What inspired you to start Waterfield Advisors?
I have been in the banking and financial services industry for 17 years now. I felt the need to do something different. I had grown in many roles at Standard Chartered Bank and I discovered a gap in the private banking space. There is a conflict of interest when a bank advises ultra-high net worth individuals. The best solution for the client may not be necessarily with the bank. So you needed a firm which could offer expertise in not just in investment management but also in other areas like trust and legacy planning, philanthropy, business advisory, risk management and governance. There was a gap in the market for ultra HNI clients who needed a firm that could address all these different aspects of their business.
Do you see banks getting into this space?
Interestingly, the largest family offices in the world are sponsored by banks. However, in India it is still an area which is developing. So there is a space for banks as well as for boutique firms like us in this space.
The family office concept is relatively new to India. How do you see the opportunity in the family office space?
The opportunity for family office is huge in India because this space has not been very well understood by a lot of families. The family office concept has not been correctly projected by a lot of our competing firms. The family office service providers have been typically offering investment management and legacy planning rather than having a holistic approach to client’ requirements.
How are your services different from your competing firms? Do you see more family offices coming in India?
A family office is an independent company that provides a coordinated set of services for a family - both for the current generation and subsequent generation in the areas of law, taxation, investment management, business advisory, philanthropy, management of closely held businesses and managing lifestyle needs.
So one of the biggest challenges for us is to educate families on what kind of services they should expect from a family office. Even within family offices, you have the concept of single family office and multi-family office. There have been a handful of single family offices in India. For instance, you would have Infosys founders, Aziz Premji, Patni family having set up single family offices.
But the concept of multi-family office is new. The cost associated with single family office can be quite high which makes sense only when you have a certain complexity in your finances/family. But there are some families which are looking for a professional and holistic solution at a lower cost. Multi-family office concept allows you to offer the same level of professional service to a number of families at a low cost.
Interestingly, family offices globally manage over $ 2.5 trillion in assets which is more than what hedge funds manage. It is a little known concept but they do actually manage a fairly large pool of assets. I think that this trend will also pick up in India.
What is the minimum criteria based on which you onboard a client?
We onboard clients who have investible surplus (financial assets) of more than Rs. 50 to Rs. 100 crore and have a certain complexity in their business/family. This complexity can come if you sold a stake in your business and you are looking at continuity in terms of legacy or if you are looking at creating a philanthropic avenue.
What are the needs and aspirations of ultra HNIs?
Most of these ultra HNIs would have sold their businesses and hence are sitting on huge sums of money. They wish to know where to invest this money. Many families invest that money in other startups companies. For most ultra HNIs, capital preservation is the priority. They create a pool of assets which they wish to protect even if the returns are lower.
After capital preservation, the second priority is beating luxury inflation. So ultra HNIs look for investments which can beat luxury inflation.
The third area where we are seeing a lot of interest from ultra HNIs is the ‘aspirational risk pool’ where they are investing in unlisted startup companies. They want to mentor companies which are similar or affiliated to their own business. The investment horizon here can be very long but they can lose all their capital or they can make exponential gains.
In the ultra HNI space, what is very different from your regular HNI clients is this concept of pools which are completely risk based. Regular HNIs tend to focus on asset allocation.
Across all your clients, what would be the rough asset class mix?
It is largely in the fixed income space because traditionally families look at capital preservation first. After fixed income, some portion is in equity and the remaining in the alternate asset space like venture capital, private equity and investments in unlisted companies.
How do you go about acquiring new clients?
Our entire focus in on word of mouth because this is a very niche business. It is also not one of those businesses where you can have too many clients because the engagement with each client is very deep. Our family office director normally cannot manage more than 8 to 10 relationships.
This is the first part of the interview.
