What inspired you to float family office set up in India? How did it all start?
Before getting into how I started this business, let me tell you how the family office concept came to India. If you look at all industrial families like Tatas, Birlas and Mittals, the main sources of income were family’s wealth and company’s profits and dividends. There were no segregation between personal wealth and company’s wealth. These families used to appoint a CFO to manage their wealth. However, when these companies got listed or attracted investments from foreign players and PE funds, they were required to follow corporate governance practices, which included segregation of personal wealth and company’s wealth. That is where family office set up came into picture. These families wanted someone to manage their wealth, income tax, estate planning and so on in a professional way.
Now coming back to the question, my grandfather started Patni Computers in 1970s. My father and uncles joined him later. In 2002, a PE investor bought a stake in Patni Computers. My father encouraged me to set up family office to manage the family’s wealth, assets and properties and I floated Raay Global Investments in 2002.
In 2011, when we sold our company entirely, our wealth multiplied by 10 times. Thanks to our family office set up, we managed to deploy such a heavy inflow.
We invested in Waterfield Advisors, a multi-family office set-up, to manage wealth of other ultra HNIs. Currently, Waterfield Advisors manages assets of over Rs.17,000 crore for around 50 families.
Why do you see the need for family offices in India?
A family office set up is a must for families having a net worth of $100 million and above. Typically, most business families are multi-generational; wherein, the first generation starts the business, the second generation builds it up and the third and the fourth generation grows it.
Each family has at least 15 members having their own investible surplus. These members need advice on asset allocation, setting up a trust for estate planning, lifestyle management, tax planning, philanthropy and money for new businesses. A family office set up is ideal to take care of these needs.
What are the advantages of family offices over other wealth managers such as banks, private wealth in terms of winning the trust of clients?
Ultra HNIs approach bank or private wealth to pick best mutual funds or stocks. Most of them invest a portion of their wealth with banks and wealth managers as they largely offer execution services. However, in a family office set up, investors’ needs are unique. For instance, most families usually plan asset allocation strategy at the beginning of the financial year. It includes inflows and outflows of the entire year and decisions like buying a new house or selling stakes in businesses. Private wealth and banks cannot give advice on these aspects.
What are the challenges in family office set up?
There are multiple challenges in a family office set up. First, since the cost of setting up a family office is very high, the size of assets you manage has to justify the cost. Another challenge is to get the right people and retain them for long term. At times, promoters get too involved in the investment decision that it creates a rift between the promoter and CIO of the family office.
Wealthy Indians have non-financial needs such as philanthropy, life style management, tax advising, education, or anything else that the family may need. However, there is little information available on these subjects. In such a scenario, how do you take care of their non-financial needs?
There are couple of service providers who offer advice on lifestyle management such as vacation planning and lifestyle expenses. However, family offices and most ultra HNIs learn about newer investment avenues through events and conferences.
A lot of money is being poured in ecommerce companies by private equity investors. What are your views? What are you recommending clients in the private equity space?
For me, the e-commerce story is over. In fact, the industry has been witnessing consolidation. Today, ultra HNIs are not interested in these companies. However, most ultra HNIs are exploring newer avenues like big data, internet of things, artificial intelligence and fintech space.
Your future plans for Campden Family Connect.
We started Campden Family Connect in 2016 along with UK based Campden Wealth.
Campden Wealth conducts events and conferences for ultra HNIs across Europe, US and Middle East to highlight the importance of family office set up, challenges and opportunities in setting up family offices and so on.
In India, we conduct eight exclusive events a year for ultra HNIs. Here the members can learn, network and share their experiences with different asset classes or businesses. So far, we have received tremendous response. In fact, 60 families are part of the Campden Family. Our members can attend all our events across the globe and get subscription of research reports and our quarterly magazine.
