Here is Why Multi-Family Offices Have a Great Opportunity
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Family offices (FOs) as a concept have been part of India’s economic culture for quite some time. However, as a business model, FOs has recently started to pick up in the country.
Having said that not ever Richie rich can go ahead to set up a family office as the corpus amount has to be close to INR 500 crore, which makes it an expensive affair.
While on the other side, according to a recently-released Credit Suisse report, the country 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.
The growing number of millionaires as helped the concept of multi-family office also gain traction in the country. One such multi-family office that is helping entrepreneurs create more wealth is Karvy Private Wealth.
In a conversation with Entrepreneur India, Shantanu Awasthi, Head of Family Office at Karvy Private Wealth shares why the future is bright for family offices.
In the earlier part of this decade, we have witnessed a large amount of merger and acquisition (M&A) activity where promoters were either liquidating entire or partial stakes in their companies/ventures to larger multinational conglomerates.
Awasthi says there were two major reasons behind the increase in the M&A activity – “ first, promoters do not have willing heirs to inherit the business. The next generation is not interested in the operating business. Second, companies have reached saturation in terms of growth with the current infrastructure and need a bigger capital and infrastructure support for growth.”
According to him, this clubbed with the flexibility FOs offers i.e. customisation, cost optimisation and structured approach along with exposure to the western developed markets has led to the growth of the concept in India.
The Growth Trajectory
Considering the fact that setting up a single family office is an expensive affair and wealth management firm look at clients with up to of INR 5 crores corpus, there is a lot of room for multi-family offices to grow.
He says, “Family offices are never going to be a threat to wealth management. 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.”
Nevertheless, we have also seen significant activity in the Robo-advisory segment. And the model, more or less with time, will catch up with FOs’s requirements.
“Robo-advisory in the current format is more focussed on mutual fund investment platforms, which is focussed more towards the mass affluent segment. In the future, Robo-advisory can be used by family offices to create their own asset allocation models,” he commented.
Working with Startups
In the last few years, FOs has also shown a keen interest in the startup ecosystem. Take an example of Burman Family Office (Promoters of Dabur) that have invested in Policy Bazaar, while last year, Ratan Tata invested in Bombay Hemp Company, Upstox or PremjiInvest (Azim Premji’s Family Office) invested in ID Fresh.
He, just every other family office in the country, believes that this trend is here to stay. Awasthi says traditional businesses follow the organic growth model. But the new age businesses have more access to capital and are expanding at an exponential rate inorganically.
“This has brought forward many unicorn success stories in India. The metrics to gauge the growth of business have drastically changed. Though, at the end of the day the business will have to generate profitability which will never go out of fashion,” he shared.