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Can you take us through the concept of family office?
Family office is basically a private office of a family to manage their private wealth. It takes end-to-end care of the family’s wealth, all issues around the management of wealth, how to invest and administer the wealth and how to keep a track of it.
Besides managing the wealth, administration of wealth also becomes critical for the family office as the scale of wealth is so large.
There are several aspects in administration which the family office takes care of:
- Paperwork and documentation for each member and asset class
- Timely deployment of maturity proceeds
- Take note of wealth holders of family and nature of ownership- individual or jointly held assets
- Manage situations like separation of families
- Handle the situation when wealth owner is not around
- Keeping track of performance across opportunities and asset classes
- Ensure succession of wealth and transmission of wealth
- Setting up entity or trust
- Deal with legal issues
- Consolidation of real estate assets
- International investments, and finally
- Taxation
Also, there are two kinds of family offices. First one is a single-family office which is like the private investment office of the family. The minimum requirement for families to be a part of this is Rs 2,000 crore assets and above.
Then there is also a multi-family office where one family office manages multiple families. Here, the portfolio size should be in the range of Rs 100 crore to 2,000 crore.
Why do you see the need for family offices in India?
The rise of generational wealth in families has created the increasing need of family offices in India. Today, the scale of wealth in affluent families has increased so much that it cannot be managed by one individual and one family member is incapable of taking all the decisions on investments. So, to protect the family legacy, wealth and assets have to be institutionalized and family offices are required to do this. This also comes from the fact that individuals are impermanent but an entity or an office is permanent.
What inspired you to float multifamily office services India? How did it all start?
The journey started 22 years ago, when India started opening its economy to the world. In the 1990s, India became a market driven economy which led to economic growth, so more and more Indians were getting richer. We sensed that this rise of wealth will create the issue of management of large-scale wealth, so we came up with the concept of multiple family offices.
In a family office, you are hired by the client, you are accountable and loyal to your client and your interests are completely aligned with the mandate of the client. There is no conflict of interest. It is a one stop solution for families as they get a single office, which would manage everything for them. It also gives an opportunity to us to completely own a client and add value to the client across multiple levers.
What are the advantages of family offices over other wealth managers such as banks, private wealth in terms of winning the trust of clients?
A family office is able to provide holistic advice as they work on the total balance sheet of the client, whereas in the classic wealth model it’s the share of the wallet. You are essentially one amongst several wealth managers the client may be working with and you won’t be able to provide holistic advice even if you wished to because the client wants to distribute the wallet across multiple wealth managers.
What are the challenges in a family office set up?
The only challenge in the family office is to find the right talent to be part of the team. To be part of a family office, one needs to have a mindset of not just managing wealth but also helping in the administration of the wealth. So, it takes time to find someone who can handle both the aspects. We basically look for someone who has a mindset for family office and wants to be in it for the long run.
Wealthy Indians have non-financial needs such as philanthropy, lifestyle 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?
Non-financial needs are taken care of by the family office when clients seek our involvement actively.
In India, philanthropy is an area where a lot of families like to participate. In case the family seeks our assistance, we help them select the right avenues, organizations or if they need some introduction with certain people we help them with it.
Lifestyle is a personal domain so unless and until the client insists on an advice here, we don’t get into it and it is something we believe the client is mature and well informed to take their own calls.
Tax advisory typically in Indian context is that most families have their CA, tax consultants which work with them and we work closely with an already existing team and ensure we get them the best advice.
We also help them to bring in expertise if they need it in certain sectors.
How can an aspiring wealth manager make the transition to a family office set up?
Existing wealth professionals who want to start their family office have to set up a team, bring in the right people to manage the big scale of wealth. There is another option to join a multifamily office and learn the aspects of family office.