Mumbai: Philanthropy may soon go commercial in a much bigger way for India’s ultra high networth individuals or families that have assets exceeding Rs100 crore. India’s third largest private sector lender, Axis Bank Ltd. in association with Banque Privee Edmond De Rothschild ( Europe) would shortly be introducing “Family Office” accounts for Indian business families, whereby the entire personal and business needs across generations of affluent families could be managed for a fee.
Family office solution combines private wealth management advisory services with management of multi-generational needs, especially children’s education to be responsible successors of wealth, their responsibilities of ownership in the business, healthcare issues of the family and its following generations. The financial services under a family office account include management of the entire assets and investments, tax and legal counselling, estate, bill-paying and so on.
The service is typically meant for ultra-high net worth investors for a fee of 0.4-0.5% of the assets under management.
Axis, which plans to introduce Family Office solutions for Indians in the coming fiscal year, envisages assets worth at least Rs4,000 crore under this business across a clientele of 20 in the next two years. Alain Mestat, director, Banque Privee Edmond De Rothschild said: “ We have an expertise of over 200 years in Family Office solutions. Through Axis Bank, we intend to offer this service for Indian families.”
Family office assumes significance when a family-owned business grows to be too big and complex to be managed in-house. On the other hand, appointment of different managers for different family related issues could be expensive.
According to Sonu Bhasin, president, retail financial services, Axis Bank, 60% of the BSE listed firms are family-owned, and at least 50,000 families in India have assets worth over Rs100 crore.
“We are targetting a market shares of 5-7% in the Family office space in the next 3-5 years,” Bhasin said.
Axis, however, is not the first to use Family office idea in India. Though players like Barclays, Kotak Mahindra Bank, and Altamount Capital Management provide Family office services to the affluent Indian mass, their services are largely restricted to wealth management and advisory services. “We are looking at providing solutions for the entire family issues and not only the wealth management part of it,” said Mestat.
At present, nearly 2,500 professionals at Rothschild cater to a number of global richies across 38 nations. Nearly 75% of Rothschild’s family office business is spread across Europe. Folliwing its tie-up with Axis Bank, the company will provide its consultancy for managing family wealth and allocations based in India too. Bhasin of Axis Bank said that the bank would offer the service to the wealth non-resident Indians too.
Family office solution seems to be gathering steam in India now. According to a Merrill Lynch and Capgemini’s Asia-Pacific World Wealth Report , India, alongside China, will remain the main source of new millionaires for some time to come, with the western economies still struggling to emerge from the upheavals. The wealth of Asia-Pacific’s high net worth individuals is estimated to grow at a rate of 8.8% annually until 2018, which is faster than the global average of 7.1%, according to the report.
The report added that the number of wealthy in India dropped by nearly a third to around 84,000 in 2008, following the slump in domestic shares.
According to Forbes, in 2008, that four Indians were among the 10 richest in the world, with a combined wealth of $160 billion. Cumulatively, India’s billionaires were the wealthiest in Asia, exceeding even those in China, with a worth of $335 billion.
Forbes calculated in 2008 that four Indians were among the 10 richest in the world, with a combined fortune of $160 billion. Cumulatively, India’s billionaires were the wealthiest in Asia, exceeding even those in China, with a worth of $335billion.
A rebound in Indian shares have brought the business of family office back on track.
Richa Karpe, a director at Altamount Capital, in a recent interview with Reuters said that the firm had signed seven families so far to advise on assets worth Rs500 crore, and was in talks with several others who could bring in about Rs3,000 crore.
Karpe said global financial crisis had added to the allure of the multi-family offices as they are seen independent and have performed relatively better than traditional wealth managers, many of whom are accused of selling toxic investments to rich.