy.

The 42-year-old lawyer with Rajah and Tann is becoming increasingly sought after for his depth of knowledge of tax and family office matters. The HIIT (high-intensity interval training) enthusiast chats with us about the trends of family offices and some of his most interesting cases.

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Why do you think Singapore is such an attractive location for family offices?

Singapore’s excellent infrastructure, strong rule of law, economic and political stability, sophisticated legal and financial advisors, world class education system and healthcare and a competitive tax regime, are some of the key driving factors why Singapore is an attractive location to set up family offices. The government has also introduced various initiatives to make Singapore a gateway for investors to tap into the region’s growth opportunities.

We have smoothly set up over 30 family offices in the past 2 years, which is a continuation of a trend we have seen over the last 4 years.

Having set up so many family offices, what have been the common problems that you’ve seen regarding generational wealth?

Many families’ key considerations are wealth preservation across generations, business continuity and fair distribution of wealth across inter- and intra-generations.

Problems arise when the patriarch or matriarch does not take the time to plan for the transition early or are unwilling to oversee the handing over of the business during their lifetimes. Another issue is integrating professional management into a family business.

I advise clients on developing succession planning mechanisms, such as setting down perimeters to appoint next-generation directors of their operating company to ensure business sustainability and succession mechanisms to appoint investment managers for their trusts to ensure that their beneficiaries will continue to enjoy distributions from the trust assets even after the passing of the family patriarch or matriarch.

“Problems arise when the patriarch or matriarch does not take the time to plan for the transition early or are unwilling to oversee the handing over of the business during their lifetimes. Another issue is integrating professional management into a family business.”

Lawyer Vikna Rajah on the main challenge he sees when advising his clients

What are the most interesting cases or families you’ve worked on in your career?

Each case is unique and interesting. I have worked with families from all over the world including China, India, US, Korea, Japan, Indonesia, Russia and the UK. Each family has a different culture and dynamic, and it is crucial to understand that in order to create a structure and governance mechanism that truly suits the family.

I once had to help resolve a dispute in a family that I was advising on. There were allegations made against one sibling for placing undue influence on his father to get a distribution from a trust. Thankfully, after speaking to the family members, I could resolve this matter amicably.

The most interesting case I advised on recently was for a supranational organisation establishing a disaster relief trust.

Have you observed a change in the asset classes these families invest in?

I currently observe families predominantly choosing the traditional asset classes such as shares in public-listed companies and bonds. However, with the current high public market valuations, I have seen families increase their exposure to alternative investments including private equity, venture capital and also cryptocurrency and non-fungible tokens. However, the exposure to the latter makes up only a small percentage of their investment portfolio given the high volatility of these instruments.

I also noticed that family offices have increased their investments in private equity through either private equity funds or direct investments with an active management role, including accepting board roles. We have also noticed a trend in the rise of responsible and impact investment, as families increasingly align their investments with their values.

Families of high-net worth individuals have also shown interest in Variable Capital Companies (VCCs) as an investment vehicle to merge, re-position, and manage multiple classes of assets. I foresee that the Monetary Authority of Singapore will probably broaden the scope of the VCC regime to enable single-family offices to manage VCCs in the future.

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