Professionalisation, succession planning and megatrends: Five years of family office evolution in India

Ambitious family offices in India are growing, diversifying and professionalising at pace, with more principals embracing succession planning and engagement with their next-generation, Campden Family Connect says on its fifth anniversary.

Founded in 2016 and based out of Mumbai, Campden Family Connect (CFC), a joint venture between Campden Wealth and the Patni family, has established itself as the pre-eminent membership network for India’s ultra-high net worth community of family business owners and family office principals.

CFC delivers to its members global and local networking opportunities and provides the knowledge, insights and vital business intelligence required by families to support their critical decisions, helping to achieve enduring success for their enterprises, family offices and preserving their legacy.

To mark the anniversary, CampdenFB asked Amit Patni about the progress of the family office space in India to date, the lessons to be learned from the Covid-19 pandemic and what the next five years may bring for families.

Reflecting on five years of Campden Family Connect, tell us some of your personal highlights when working with families.

Back in 2016, when we launched CFC, the concept of a family office was very nascent in India.

Our initial family outreach programmes helped us understand that although India is home to more than 200 family offices, not many truly understood the importance and purpose of this set-up.

At a time when the role of family offices globally was evolving to include non-financial advisers as well, in India, it was at grassroot levels, and the existing ones were established with the primary objective of preserving family fortunes.

We also learned there is a strong requirement for guidance for not only establishing a family office, but also for succession planning to ensure the smooth transition of ownership and wealth inheritance.

Capitalising on their keen desire to learn about family offices, our knowledge programmes were designed to educate families on various topics pertaining to management and preservation of wealth, both personal and business.

Topics on structuring family offices, next-gen grooming, succession planning, professionalising businesses and wealth/asset management have been really well received in the past and continue to dominate members’ interests even today.

How has the Indian family business and family office space evolved in the past five years?

India witnessed some megatrends in the recent past, such as shifts in global economic power, rapid urbanisation, the rise of technology and its adoption. Despite all these volatilities, the family business ecosystem exhibited a commendable growth.

Various regulatory changes have pushed families to professionalise their businesses and disruptive technology is pushing them to transform. All these new market elements and opportunities are sowing seeds for a renewed sense of ambition in family businesses, making them resilient even during times of uncertainty. Large multigenerational family businesses are diversifying their presence across sectors and geographies, thus making this ecosystem’s contribution to the country’s wealth noteworthy.

Given the desire for business continuity, succession planning is also now viewed in a different light. More and more principals are having conversations with their next-gens on their future plans and are inducted early on. Our recently concluded Indian Families in Business Forum was themed around the successful landing of next-gens into the family business, a theme that was designed to address the demand from the ultra-high net worth community.

On the family office front, different formats of family offices are becoming increasingly popular in India, thanks to the recent sales of assets and exits from family businesses. There is also a rise in wealthy individuals given the growing number of startups joining the unicorn club.

You noted last year some of the key concerns with business families have been that of effectively professionalising the operating business, shifting the role of a promoter-driven company to a shareholder and board-run company, and effectively mentoring the next-generation. Are you seeing improvements in these concerns?

Though slow, there definitely has been a steady improvement in all these areas.

Given the huge growing opportunities, more families are professionalising their businesses to appropriately capitalise on these. Early conversations and grooming of next-gens are also done to ensure business and wealth continuity.

What’s interesting is to see that the principal, or Gen-1, are taking a step back and are involved in advisory roles, thus giving the next-gen a free-hand to run the show. Today we have various success stories of next-gens digitally transforming the family business or diversifying the business into newer verticals/geographies. Talent management is also viewed in a different light by the next-gens who opt for meritocracy over long stints with the company. Communication is also gaining a lot of prominence in family and business surroundings, as against earlier times where knowledge was circulated in a closely knit circle.

What are the most common questions families ask Campden Family Connect when setting up their single family offices?

As the concept is still catching-up, I encounter a barrage of questions on family offices. But the most common ones are:

-              What’s the primary objective of a single family office?

-              What are the costs incurred?

-              When is the right time to establish one?

-              Which structure is the best?

-              Will an embedded family office serve the purpose?

-              Who should be the chief investment officer—a family member or a professional?

Which investment trends have emerged among family investors over the five years Campden Family Connect has operated and which trends do you see emerging over the next five?

We have seen families investing in public markets, alternatives, private equity/venture capital and co-investments. This is primarily to have a diversified portfolio and also to gain higher returns. Their risk appetites have also been bullish, making families explore global investment opportunities especially in the United States, in equities and real estate, and in the United Kingdom and Germany.

Going forward too, families are bound to follow this investment pattern. However, with the unicorn club gaining prominence, families are vying to get a share of this growing pie. ESG/impact investments will also attract wealth from families in the future.

What lessons in resilience can families learn from the Covid-19 pandemic?

When the pandemic struck, family businesses were faced with a black-swan event. While there was a crisis, it also presented them the opportunity to go digital, something that they may have parked for future consideration in a normal world.

Digital transformation has helped various businesses to run their operations smoothly. Though employee safety has been at the operating businesses’ forefront, the pandemic called for enhanced welfare of the employees. Families also learnt to have ample cash reserves in the business to cushion situations of zero cash flow or revenue.

On personal investments, those who had a portfolio of a balanced mix of asset classes across geographies were able to weather the difficult times and take care of market volatilities.

What are your ambitions for Campden Family Connect over the next five years?

Since inception, we have come a long way, achieving various milestones, growing in size and reach. In the coming years, we aim to make Campden Family Connect an aspirational brand, a one-stop destination for families who prioritise peer knowledge and networking.