Family Offices in Panama

Panama’s reputation as a paragon of financial stability has prompted renowned family offices to relocate to the country and has also led legal and corporate law firms to offer family office type services. Family offices are on the rise around the globe as they can offer high-net-worth clients a more convenient way of protecting and growing their fortunes. As the financial crisis has brought down the level of trust and confidence in large banks, a gap in the market has appeared which Panama’s financial services sector intends to take full advantage of. Offering the entire spectrum of services, the country’s firms have built up a reputation of personalized assistance and tailored solutions over the years that now allows them to cater for every aspect of a client’s wealth management needs.

Years of Practice

Panama’s growth as an International Financial Center (IFC) has also made it a strong contender in the market for high-end financial services. The country is increasingly being seen as an alternative to traditional family office locations such as Singapore, Luxembourg, Hong Kong, and Switzerland. Although the Panamanian family office sector is still in its infancy, the composite services have been available in the country for much longer. In fact, Panama was an early mover in this segment with many lawyers and accountants acting as trustees or advisers on a wide range of issues and providing services to single and multi-family offices worldwide.

As more and more clients are beginning to appreciate the country’s relationship-driven business culture and service-oriented workforce, Panama’s family office sector is maturing rapidly. Wealth management firms seek to serve their clients more holistically by moving up the value chain and are launching complete family office services. At the same time, increased demand for Panama’s financial products requires better coordination and integration of services, attracting money managers from the world’s banking centers to establish fully-fledged offices in the country.

Key Advantages

Wealth creators and their families, heirs who benefit from old fortunes, as well as newly rich tech and life sciences billionaires and professional athletes, are looking at Panama as a location to manage their assets. They will find service providers who manage everything for them: tax structuring, investment management, estate planning, as well as inheritance and wealth transfer services. Efficient law and accounting firms are providing an array of family office services. One of the key attractions for family office providers is the country’s regulatory framework surrounding the wealth management industry and the smooth licensing process for trustees, foundation administrators, and investment advisors.

Setting up a family office is expensive—it often costs more than US$1 million a year to run a single-family office due to the lack of economies of scale. By locating both the administration and asset management functions in Panama, multi-family offices can share those services and costs among different families, while their advisors benefit from the country’s low administrative costs.

Investment Choices

Globally, the combined wealth of ultra-high-net-worth individuals stands at US$14.7 trillion, with North America having the largest percentage, followed by Asia and Europe. Thus far, most family offices in Panama originate from Latin America and continental Europe; however, several companies are seeking to reach new and profitable markets such as the U.S., Middle East, and Asia. To attract affluent families and their financial officers, Panama offers a full suite of investment vehicles and corporate structures. The country has world-class regulatory frameworks for holding companies, investment funds, trusts, and foundations, constantly developing new solutions that can be used in a family office setting.

For a family foundation, a company can be set up to act exclusively as foundation manager to this particular family foundation, allowing for greater control and confidentiality. These family foundations are also exempt from government authorization since they are structured as foundations, not trusts.

Unfazed by Legislation

Although the financial sector is more complex than ever, family offices based in Panama say they can successfully navigate the new regulatory landscape. New and foreign companies benefit from streamlined licensing procedures, lower regulatory fees, and reduced bureaucracy compared to other international finance centers. Political and financial stability is also critical in attracting business to the country, and Panama’s strengths have been proven in recent years, particularly in how well it weathered the global recession.

Staff recruitment, however, has become a key challenge for firms as competition for talent in Panama’s rapidly expanding financial services industry has intensified. More and more companies are sourcing foreign employees with the required expertise to meet the demand. Though the sector faces these challenges, most companies intend to remain boutique, providing their clients with the personalized service for which they are known, while ensuring the human resources needed to sustain growth.

Sector Growth

It is estimated that there are around 6,000 family offices worldwide, and the number of high-net-worth individuals is expected to grow in the coming years. To remain cost-efficient, a family office must control its operational costs, including staffing, administration, and IT systems. Many family offices are analyzing their cost structures, and Panama—with its lower professional fees and salary levels—expects to welcome more family offices soon.

The country’s role as a reliable outsourcing partner will remain important, supported by a strong infrastructure that includes account managers for daily transactions, portfolio managers for investment decisions, and law firms for legal advice. Most multi-family offices are open to clients with at least US$10 million, while a few hundred million is typically required to operate a single-family office. However, Panama is also attractive to families of moderate wealth, who can access high-end wealth management services or outsource select functions to Panama’s experienced providers.

Location, Legislation & Longevity

As the global financial crisis pushed wealthy clients to seek secure alternatives to traditional banking, Panama’s strategic position, strong legal framework, and appealing tax benefits have made it a top choice. With ultra-high-net-worth individuals increasing globally and a favorable economic outlook, family office services are expected to expand in Panama. Establishing a family office in the country allows direct access to diverse investments while controlling operational costs. Despite challenges and competition from more established markets, Panama continues to gain prominence as a professional and attentive wealth management hub with sustainable growth.