Multi-Family Offices in India: Guide for Indian HNIs

The journey of wealth creation for High-Net-Worth Individuals (HNIs) in India has become increasingly intricate. As family businesses expand and financial portfolios diversify, the need for sophisticated, holistic wealth management solutions has never been more pronounced. The Indian family office sector itself is experiencing remarkable growth, with the number of family offices surging to over 300 by mid-2024, a significant leap from just 45 in 2018. This expansion, coupled with projections of 1.6 million HNIs in India by 2027, underscores a fundamental shift in how affluent families manage and preserve their legacies. In this blog, we explore multi family offices, one of the types of family office structures and break it down in detail.

At its core, a family office is a private wealth management firm dedicated to serving ultra-high-net-worth individuals or families. Its primary objective is to manage and preserve a family’s wealth across generations, offering a highly personalized approach to their unique financial needs.

A Multi-Family Office (MFO) extends this concept by providing comprehensive wealth management services to multiple families. Unlike a Single-Family Office (SFO) that serves only one family, an MFO allows several families to share resources and expertise. This collaborative model enables each participating family to benefit from economies of scale, making top-tier financial services and specialized advice more accessible and cost-effective. The ultimate goal of an MFO is to ensure the efficient management and protection of wealth for all families it serves.

While both SFOs and MFOs aim to manage and preserve family wealth, their structures and operational models differ significantly:

For families considering a dedicated Single-Family Office (SFO), the operational costs can be substantial. A rough estimate suggests a break-even point for an SFO might be around ₹500 crore in assets. This is because setting up an SFO involves significant overheads: hiring a team of 4-6 employees could incur salary expenses of approximately ₹2 crore annually, with an additional ₹25 lakh for administrative expenses. In contrast, engaging an independent Investment Advisor (IA) for a portfolio of this scale might involve fees of around ₹5 crore, highlighting the different cost structures involved in managing substantial wealth.

For Indian HNIs, the choice often hinges on the complexity of their wealth and the desired level of exclusivity versus cost-efficiency. While SFOs offer complete privacy and bespoke solutions, MFOs provide a robust, expert-driven platform at a more accessible price point, making them a compelling option for a wider range of affluent families.

Multi-Family Offices function as a “one-stop shop” for the diverse financial and non-financial needs of wealthy families. They offer a comprehensive suite of services designed to preserve and grow wealth across generations:

• Wealth Planning & Management: Crafting personalized strategies to align financial goals with family objectives, from asset allocation to long-term growth.
• Investment Management: Providing expert guidance on portfolio management, including access to exclusive alternative investments such as private equity, venture capital, startups, and real estate, which are increasingly sought after by Indian HNIs.
• Tax & Estate Planning: Optimizing financial structures for tax efficiency and ensuring the orderly, tax-efficient transfer of assets across generations.
• Succession Planning & Intergenerational Wealth Transfer: Crucial for Indian families, MFOs help establish plans for business and wealth succession, preserving family legacies and values.
• Family Governance: Assisting families in establishing clear decision-making processes, defining roles, and implementing communication channels through tools like family charters, fostering unity and preventing disputes.
• Philanthropy Management: Guiding families in their charitable endeavors, from identifying causes to structuring giving to maximize impact in line with family values.
• Risk Management & Insurance Coordination: Identifying and mitigating financial risks, and coordinating comprehensive insurance coverage to protect family assets.
• Lifestyle & Concierge Services: While primarily financial, some MFOs also assist with non-financial aspects like travel arrangements, household management, and other personal affairs, adding a layer of convenience for UHNWIs.
• Account Aggregation & Reporting: Providing consolidated financial views and detailed analytics across multiple accounts and institutions, ensuring transparency and efficient monitoring.

