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6 signs of a genuine Family Office

By Rajmohan Krishnan

How does one decide if a Family Office (FO) is unquestionably loyal to its UHNI clients? How does the UHNI choose a service provider in an environment swarming with wealth managers, financial advisors, product distributors and so-called Family Offices? Here’s how.

Every UHNI eventually attains a quantum of wealth where he feels compelled to rethink his financial strategies. By this time, he might have a couple of wealth managers on speed dial. But his conversations with them seem limited to the purchase of promising new products. He wants help in dealing with government agencies, bankers, lawyers, tenants and other stakeholders that cross his orbit. Limited help is offered. Even less is given. The UHNI squirms, realising that every Chandragupta Maurya needs a Chanakya.

At this juncture, the UHNI contemplates hiring a Family Office. Unlike wealth managers who must necessarily be loyal to their employers, the Family Office Investment Advisor (FOIA) has no obligations to anybody but his client. He also learns that the FOIA will take care of his every financial need – from recording his dividend payments, maintaining his real estate, tracking all his asset classes in a comprehensive portfolio, identifying apt investment instruments and even filing his taxes. It sounds too good to be true. Having burnt his fingers often, he wants to be certain.

These are the signs that he needs to watch out for:

1.The talk extends beyond wealth

While a typical Wealth Manager promises astronomical returns at every sales pitch, the FO offers a different perspective. The FO’s existing clients are much wealthier than the new client who, usually, is a fresh entrant to the UHNI club. Therefore, the FO will help the client understand that reputation, peace of mind and freeing up bandwidth are a lot more important than slightly higher financial returns. In short, the client learns in the very first conversation that the FO aims to enhance his quality of life.

2.Nothing is beyond the call of duty

FOs are willing to go the extra mile, from finding a tenant for a high-end property to maintaining rare artefacts (like artwork, antique cars etc) to creating a succession plan. Because nothing is out of scope in life’s important relationships.

3.The FO thinks on your behalf

The FO keeps looking at the horizon so that the client can continue looking at his work desk. For instance, when the Ministry of Company Affairs recently decreed that every Director of a private limited company has to re-file their KYC, every genuine FO would have asked their clients to call their CA and also made an open offer of assistance in this regard.

4.Loyalty trumps sycophancy

FOs are known to vociferously disagree with the client if they are about to make an investment choice that is not aligned with their risk profile or is detrimental to their long-term goals. The FO will confront like a friend rather than benefit like a sycophant. UHNIs know that it gets lonely at the top and sycophancy only accentuates their loneliness. They, therefore, learn to value opposing viewpoints from a trustworthy source.

5.There is complete transparency

Till recently, FOs never received payments from anybody but their clients. They would not accept even a box of sweets from any financial institution in lieu of recommending their instruments. Each and every payment charged to the client is clearly communicated to them in advance. This could be in the form of a fixed fee or fee for coordination with third parties or fee for vetting exclusive opportunities such as Private Equity deals. Unlike most distributors and institutions, there are no hidden costs.

6.Continuity is the name of the game

Each and every client relationship is overseen by one of the senior partners in the FO. This means that even if junior employees leave the FO, there shall be no disruption in services. The senior partner knows the client’s risk profile, history of investments and unique needs of the client’s family.

FOs also make every attempt to maintain the continuity of the relationship from one generation to another. From grooming the young scion of the family on financial affairs to understanding their areas of passion to helping these youngsters find their professional wings, the FO remains by their side. So when the torch is passed on to the next generation, the FO is ready to adapt and serve.

Newly-minted UHNIs find the transition from having multiple wealth managers to having a single FO pleasant and fulfilling. As a bonus, they indirectly benefit from the wisdom gleaned by an FO that has served countless illustrious families with stoicism, humility and prudence.

The author is the Co-founder and Managing Director of Entrust Family Office Investment Advisors

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