KUALA LUMPUR: Malaysia presents significant untapped opportunities in the Asean family office space as the country positions itself as a leader in Islamic wealth management and Shariah-compliant financial services.

With its expertise in structuring wealth according to Islamic principles, Malaysia offers ultra-high-net-worth individuals (UHNWIs) a unique advantage in ethical asset management.

Maybank's head of Group Wealth Management, Alice Tan, said that the nation's strength in Islamic finance and commodity financing is increasingly relevant to UHNWIs looking to expand their business footprints in Asean.

"While Singapore is an established wealth management hub due to its political stability and robust legal framework, Malaysia offers unique opportunities for UHNWIs seeking integrated personal and business solutions across Asean," she told Bernama in a recent interview.

Tan explained that Malaysia's lower operational costs and proximity to Singapore also serve as attractive factors for clients seeking affordable access to Singapore's financial services.

"UHNWIs and family offices can easily diversify their investments across both jurisdictions, leveraging each country's strengths," she added.

She noted that establishing family offices in Malaysia can serve as a springboard for business expansion into Asean, with UHNWIs increasingly looking beyond personal wealth management to support their ventures.

She added that family offices in Malaysia can effectively manage personal wealth while addressing business interests in the region.

While discussing Singapore's growth, Tan highlighted that the increasing number of UHNWIs there creates an opportunity for Malaysia to position itself as a complementary hub.

"The Singapore-Malaysia Double Taxation Agreement (DTA) minimises tax uncertainties and clarifies tax liabilities.

"Collaboration with Singapore's family office and wealth management communities will further enhance Malaysia's standing in the region," she said.

Additionally, the recent introduction of tax incentives, like the Single-Family Office (SFO) scheme for the Forest City Special Financial Zone (SFZ), aims to attract both foreign and domestic wealth.

Enhanced collaboration between Malaysia and Singapore could solidify the region's position as a global wealth management hub, added Tan.

Meanwhile, UOB Kay Hian Wealth Advisors' head of investment research, Mohd Sedek Jantan, pointed out that while Malaysia could benefit from spillovers from Singapore, it still lacks a regulatory framework tailored to family offices.

"Establishing such a framework, combined with clear and competitive tax policies, would enhance Malaysia's attractiveness for family offices," he said.

He also emphasised the need to expand Malaysia's financial product offerings, particularly in private equity, private credit, and real estate, to meet UHNWIs' diverse investment needs.

Without these improvements, he said Malaysia risks being overshadowed by Singapore's more sophisticated financial ecosystem.

To attract family offices and UHNWIs, Mohd Sedek also advocates for a multi-faceted strategy focusing on regulatory flexibility, competitive tax incentives, and an open immigration policy appealing to global elites.

Currently, wealth inflows into Singapore and Hong Kong are primarily driven by UHNWIs from China, India, and Southeast Asia.

"Malaysia is well-positioned to capitalise on regional strengths in insurance and investment services as the Asia-Pacific becomes a 'third safe haven' for global portfolio diversification," Mohd Sedek said.

He commended Malaysia's tax incentives for family offices through the Securities Commission Malaysia's SFO scheme, saying that it was a positive step forward.

Mohd Sedek emphasised that to attract family offices, Malaysia should offer targeted tax incentives, similar to Hong Kong's exemptions for compliant family offices.

"However, these incentives must be carefully structured to avoid loopholes that could weaken anti-money laundering enforcement," he said.

Despite having over 1,400 financial planners and 1,500 licensed financial advisers as of end-2023, Malaysia still faces challenges in developing professionals skilled in managing complex wealth structures.

In comparison, Singapore has established itself as a leading global and Asian wealth management hub, with its UHNWIs projected to reach 5,860 by 2026.

As of August 2024, Singapore had already set up 1,650 single-family offices, highlighting its more advanced wealth management ecosystem compared to Malaysia.