Kripa Sethuraman is Managing Partner of Family Office Exchange, London. Kripa is an expert on all matters related to family offices. In this interview she talks about the challenges in setting up and running a family office especially during times of financial distress.
MyPrivateBanking.com: As an experienced advisor to families, what has changed for Family Offices in these times of financial distress?
Kripa Sethuraman: The financial crisis has caused a lot of uncertainty for Family Offices. Assets have fallen considerably for a number of Family Offices, anything from negative 5 percent to negative 40 percent. This has had an impact on how Family Offices are thinking about different things including cost control, risk and long-term investment process, planning and legacy for future generations. It has also led Family Offices to re-examine their relationships with existing advisors.
MyPrivateBanking.com: Can you elaborate a little bit on the specific shifts in investment strategies and risk management during the crisis?
Kripa Sethuraman: We definitely have seen some interesting trends around investment strategy. For Family Offices there was a distinct shift to safety and low-risk propositions at the start of the year. Cash as well as tangible assets like gold became popular. Since then however, we’ve seen a renewed interest in opportunistic investment possibilities, including in real estate and private equity.
MyPrivateBanking.com: On a more general note, what is the most important point for families when they select their advisors?
Kripa Sethuraman: What we generally recommend is for families to think about the quality of advice, the quality of services, and of course investment performance. Due diligence should be done with an understanding of facts, like performance, as well as a recognition of the reality of the chemistry or finding the right fit between the Family Office and the advisor. We describe this as the 6 P’s - the right combination of people, philosophy, process, product, performance and price.
MyPrivateBanking.com: Can you describe the most critical elements for a family to set up a new Family Office?
Kripa Sethuraman: Typically the Family Office has responsibility in the following four areas – as a wealth and risk manager for asset enhancement and protection, as an integrator or central coordinator of financial and personal services to the family, as a succession or transition manager and as an educator and mentor to the next-generation in preparation for the future. Each Family Office is designed a little bit differently and has a different emphasis on each of these four key elements, and in designing their Family Office each family needs to take careful stock of their own personal family values and culture.
MyPrivateBanking.com: Thank you very much for this interview, Kripa.