April 2019

Multi-Family Office - The What, Why and How

The What

What exactly is Multi-Family Office? Dictionary defines it as "A joint office for multiple families to take care of their financial requirements". Wealthy individuals and families have a wide array of financial requirements including but not limited to wealth management, angel investments, tax planning, succession planning etc. Such individuals and families may seek to develop a family office with the core intention of preserving the family fortune and multiplying it; they may however like to address other non-core financial requirements like social involvements, property investments, art dealings, luxury travel or anything else that they may foresee through the same setup. Intention of multiple such families in getting together to undertake this activity has led to shoot out of Multi-Family offices. Now these families can either hire common staff to do it with cost consensus or they can liaison with a professionally organized platform for such services.

The Why

Why is it that suddenly this catch-phrase has become popular in Indian subcontinent? Investment and growth story of India has been like a sine wave and it's riding on the high tide from the past few years. It boosted businesses all around leading to liquidity which needs to be manifested responsibly, though still a lot of us are set in the old molds by working with experts who have stagnated long back. We are comfortable with our Chartered Accountant as both our taxation expert and wealth manager, our Banker as both our investment advisor and lending expert, our Insurer as both our medical advisor and financial planner. There is no immediate trigger so why change; but try and allow yourself a second to think about the catastrophe if one of them dozes off… I am sure none of us can afford to navigate through such a continuity peacefully. It has the potential to deter both our financial and mental wellbeing. We have stopped applying old is gold in many areas but not this, isn't it strange that we don't shy away from trashing our current equipment in lure of using new technology enabled device, but we ignore the wealth we possess making us capable in taking all these decisions. Wealth management is equally important as health management, or probably more in the current times brooded by deadly diseases. We all need an able financial doctor, someone who is qualified to treat our financial illness and can help in creating a plan for prevention. We all have the right to seek personal CFOs, as that's the kind of comfort we would like to be given in terms of trust and power of consolidation. What if we don't belong to Ambani, Mittal, Premji, Adani lineage; there still are requirements which need similar expertise at a mid-level scale. Can only one person take it all? Not really! how much so ever trained this person may be but there is still a chance of getting levelled out as against the ever changing dynamics and regulations. I believe every growth story has an ecosystem playing at the backend, thus the need of the hour is to have an able advisor complimented by an agile platform and that is the recipe of your Multi-Family Office.

The Who

An important question still remains is that who can do it and how? Can a bank do it? May be, though I wonder the amount of juggle a banker has to handle starting from our financial planning to their crazy revenue targets. A salute to the one who has been able to wade through the muddle without comprising the ethics. How easy will it be for them to duck a client's interest pitched against their investor's interest, more so if they have a product manufacturing plant installed within the premises? A banker at best is like a submarine that surfaces only for a little while sailing by your side before diving beneath the ocean under the weight of their own interest than ours. Banking needs are clearly distinct than other financial needs which need an eye and hand of an expert. Glad there is an option of multiple non-banking platforms to choose from these days but why look elsewhere when open architecture platforms exist in the form of Multi-Family Offices. These are platforms offered by firms who want to drive away from the classical conflict of interest between client and the seller. They choose to not manufacture products inhouse and are driven by the value- added approach. They will offer you the freedom to discuss and choose products much aligned with your financial goals rolled up in an investor policy statement which makes sure your goals are always kept above the transactional whirlwind. They can also give you an access to "best in class" service providers for extended financial requirements, the older the platform the thicker will be the network and capability to address complexity. So, an advisor attached with one such platform can be the ship you will like to sail with. The fact that Multi-Family Office works for multiple families' financial requirements makes the learning curve steeper without diluting on the focus that each family desires.

"The flexibility of structure should be in the hands of the seeker by picking and choosing the subset of services to be availed".

The How

A true blue Multi-Family Office will go way beyond the typical route to service you efficiently as its interest will be in adding value to your portfolio linked to annuity growth which cannot be a short term play. It demands the frugality of an economist and dexterity of a manager. An advisor with a Multi-Family Office platform will never come across as a hyper-active sales person, this attitudinal difference sets them apart both as a subject matter and a relationship expert. However one should keep in mind the following before going ahead before structing a service proposition with an advisor or a firm

  • - Does the service kitty suffice your current and future financial requirements discussed during the discovery process?
  • - Understanding the thought process of the platform and checking its fitment with your own for long-term and short-term financial goals.
  • - Establishing awareness about the interests of the firm Vis a Vis your interests and ascertaining conflicting situations.
  • - Is there a flexibility in earning model, e.g direct fee, profit linked fee, advisory fee, commission? Are open and transparent conversations encouraged?
  • - How strong are compliance measures w.r.t confidentiality and un-pleasant situations?
  • - Is their conviction backed by knowledge and track record?
Don't ignore
  • - If your family business and its attached structure is complex as the transition will start simmering much before you may want to plan for it
  • - If you are planning for a liquidity exercise
  • - If you are featured in any of list of riches
  • - If you are a passionate investor while continuing to manage your own venture and eyeing on more in future.

Garima Gulati Bhutani
Vice-President, Human Resources and Communications
Client Associates, Gurgaon
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