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Tat Capital
Jan 28 2019

What’s Fueling The Growth Of ‘Family Offices’ In India?

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What’s Fueling The Growth Of ‘Family Offices’ In India?
<p><em>Family office is the new rage, as&nbsp;the rise of ultra high net worth families in India has given impetus to its growth!</em></p> <p>As the country continues to grow, the list of India&rsquo;s super-rich is also swelling &mdash; we are going to add more Ambanis, Tatas and Birlas or rather Agarwals (considering the number Agarwals in the Indian entrepreneurial ecosystem) to the list.</p> <p><strong>According to a recently-released Credit Suisse report, India ranks sixth in Ultra High Net Worth Population and the total number of dollar millionaires in India is expected to go past 5.26 lakh by 2023. In fact, in the past year, the Hurun Global Rich List added 31 new Indian billionaires to its list.</strong></p> <p>Due to the rapid growth of family businesses in the country and the rise of new-age entrepreneurs, professionals and CXOs, in all probability, the number is bound to increase. This, in turn, has popularized the concept of family offices (FOs). Two decades ago, India barely had some 10-20 family offices to preserve their wealth, but today the number has gone well over 200.&nbsp;</p> <blockquote> <p>Himanshu Kohli from Client Associates says, &ldquo;This role (of munshiji) has evolved and has become more sophisticated in this organized world and now same munshi-ies are playing the role of private CFOs (chief financial officers) for large wealthy families. With this revival, the whole industry of wealth management, including family office concept is evolving fast in our society.&rdquo;</p> </blockquote> <p><strong>What&rsquo;s intensifying the Rise of Family Offices?</strong></p> <p>From existing businesses to the next generation entrepreneurs, FOs in India are gaining popularity for multifarious reasons. Sharing her opinion on what is fueling the growth of FOs, Apurva Damani, managing director &ndash; Artha India Ventures says:&nbsp;</p> <blockquote> <p>&ldquo;With more entrepreneurs generating wealth, and as the median incomes of Indians rise, many families are looking to develop a formal structure and even professionalize their investment vehicles. This is resulting in the growth of FOs as formal institutions.&rdquo;</p> </blockquote> <p>Rajmohan Krishnan, managing director and principal founder, Entrust Family Office feels even the NRIs segment has equal contribution:&nbsp;</p> <blockquote> <p>&ldquo;NextGen promoters along with NRIs returning to India to settle have exposure to these concepts during their stint abroad, all these factors are creating a need for more people wanting to engage and set up family offices.&nbsp;The reason being that there is so much active work-life left in these entrepreneurs and there is an apparent need to set up their own offices to take care of their affairs, while they continue to focus on their core business or pursue their passion,&rdquo; he explains.</p> </blockquote> <p><strong>How Family Offices Differ from Wealth Management Companies?</strong></p> <ul> <li>FOs don&rsquo;t just manage your wealth, but also provide multi-generational wealth management services along with other services like charity, succession planning, etc.</li> <li>FO is a one-stop solution for a multitude of problems that a business can face at any point in time. It will look after the prestige, reputation and governance of your business, even take your legal issues and travel plans in stride.</li> <li>FOs only serve ultra high net worth families.</li> <li>Single-family office is a costly affair and thus, the size of the corpus has to be at least Rs 500 crore. However, wealth management looks at managing amounts upwards of Rs 5 crore corpus and there are many clients in between Rs 5 to 500 crore, who will need wealth management services.</li> </ul> <p>Shantanu Awasthi, head of the family office at Karvy Private Wealth,&nbsp;asserts: &ldquo;Both models will coexist and grow at a very rapid rate as the economic growth continues to be robust. Over a period of time, wealth management firms will reposition themselves into the advisory format. For larger AUMs more and more multi-family offices will emerge within and outside wealth management firms.&quot;</p> <p><u>Source</u>:&nbsp;<a href="" target="_blank">HydNews</a></p>

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