Family office concept takes a foothold in India

Patni's investment in Waterfield Advisors shows the concept catching up in India

Being rich is not always fun, especially if it involves managing the family wealth and spotting the right financial investments. At least, that has been the experience of Amit Patni, one of the promoter-shareholders of information technology (IT) services company Patni Computers. His father Gajendra Patni was the eldest of the three co-founders of Patni Computers, which was acquired by iGate. For him, finding the right advisor to invest and manage wealth was always hard to come by.

"We were approached by several bankers but they were not able to give a consolidated portfolio allocation. We would have liked to have a team that could have built an overall allocation. Also, we found that advisors would come and then vanish for weeks. Then come back again and talk about the products marketed by their institutions. No banker came and advised me that I should get into private equity(PE). I wanted to build something," says Amit Patni.

When he started RAAY Global Investments in 2002, a family office of Amit Patni Group, no proper financial advisory service was available. Last month, he and brother Arihant Patni purchased a minority stake in Waterfield Advisors, a boutique firm that advises India's family offices on succession planning and creating trusts. The firm, founded in 2011 by Soumya Rajan, works with 30 Indian business families.

Family office basically caters to the investment - financial and non-financial - needs of a family and its members.

"Realising the lacuna that the current market has, we created the Patni Family Office almost 10 years ago. I was keen to start a multi-family office setup in India, and was in talks with several family offices in the UK, Switzerland and Hong Kong, when we came across Waterfield Advisors and thought of joining hands," he adds.

Family office is still a nascent concept in India, although it is common in markets such as the UK, the US and Europe.

India has a handful of family offices, including Azim Premji's PremjiInvest, Ajit Khimji's Khimji Family Office, N R Narayana Murthy's Catamaran and the Ambani Family. The investment needs of high net worth individuals (HNIs) and ultra-HNIs are different as they have higher risk-taking capabilities and also prefer custom-made products and services.

According to Patni, the need to have family office for HNIs in India is a must with an increasing trend of companies giving employee stock ownership plans, and entrepreneurs having liquidity events.

"We experienced it ourselves. The advisors or private bankers that approached us do not sit and understand the need of the family. And we faced these problems and we had several advisors coming to us, but rather than understand my need, they pushed what they wanted to," he adds.

According to Rajan, who has worked at both ends - with entrepreneurs wanting to raise funds and entrepreneurs who have made money - the current crop of advisors in the market don't provide solutions but sell products. "Even today, some of the family offices in India have the tendency to align with institutions and push a product from institutions. We will not do that, and we will remain neutral. We will be a pure advisory firm," she says.

Patni says the need to have family office is crucial. "Today in India, all the wealth - in corporate or owned by family - is being managed by corporate treasury. The problem is corporate treasury needs liquid money, as they need capital for expansion purposes. Hence, a family office is required. In our own case, we put in place a professional team that would look into managing personal wealth and the money that goes into managing operations," he adds.

This is crucial as when new generation comes in, their interest might not align with that of the earlier generation.

Waterfield Advisors will look at the top 3,000 families in India as a target segment for its services. "We would like to work with families that have $25 million of liquid wealth, so that becomes a threshold. At present, we need to create awareness, as there are families who are sitting on cash piles and young entrepreneurs who have had a successful liquidity event that has made them cash-rich and now needs to be invested," says Rajan.

According to Markets and Markets research, family offices market provides a huge opportunity in terms of low penetration (20 per cent) of ultra high net worth individual. Plus, a huge amount of inter-generational transfers is going to change hands in the coming decade. The amount is estimated at Rs 5.78 lakh crore ($128 billion).

At present, although the focus of Waterfield is on the domestic market, Patni says he is already in talks with global family offices. "We have been in talks with several family offices and in the next six to seven months, will also have some tie-ups," he adds.