Family offices diversifying their portfolios, accessing global opportunities: PwC India report

A latest report by PwC India stated that family offices in India are increasingly investing in startups, diversifying their portfolios, and seeking higher returns as they are shifting from traditional investments. 

The report sheds light on how family offices have evolved from wealth preservation units to sophisticated entities driving impactful and responsible investing. “FOs are diversifying their portfolios, accessing global opportunities, and embracing a global citizenship mindset, a trend that reflects the dynamism and adaptability of their wealth management strategies in response to the evolving economic landscapes,” the report stated.

Currently, there are over 300 family offices in India, as against 45 such offices in 2018. The number is set to rise exponentially, with promoters building impressive businesses in Tier 2 and Tier 3 cities, the report titled ‘Creating Holistic Value for Family Businesses’ said.

“Among Indian family offices, fintech is a key attraction that raised a total funding of USD 853.6 million in CY23,” the report said, adding that Indian family offices are also setting up offices abroad to tap global investment opportunities.

One such Indian family office has made several strategic investments in the Indian startup ecosystem, seeking out promising startups with innovative business models and disruptive ideas.

The report highlighted five perceptible trends shaping the future of family offices in India – how family offices are transforming into holistic service providers; how they are increasingly investing in startups, diversifying portfolios, and seeking higher returns; how adopting new technologies such as artificial intelligence (AI), machine learning, and data analytics is gaining traction among family offices; how wealthy families are expanding their investment horizons beyond domestic markets; and how responsible investing is becoming a key priority for family offices.

Falguni Shah, Partner and Leader, Entrepreneurial and Private Business, PwC India, said: “The rising influence of Family Offices highlights the evolving wealth management and financial advisory landscape in India. Over recent years, family offices have secured an integral spot in India’s financial ecosystem, offering specialised services tailored to the unique needs of high-net-worth individuals and business families. Factors such as the growing ultra-high-net-worth population, a focus on generational wealth transfer, global asset diversification, and the rise of impact investing have fuelled their growth. Family offices are uniquely positioned to address these demands. Moving forward, adapting to the evolving investment landscape and hiring the right professionals will be crucial for their continued success.”

Highlighting that the Indian economy is on a roll, the report said that contributing to its expansion are family businesses, both large conglomerates and small-to-medium-sized enterprises, spanning sectors, such as manufacturing, retail, real estate, healthcare and finance.

Jayant Kumaar, Partner, Deals and Family Office Leader, PwC India, said: “Family offices in India are transforming wealth management by embracing technology, global diversification, and ESG principles. Their evolution from wealth preservation to impactful investing is crucial for sustainable growth and positive societal impact. Addressing trust, succession planning, and risk management will be key to their success.”

Amidst these evolving trends, family offices face several challenges. Building trust within family members and the family office is crucial but complex due to varying mindsets and interests. “Effective succession planning and robust governance structures are often lacking, hindering smooth wealth transfer, and creating conflicts. Additionally, defining key performance indicators (KPIs) is essential for measuring performance and aligning priorities with business goals,” Shah said.

The report said family offices also face risks such as cybersecurity threats, regulatory compliance, and privacy concerns – making a robust risk management framework an imperative today. Talent acquisition and retention pose another significant challenge, requiring family offices to offer competitive salaries, work flexibility, and a compelling value proposition to attract skilled professionals.

Family offices require a holistic approach, binding family members with a common purpose and values. Six core qualities are essential: legacy preservation, unity and purpose, wealth stewardship, relationship building, adaptability and innovation, and talent development.

Even as family offices in India are on a transformative path, driven by a confluence of innovation and tradition, they still have a long way to go. “With an ever-changing regulatory environment, and with new compliance requirements and tax structures emerging across jurisdictions, the adaptability of family offices in addressing these complexities through innovation and technological solutions will be key to their remaining relevant and effective in their role as custodians of generational wealth and beacons of trust,” Kumaar added.