The appeal of MFOs for Indian HNIs stems from their ability to address unique challenges and aspirations:

• Navigating Wealth Complexity: As wealth grows and diversifies across various asset classes and geographies, managing it effectively becomes increasingly complex. MFOs provide the specialized expertise needed to navigate this intricacy.
• Cost-Efficiency and Economies of Scale: For many Indian families, establishing and maintaining a dedicated Single-Family Office can be prohibitively expensive. MFOs offer access to premium services and expert teams at a lower cost, by spreading operational expenses across multiple clients. Therefore families can first transition to MFOs to manage costs and then move to SFOs once their wealth multiplies providing even more benefits of scale as well as greater customisation and control.
• Access to Diversified and Exclusive Opportunities: MFOs often facilitate access to private market investments, co-investment opportunities, and other sophisticated asset classes that might be inaccessible to individual investors. This aligns with the growing interest among Indian HNIs in high-growth, alternative investments.
• Unbiased, Fiduciary Advice: A key differentiator is the MFO’s commitment to a transparent, fee-based model, ensuring there is no conflict of interest and advice is always aligned with the client’s objectives.In India, many MFOs are registered with SEBI as investment advisors, reinforcing their commitment to fiduciary standards.
• Preserving Legacy Across Generations: Given India’s strong family business culture, the emphasis on intergenerational wealth transfer and family governance is paramount. MFOs provide the framework and expertise to ensure wealth is preserved, values are instilled, and family unity is maintained for future generations.

Selecting an MFO is a significant decision that requires careful consideration. Here are key criteria to guide Indian families in their search:

• Fiduciary Standard: Ensure the firm is legally obligated to act solely in your family’s best interests. This is a non-negotiable aspect of trust and transparency. This can be best achieved by hiring an MFO which has an Investment Advisory license from Sebi.
• Services Alignment: Evaluate whether the MFO’s range of services precisely matches your family’s unique and complex needs, from investment management to family governance and philanthropy.
• Cultural & Philosophical Fit: A long-term partnership with an MFO requires alignment in values, communication style, and investment philosophy. Seek a firm that truly understands and respects your family’s vision.
• Track Record & Reputation: Conduct thorough due diligence. Review the firm’s history, client testimonials, and seek references to assess their proven expertise and reliability.
• Local Expertise & Regulatory Compliance: For the Indian market, it is crucial to choose a firm with a deep understanding of local regulations (such as SEBI guidelines for investment advisors) and the nuances of the Indian economic and cultural landscape.

What is the primary purpose of an MFO?

The primary purpose of a Multi-Family Office is to provide comprehensive, centralized wealth management and advisory services to multiple affluent families, helping them preserve, grow, and transfer their wealth across generations.

What is the minimum net worth required for an MFO in India?

While there’s no strict rule, MFO services are generally considered effective for families with a net worth of ₹100 crore and above in India, allowing for the benefits of shared costs and specialized expertise.

How do MFOs differ from traditional wealth managers in India?

Unlike traditional wealth managers who often focus on product sales and commissions, MFOs typically operate on a transparent, fee-based advisory model, providing holistic and unbiased advice across a much wider range of financial and non-financial services, including family governance and succession planning.

Do MFOs invest in alternative assets like startups or real estate?

Yes, many MFOs facilitate access to and manage investments in alternative asset classes such as private equity, venture capital, startups, and real estate, aligning with the sophisticated investment needs of ultra-high-net-worth families.

What are the key challenges MFOs face in India?

Key challenges for MFOs in India include navigating the evolving legal and regulatory landscape, attracting and retaining top talent, and managing the operational complexities of serving diverse family needs.

How does an MFO ensure family governance and intergenerational harmony?

MFOs assist families in establishing governance frameworks, which can include creating family charters, facilitating regular family meetings, and developing succession plans. These processes help define roles, improve communication, and ensure alignment among family members across generations.

The journey of managing significant wealth is complex, particularly in India’s dynamic economic environment. Multi-Family Offices offer a powerful solution, providing not just financial acumen but also strategic guidance on legacy, governance, and intergenerational harmony. By combining global best practices with a deep understanding of the Indian context, MFOs are uniquely positioned to serve the sophisticated needs of affluent families.

At EquiZen, we understand the unique aspirations and challenges of Indian HNIs. Our expertise lies in crafting tailored wealth management solutions that align with your family’s distinct vision

and long-term objectives. Contact EquiZen today for a personalized consultation and understand the correct way forward towards your wealth management journey.