Blog Image_Why Family Offices need to think beyond money

The Rockefellers are quite possibly the most well-known industrialist family in modern history, whose family name is synonymous with staggering wealth and power. Starting in 1882, the Rockefellers set up an office of trained professionals to handle their wealth. Although never formally called a “family office”, this idea was the seed that gave rise to the concept in modern times as several wealthy families began to follow suit.

The term ‘family office’ has usually been associated with the idea of an entity dedicated solely towards personal investments of a wealthy family or individual, or some combination of them. As a result, the expansive range of other functions that could possibly be carried out by family offices is overlooked. The impact of this is that many wealthy families, including in India, tend to be unaware of the broad spectrum in which a family office can assist them in their day to day lives. It can transcend wealth management and help them in a myriad ways. A critical function that a family office can perform (and has done so for many families across the globe) is to assist the family in institutionalising a robust family governance structure as a means to enhance and guard the family’s legacy on a multi-generational basis.

As part of a two-part blog series, in this installment, we will explore the hypothesis that family offices as mere wealth management vehicles is in fact impeding their progress, and highlight the untapped potential of family offices as all round growth drivers in India. In particular, we will focus on single family offices.

According to family membership and research organisation Campden Wealth, in 2019, single family office numbers had increased worldwide by 38% since 2017. The greatest rise over this period has come from South America, Africa, and the Middle East, followed by the Asia Pacific, North America, and Europe. India accounts for approximately 150 of the world’s nearly 10,000 single family offices and has approximately 8-10 multi-family offices.[1] Formal family office structures may be limited in number, but they are most certainly not limited in size. In 2019, the total estimated assets under management of family offices stood at USD 5.9 trillion, while the wealth of the families behind them totalled a vast USD 9.4 trillion.[2]

As a result of this growth, transactions that could earlier have been undertaken only by large corporations or private equity firms are now being handled by family offices. The disruptive force that has been played by family offices in recent times has been unparalleled. Even in India, family offices have taken on larger roles, with many family offices moving into the roles of venture capitalists and angel investors. For example, Anirudh Damani-led Artha Venture Fund has invested in Oyo Rooms, online cosmetics retail brand ‘Purplle’, and similar start-ups.[3] Education-focused fintech company GrayQuest has secured USD 1.2 million in funding, led by Mahansaria family office, Jeejeebhoy family office, Ashok Wadhwa’s family office, among others.[4]

Factors Driving the Evolution of Family Offices

Traditionally, the role of a family office was almost limited to managing of investments, administration of the family affairs through estate planning and tax planning. However recently, the role of a family office is rapidly expanding. Family offices are now seeing a growth trend in terms of the services they can offer as the uber-wealthy look to consolidate their needs to one service provider. Multi-generational families and businesses have started to realise the role a family office can play 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. Encouragingly, the role of some of these family offices is not merely investment related, but also encompasses functions such as assisting with compliance requirements, reporting and keeping of records, philanthropy, upholding the family constitution (if any), family secretariat, and providing support for new ventures or enterprises that the family may commence.

Family Offices and their role in Institutionalising Family Governance

Initiating a discussion to institutionalise a formal family governance structure is a fairly emotional experience for family businesses in India.

Several Indian family businesses were incorporated in the late 1980s and early the 1990s, when economic reforms were introduced. According to a 2019 study, most of these business founders are at the brink of retirement with no planned succession. Unfortunately, studies have shown that around 97% of family businesses in India are operating without a succession plan in place.[5] Further, 70% of global family businesses do not have a formal succession plan.[6]

For a succession plan to be effective, planning for the same needs to begin at an early stage, which commences with identifying the successor to the business. Grooming a successor is one such service that a family office can offer, through exposure to the estate and affairs of the family and training on the job. Apart from this, a family office can assist in liaising with legal experts to help draft a succession plan, and to help make the transition between generations as smooth as possible.

