The concept of Family Office, where a private firm advises and manages the personal wealth of rich families, may be new to India. But slowly and steadily, wealthy Indian business families and even rich sportsmen (especially cricketers) and Bollywood billionaires are employing the services of Family Office.

In India, from local firms Kotak Wealth, ASK Group to boutique player Altamount Capital and biggies like Merrill Lynch, Morgan Stanley, Goldman and Barclays are wooing rich families to provide personalised services on their investments (including putting their investments in various asset classes and products in an easy-to-understand format), succession planning, tax & accounting needs, estate planning and to small extent philanthropy and lifestyle management.

Big wealthy families such as Azim Premji (Premji Invest), NR Narayana Murthy (Catamaran) and the Ambani family have their exclusive single-family offices. But leading Indian brokerages, wealth management firms and banks are looking at the second-rung of wealthy business families for family office businesses. These are multi-family office firms designed to cater to multiple clients to provide personalised services for investment, taxation, accounting and lifestyle needs.

Richa Karpe, director of multi-family office firm Altamount Capital, concedes that the concept of family office is not fully understood by Indian families, but as they get exposed to global practices, things might change. The problem, she says, is that many Indian wealth management outfits are just re-branding to tap the family office business.

Rohit Bhuta, CEO of Religare Macquarie Wealth Management, more or less echoes Karpe’s view saying “like the term wealth management, family office as a term has been used very loosely in India.”

Who are the prospective clients for these multifamily office firms? Top 500 business families outside Nifty (top 50 companies) require services of multi-family office or third-party managers in India, reckons Nishant Agarwal, director of ASK Wealth Advisors.

Typically, a multi-family office caters to families with an investible surplus of $30 million (about Rs 150 crore), but in India multi-family offices are even targeting families with $15 million.

According to MarketsandMarkets (M&M), a global market research and consulting company based in the US, various companies have their own qualifying amounts for providing service in India. For instance, DSP Merrill Lynch and Barclays have a minimum cutoff of Rs 100 crore. Is there too many players trying to corner business from a small pie of rich families?

“We believe there is space for everyone,” said Agarwal of ASK. He said ideally one multi-family office should not cater too many clients, as this would affect the quality of service provided.

In a report last March, MarketsandMarkets said the Indian market provides a huge opportunity for family offices in terms of low penetration (20 per cent) of ultra high net worth individuals and also the huge intergenerational transfers of about Rs 5.78 lakh crore ($128 billion) scheduled for the coming decade.

The Kotak group entered the Family Office business after a detailed exercise done through a global consultancy firm in September 2007. The consultancy firm found that Indian families are ready to outsource their financial, tax and accounting practices and succession planning to an outside agency. “We (family office) have become a single-point contact for risk profiling and financial planning for the business families,” said Ashish Khetan, head of family office at Kotak Wealth.

But getting a client to sign up is easier said than done. “It will take 3-4 months to add a client,” informs Karpe of Altamount Capital. “There is a period of courtship before a prospective client signs up a family office. There has to be a meeting of minds, between the families and the family office,” added Khetan.

Hrishikesh Parandekar, CEO of Karvy Private Wealth, said it is a tough and gradual process for Indian multi-family offices to attract clients. “Getting the trust and confidence of the families is an important factor.” And this does not come easily, he admits.

Once a client signs up, firms such as Kotak Wealth hopes that the relationship lasts longer. Otherwise, it indicates either lack of confidence or a drastic drop in their investments, or both.

Altamount’s Karpe explained that many rich Indian business families were not aware of the benefits of a family office. For instance, they are clueless on how their various investments are performing at the end of a month; some wealth managers provide mark-to-market picture, some funds provide returns based on initial investment and others on some other benchmarks.

“We have been able to help families to get their various investments in a single uniform format,” she said. “We provide consolidated robust reporting format,” Karpe said, adding that Altamount is the only Indian member in the prestigious International Family Office Exchange.

Bhuta of Religare Macquarie Wealth has a different point of view. He says, the wealthy Indians are traditionally reluctant to share information on their family wealth with people who are not part of the family or organisation, leading many well known families to prefer their own family office than going to private banks for wealth management service.

“Multi-family offices have not necessarily been successful to date. For multifamily office to run successfully it is important for it to exist as a standalone entity with complete independence. It is critical to ensure that the multifamily office does not have any direct or perceived conflicts of interest (offering of in-house investment products for example),” he said.

rajeshabraham

@mydigitalfc.com