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$125 Billion up for grabs to manage family offices
By siliconindia
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Monday, 14 December 2009, 22:48 IST |
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6,00,000 crore) of wealth will come up for transfer in the next few years, implying a huge business opportunity for companies in multi-office family practice. Kotak Mahindra Bank and J M Financial Services have for long advised business families and managed their wealth, mainly on account of their long-standing relationships with India's leading corporate houses. Karvy Private Wealth and ASK Wealth are the new firms in this line and there are others who want to join in. Among them are Barclays Wealth (part of Barclays Securities India) and Credit Suisse. Both see big potential for this business in India, reports Financial Chronicle.
The Mumbai-based Altmount Capital Management recently launched a multi-family office, claiming to be the first independent and dedicated firm in India to cater to this service. Indian billionaires such as Mukesh Ambani and Azim Premji have their own family office, managed internally.
"The family office is a relatively new phenomenon in India, though several billionaire families have had their own family offices for some time now," said Hrishikesh Parandekar, Chief Executive Officer of Karvy Private Wealth, who undertook the study titled "Are billionaires prepared?"
Jaideep Hansraj, Head of wealth management services at Kotak Mahindra Bank, said that corporate houses in India were warming up to the concept of family offices. "They see tremendous strategic and economic value in funneling the management of family wealth through a structured family office environment," he said.
The concept was born in the U.S. 130 years ago when the Rockefellers put in place a family office structure big success. The idea caught on elsewhere also.
Satya Narayan Bansal, India CEO of Barclays Global, said that family businesses in India were exploring ways to benefit from the global expertise family offices brought in. "In our experience, most family business owners are open to discuss and explore how best we can help them benefit from our global experience in managing requirements of business families overseas," he said.
Karvy's Parandekar said that inter-generational transfers brought with them various issues and challenges unique to each family. The family office structure helped in grooming the second line of leadership, assess different heirs and a possible division and/or liquidation to ensure a fair distribution among heirs.
Puneet Matta, India head of wealth management at Credit Suisse, said Indian wealthy families were getting more sophisticated in their wealth management approach. At one end, there was a need for the best-in-class products and at the other end there was an issue of time and bandwidth to manage and coordinate multiple providers. "There was growing recognition of the need for using family offices to fulfil these requirements," he said.
"In India, people are still not open to sharing information about their wealth. So it requires an independent dedicated multi-office structure," said Richa Karpe, Director of investments at Altamount Capital Management. The firm is already advising eight families and hopes to get the business of 15 more in a year or so.
Vipul Shah, Head of private wealth group at JM Financial Services, said the firm was targeting clients in the bracket of 100 crore to 2,500 crore. "We not only address client needs on personal wealth, trust, taxation, etc, but also help out in their business through our large investment banking franchisee," he said.
Though there is no set fee structure for multi-office practice in India, globally it is about one per cent of assets supervised. In India, it could vary between 50 and 60 basis points, according to industry officials.