Build vs Buy: CMS License Application vs Partnering with a Licensed Fund Management Company

Table of Contents

• Understanding Fund Management Licensing in Singapore

• Option 1: Applying for Your Own CMS License

• The Application Process

• Regulatory Requirements and Compliance Obligations

• Resource Commitments and Timeline

• Option 2: Partnering with a Licensed Fund Management Company

• Benefits of Leveraging Existing Infrastructure

• Access to Established Expertise and Networks

• Cost-Efficiency and Time-to-Market Advantages

• Comparative Analysis: Build vs Buy Decision Framework

• Strategic Considerations

• Financial Implications

• Operational Flexibility

• Case Study: Successful Partnership Model

• Making the Right Choice for Your Wealth Management Strategy

Build vs Buy: CMS License Application vs Partnering with a Licensed Fund Management Company

For Ultra-High Net Worth Individuals (UHNWIs) and Family Offices seeking to establish or expand their fund management operations in Singapore, a critical strategic decision awaits: should you pursue your own Capital Markets Services (CMS) license from the Monetary Authority of Singapore (MAS), or partner with an established licensed fund management company?

This decision carries significant implications for your investment strategy, operational efficiency, regulatory compliance, and ultimately, the growth and preservation of wealth across generations. Singapore, as Asia's premier financial hub, offers a robust regulatory framework and attractive tax incentives that make it an ideal jurisdiction for wealth management. However, navigating the licensing landscape requires careful consideration of various factors including time-to-market, expertise requirements, compliance obligations, and resource allocation.

In this comprehensive guide, we examine both approaches in detail—highlighting the processes, requirements, advantages, and potential challenges of each path. Whether you're establishing a new family office, expanding your investment capabilities, or restructuring your wealth management approach, understanding these options is essential for making an informed decision aligned with your long-term financial objectives.

Understanding Fund Management Licensing in Singapore

Singapore's fund management regulatory framework, overseen by the Monetary Authority of Singapore (MAS), is designed to maintain the integrity and stability of the financial system while fostering innovation and growth. The framework categorizes fund managers into several tiers, with distinct regulatory requirements for each:

1. Registered Fund Management Companies (RFMCs): Managing assets up to S$250 million with no more than 30 qualified investors

2. Licensed Fund Management Companies (LFMCs), which are further categorized as:

   1. A/I LFMCs: Serving accredited and institutional investors only

   2. Retail LFMCs: Permitted to serve retail investors

The regulatory distinction reflects Singapore's calibrated approach to financial oversight, balancing investor protection with market efficiency. This tiered system allows for proportionate regulation based on the nature of clients and potential systemic impact of the fund management activities.

Each category requires a different Capital Markets Services (CMS) license under the Securities and Futures Act (SFA), with varying capital requirements, compliance obligations, and operational prerequisites. Understanding these distinctions is fundamental to evaluating your optimal path forward.

(Note: There is also the Venture Capital Management Companies (VCFMCs), which is even more restrictive than RFMCs and limited in usage and investment scope, and hence not covered in this article.)

Option 1: Applying for Your Own CMS License

Pursuing your own CMS license grants you direct authorization from MAS to conduct regulated fund management activities in Singapore. This approach provides maximum control and creates a foundation for building a proprietary fund management infrastructure aligned precisely with your investment philosophy and family governance structure.

The Application Process

The journey to obtaining a CMS license involves several distinct phases, each requiring careful preparation and engagement with MAS:

1. Pre-application consultation: Informal discussions with MAS to understand requirements and expectations

2. Preparation of application materials: Developing comprehensive documentation including:

3. Detailed business plan

4. Risk management framework

5. Compliance manual and procedures

6. Anti-money laundering policies

7. Technology risk management framework

8. Formal submission: Filing the application through MAS' MASNet/MAS-Tx digital platform

9. Review and clarification: Addressing MAS queries and providing supplementary information

10. Approval-in-principle: Conditional approval subject to meeting specified operational readiness requirements

11. Operational readiness assessment: Demonstrating implementation of systems, controls, and human resources

12. In-Principle Approval for license issuance: Initial authorization to commence regulated activities and meet the qualifying conditions

13.    License issuance: Final authorization to condut regulated activities

This process typically extends over 9-15 months, depending on the complexity of your proposed operations and the comprehensiveness of your initial submission.

