Family offices in India have professionalised at an astonishing rate in the four years since Campden Family Connect was founded, but engaging the next generation remains a key concern and the coronavirus pandemic is causing pain as portfolios lose value.
The fourth anniversary this week of the pioneering global membership community for ultra-high net worth families in India was the ideal opportunity to take stock of what the family office space has achieved in the country, how it is looking now and where it can progress.
CampdenFB spoke with Amit Patni (pictured), who directs the business of Campden Family Connect in India, focusing on growth and strategy. A third-generation member of the Patni family, the founders of Patni Computers and pioneers in establishing family offices as early as the 2000s, Patni says wealth management is only the beginning of what Indian family offices can achieve.
What is the state of the family office space in India today, four years after Campden Family Connect launched?
In the last couple of years, the family office space in India has evolved a lot. Through knowledge forums like Campden Family Connect, families have begun to understand the importance of a formal family office set-up. Multigenerational families and businesses have started to realise the role a family office plays in various aspects of managing and conservation of wealth, succession planning and grooming the next generation among others. In fact, there has been a rise in the number of family offices in India in the last four years with many business families setting up single family offices.
How has the professionalisation of Indian family offices progressed in terms of governance and succession planning?
Family offices are now more advanced and formally designed. Families have begun to structure their wealth to ensure it is divided equally and eventually percolate down to many generations. There are family constitutions being set in place and value systems are being planned in documented ways. Family offices have started taking professional help, like going to legal advisers and knowledge partners to set up structures and trusts to avoid unforeseen situations, like a sudden death in the family or death of the patriarch before distribution of wealth.
What are the biggest concerns for Indian family office principals and next gens today and have they shifted over the past four years?
One of the main concerns with business families has been that of effectively professionalising the operating business and shifting the role of promoter-driven company to a shareholder and board-run company.
Another key concern is grooming the next generation of the family. Conflict in ideologies of the patriarch and the next generation has been a common/regular trait across the world. Nowadays it is seen that many of the next generation members prefer to venture out on their own than taking reins of the family business. The grooming has to be planned very specific each family’s members to goals and aspirations.
What are the short, mid and long-term impacts of the coronavirus outbreak on Indian family offices? How are families changing their investment strategies?
In the current situation, there is going to be a pain in the short to mid-term with the existing portfolios having lost their value. Families with operating businesses will suffer short to medium term loss in terms of their business and revenue targets.
It would be premature to plan investment strategies until the impact of the coronavirus is contained and the lockdowns are lifted. Once the business are back to operating, each family will need to take stock of how to go ahead in the new scenario. Until then, it is important for families to stay calm, but cautious, and not take rash decisions and definitely not panic until the situation is under control.
How can gender balance be reached in Indian family offices?
The Indian family office should involve women of the family more often than they do currently. They need to be involved in family meetings and keep them abreast of all investment decisions, portfolios and systems.
What are the future areas of investment focus for Indian family offices?
The pandemic outbreak has blurred the focus areas as of now. However, on a broader level, families have been looking at alternative asset classes like hedge funds, derivatives, products that give absolute returns, private equity, co-investments among others. Geographically, there are interests to diversify investments in developed countries like the United States and Europe.
What progress would you like to see in the family office space occur in the next four years and how can that be achieved?
In the next four years, we are expecting family offices to mature and professionalise. Family offices need to adopt a systematic approach wherein they undertake various aspects of the family in totality and move focus beyond just wealth management.
Having a family office doesn’t mean hiring a chartered accountant while the decision-making still rests with the patriarch. Families need to understand the true sense of a family office, its role and importance. It has to be more professionalised and the powers need to be delegated and systematised so the wealth and business both lasts for many generations ahead.