The role of the family office can be broken down into various stages. In the preliminary stage, the family office can assist with exploring various governance models suitable for both the family and the business. Once a governance structure is determined, the family office works on the intricate structuring and documentation/ legal matters, with external counsel. The family office, by virtue of its thorough knowledge of the affairs of the family, is well placed to assist legal advisors in filling any informational gaps that may arise in this process. It can act as a liaison for the family and ensure that there is consensus within the family on the proposed governance structure and that each of the members is made aware of their roles and responsibilities, preventing potential disputes.

The family office can also liaise with legal advisors, who have appropriate expertise, in obtaining a comprehensively drafted family constitution. While it is not often structured as a legally binding document (but it can be), it does serve as an invaluable guiding document for the family at all times. Finally, at the implementation stage, the family office can assist the family in setting and driving the agenda for family meetings/ discussions, maintaining records and helping manage frictions that may arise.

The other way a family office can help is in administering the family constitution and its underlying bodies. Most well drafted family constitutions and plans incorporate a family council or a family business board, consisting of representative members from different parts of the family. Family offices can assist in facilitating meetings between such members to ensure transparency on aspects of communication between members, financial related decisions, planning for future generations, and similar matters.

Regulating the conduct of family members is also a critical aspect of the family office as far as family governance is concerned. A family office can help the family members outline policies to regulate their public interaction. For example, it is not uncommon to have a ‘media’ policy (applicable to in-person interviews or online posts), which is adopted to regulate the ways in which the members of the family can interact with the media or the general public when making statements about the family or the business.

Administrative Functions

Typically, a family office structure will consist of a secretariat, comprising trusted executives. Sometimes, they are led by an individual who performs the role of a ‘Family Office Chairman’ (it could also be a CEO designation).The Family Office Chairman serves as the lead point of contact on all matters pertaining to the family office and is more often than not a long standing confidant of the family or a former senior executive from the core family business. The Family Office Chairman’s close proximity to the family, coupled with his intrinsic knowledge of the family business, places him in a unique position to be able to provide objective and holistic solutions for the interests of the family at large.

Apart from investing, tax planning, family governance, and related functions, family offices are capable of providing secretarial functions to the families they serve. It is not uncommon for family offices to coordinate travel itineraries, plan special occasions, help with children’s admission into educational institutions, and even hiring household help.

Impact of COVID-19 on family offices

COVID-19 has affected the way we look at succession, and consequently, how we look at wealth. All of us have been ‘working from home’ or virtually in some form. Hence, the pandemic can lead to the emergence of virtual family office model.[7] The virtual family office model can help mitigate issues often associated with a siloed approach (where professionals work independently of each other and only as needs arise) or the full-time professional staff approach (which can be cost-ineffective as full-time staff may not be needed at all times, or staff members may lack experience in areas of need that require technical expertise). Several family offices are now running a magnifying glass over their processes and infrastructure to determine which model suits their needs.

In a COVID-19-impacted market, Indian family offices have been looking at alternative asset classes like hedge funds, derivatives, products that give absolute returns and private equity.[8] The younger generation in family offices is entering the business with a higher risk appetite and global experience.[9] Maintaining the family office’s daily operations and administration can be challenging as a high proportion of employees work from home. This has led to some upgrading their security systems and adopting automation where necessary. Those with virtual family offices are likely to be better positioned to respond due to higher levels of operational disruptions.[10]


In this first part of the two-part blog series, we have explored some of the multi-dimensional facets of the family office and the critical role they can play in implementing a robust family governance structure. If utilised effectively, they are truly an extension of the family and act as guardians of the family’s invaluable legacy. Over the coming years, there is likely to be a considerable change in the way resources are managed for the wealthiest families of the world. One can expect Indian family offices to scale up to the level of their foreign counterparts. While adopting a family governance structure is the first prudent step, business families must recognise the challenges that will emanate from giving effect to the structure itself. There are a host of complexities to navigate and many pitfalls to avoid. The family office can be utilised as the guiding ‘North Star’ for the family – forever constant for successive generations and objective in its stance.

In our second part, we will discuss the driving factors influencing the popularity of family offices in India and global trends in relation to family offices. We will examine global best practices and use them to demonstrate that shifting the focus of Indian family offices from investment management to other functions will benefit the underlying families.









[9] valuations-to-correct-due-to-covid-19-crisis-6120451.htm