Regulatory Requirements and Compliance Obligations

MAS imposes stringent requirements on CMS license holders to ensure prudent management and regulatory compliance:

Capital Requirements: - Minimum base capital of S$250,000 for A/I LFMCs - Minimum base capital of S$1,000,000 for Retail LFMCs - Risk-based capital requirements calculated as a percentage of assets under management

Human Capital Requirements: - At least two directors with relevant experience - At least two full-time representatives with minimum five years of relevant experience - Designated compliance officer and risk management personnel

Governance and Control Functions: - Independent risk management function - Comprehensive compliance framework - Internal audit arrangements - Independent valuation and custody of assets

Ongoing compliance includes regular reporting to MAS, annual audits, and staying current with regulatory changes—creating substantial administrative overhead.

Resource Commitments and Timeline

Establishing your own licensed fund management operation requires significant resource allocation across multiple dimensions:

Financial Investment: - License application fees - Capital requirements (both base capital and risk-based capital) - Compliance infrastructure costs - Professional services fees (legal, compliance, audit) - Technology systems implementation

Time Horizon: - Pre-application preparation: 1-3 months - Application processing: 6-12 months - Operational readiness implementation: 2-6 months

Human Resources: - Recruitment of qualified professionals - Training and development - Ongoing professional education requirements

These commitments represent not only significant upfront investments but also continuous operational expenditures that must be factored into your strategic planning.

Option 2: Partnering with a Licensed Fund Management Company

Alternatively, partnering with an established licensed fund management company like IWC Management offers an efficient path to achieving your investment objectives while leveraging existing regulatory infrastructure, expertise, and operational capabilities.

Benefits of Leveraging Existing Infrastructure

Partnering with a licensed fund management company provides immediate access to operational infrastructure specifically designed for fund management activities in Singapore:

Regulatory Foundation: - Immediate utilization of partner's existing CMS license - Established compliance framework aligned with MAS requirements - Regular regulatory reporting mechanisms

Operational Systems: - Robust investment management platforms - Portfolio tracking and reporting capabilities - Risk management systems and methodologies - Fund administration and investor relations infrastructure

Structural Options: - Segregated mandate arrangements - Dedicated fund structures - Sub-advisory relationships - Investment platform access

These established systems allow you to focus on investment strategy and wealth preservation rather than operational implementation.

Access to Established Expertise and Networks

A licensed fund management partner brings valuable expertise and connections that can enhance your wealth management outcomes:

Investment Expertise: - Seasoned investment professionals with market insights - Research capabilities across asset classes and geographies - Portfolio construction and risk management expertise

Regulatory Knowledge: - Deep understanding of MAS requirements and expectations - Regulatory change management processes - Compliance best practices implementation

Professional Networks: - Established relationships with service providers - Connections to investment opportunities - Industry intelligence and market access

At IWC Management, our status as a Tech@SG recognised investment firm exemplifies the additional value partnerships can provide—facilitating not just fund management but broader access to Singapore's business ecosystem.

Cost-Efficiency and Time-to-Market Advantages

The partnership approach offers compelling economic and strategic advantages:

Accelerated Implementation: - Immediate regulatory coverage under partner's license - Rapid operationalization of investment strategies - Elimination of lengthy application and setup processes

Cost Optimization: - Shared operational infrastructure costs - Elimination of upfront capital requirements - Reduction in compliance establishment expenses - Variable cost structure aligned with activity levels

Resource Allocation: - Focus internal resources on core competencies - Access to specialized expertise without permanent staffing - Scalable support aligned with portfolio growth

These advantages are particularly valuable for family offices and UHNWIs seeking to establish or expand Singapore operations without the burden of building comprehensive infrastructure from the ground up.

Comparative Analysis: Build vs Buy Decision Framework

Evaluating the optimal approach requires systematic assessment across multiple dimensions, with each family office or UHNWI's circumstances influencing the appropriate choice.

Strategic Considerations

Control vs Collaboration: - Self-licensing provides maximum control over all aspects of operations - Partnership balances control with collaborative expertise and shared infrastructure

Core Focus: - Self-licensing requires significant focus on regulatory and operational matters - Partnership allows greater focus on investment strategy and family governance

Long-term Vision: - Self-licensing may align with building a multi-generational institutional capability - Partnership can provide flexibility as family needs evolve over time

Financial Implications

Initial Investment: - Self-licensing requires substantial upfront capital commitment - Partnership typically involves lower initial investment with ongoing fee structures

Ongoing Costs: - Self-licensing creates fixed operational costs regardless of portfolio size - Partnership often provides more scalable cost structures aligned with AUM

Cost-Benefit Analysis: - For smaller portfolios, partnership typically offers better economic efficiency - As AUM grows, the relative cost advantage of self-licensing may increase

Operational Flexibility

Implementation Timeline: - Self-licensing requires extended implementation period - Partnership enables rapid deployment of investment strategies

Scalability: - Self-licensing creates fixed infrastructure that may be underutilized initially - Partnership provides scalable services that grow with your portfolio

Adaptability: - Self-licensing requires managing regulatory changes directly - Partnership transfers regulatory adaptation responsibility to the partner

Case Study: Successful Partnership Model

The value of the partnership approach is illustrated by the experience of a prominent Asian family office that chose to collaborate with IWC Management rather than pursuing its own CMS license.

Facing time constraints and seeking to capitalize on immediate market opportunities, this family office utilized IWC's regulatory umbrella and operational infrastructure to launch a dedicated investment strategy focused on Asian private equity opportunities.

Key outcomes included:

• Market entry in weeks versus an estimated 9-month timeline for self-licensing

• Deployment of investment capital months earlier than would have been possible independently

• Access to co-investment opportunities through IWC's established network

• Significant cost savings on operational infrastructure

• Beneficial tax treatment under MAS' 13-series tax incentives

Crucially, the family maintained investment decision autonomy while benefiting from IWC's compliance framework and operational support. This balanced approach delivered both strategic control and operational efficiency.

The family's investment portfolio has since grown substantially, while maintaining the partnership structure that continues to provide regulatory coverage, operational support, and access to Singapore's favorable wealth management ecosystem.

Making the Right Choice for Your Wealth Management Strategy

The decision between pursuing your own CMS license and partnering with an established licensed fund management company should align with your specific circumstances, objectives, and resources. Consider these guiding questions:

1. What is your timeline for implementing your fund management strategy in Singapore?

2. How central is fund management to your overall wealth management approach?

3. What internal resources do you have available for regulatory compliance and operations?

4. What scale of assets will you be managing initially and in the medium term?

5. How important is maintaining complete operational control versus leveraging external expertise?

6. What is your appetite for regulatory engagement and compliance management?

For many UHNWIs and family offices, the partnership approach offers a compelling balance of control, efficiency, and expertise—particularly during initial establishment in Singapore. Over time, as operations grow and stabilize, some may choose to transition toward self-licensing, while others find continuing value in the collaborative model.

At IWC Management, our experience serving sophisticated clients through our licensed fund management platform demonstrates that partnerships can deliver not just regulatory efficiency but also enhanced investment outcomes through shared expertise and expanded opportunity access. Our comprehensive portfolio services are specifically designed to provide the flexibility and customization that sophisticated investors require.

Whichever path you choose, Singapore's robust regulatory framework and vibrant financial ecosystem provide an excellent foundation for preserving and growing wealth across generations. The key is making an informed choice aligned with your specific circumstances and long-term objectives.

Conclusion: Strategic Alignment for Long-Term Success

The choice between pursuing your own CMS license and partnering with a licensed fund management company represents a fundamental strategic decision for UHNWIs and family offices establishing or expanding their Singapore presence. While self-licensing offers maximum control and may be appropriate for larger operations with substantial resources and long-term horizons, the partnership approach provides immediate market access, operational efficiency, and expertise leverage that can substantially enhance your wealth management outcomes.

Singapore's position as Asia's premier wealth management hub creates opportunities for both approaches to succeed. The key is aligning your licensing strategy with your broader wealth management objectives, resource availability, and timeline considerations.

For most UHNWIs and family offices, the partnership approach offers the optimal balance of control, efficiency, and expertise—providing a foundation for successful wealth management while eliminating the regulatory and operational burdens of self-licensing. Even for those who ultimately envision establishing their own licensed entity, beginning with a partnership can provide valuable insights into regulatory expectations and operational requirements before undertaking the more substantial commitment of self-licensing.

Regardless of which path you choose, thorough due diligence, careful planning, and alignment with your long-term wealth objectives remain essential for successfully navigating Singapore's fund management landscape and achieving your financial goals.

Ready to explore how a licensed fund management partnership could enhance your wealth management strategy? Contact IWC Management today to discuss how our comprehensive platform can support your investment objectives in Singapore and beyond.

Contact Us

Contact us at info@iwcmgmt.com for more information.