September marked a decade since the 2008 economic crisis, which has been reckoned as one of the worst economic disasters since the Great Depression of the 1930s. Housing prices fell by more than 30% and unemployment levels were alarmingly high. What started out as a crisis—the subprime mortgage crisis—that would have affected only the housing sector, escalated into something far more serious, resulting in millions of investors losing faith in the traditional banking system.
A decade on, and key economies have recovered. However, the scepticism towards banks has remained. This has in fact become a fertile ground for family offices to gain relevance again. Family offices have their roots in sixth century, when the King’s steward was held responsible for managing and safeguarding royal wealth. A modern family office, developed by financiers JP Morgan and Rockefellers in the 19th century, is one that manages private wealth and other family affairs. Since the 2008 financial crisis, the number of single-family offices in the UK has more than doubled to nearly 1,000, managing more than $1,000 billion in assets. One such company is Sun Global Investments, which manages a portfolio of nearly $350 million, comprised of ultra highnet worth (UNHWs) individuals and families. Based in London, Sun Global Investments focuses on idea-centric and innovative wealth management, covering emerging and developed markets.
One of the most critical aspects that led to the success of Sun Global Investments family office operations was the lack of personalised counsel for UNHWs and families, especially after the economic crisis following which banks were focused more on revenue generation. Udit Garg, head of wealth management, says, “Even for basic banking assistance, there are no resources available in the UK. So UNHW individuals and families felt even more at sea due to the lack of specialized, sophisticated assistance. This is what we wanted to address.”
In the UK alone, the number of high net worth individuals stood at 448,000 in 2009, and this number rose to 568,000 by 2016, according to Statista. Given the propensity of international businesses and sustained migration, this number is likely to increase over the years, feels Garg. “The role of the family office has really evolved in the last decade. We are witnessing an increase in investors, who are intelligent but lack the time to plan their investments. Family offices act as natural influencers on families as we manage their assets, understand their financial needs and plan their investments.”
Infact, Garg says it better.” We look at the emotional side of Financial Needs of our clients first & so its EQ before IQ”.
As technology and communication is making the world more connected and accessible, these two factors have even brought about a significant change in investor outlook. There is a heightened increase towards Green investing, with a foreseeable 15% increase annually. Garg believes this is a reflection of social awareness and investor maturity. “The new generation of investors are keen on paying forward and this ethos reflects in their investing behaviour. While investors are cautious, they are not averse to new avenues of investment, provided they understand the impact and scope for financial returns.”
One of Sun Global Investments most popular green investments is Smixin, a smart hand washing system that considerably reduces the use of water and soap. The company is intent on reaching its goal to save 10 billion litres of water by 2021. Sun Global Investments owns a significant part of the company, through investors as well as key management personnel, committing over $10 million in it. This is the company’s first major green investment, and Garg says investors are excited by the prospect of tangible social change. Moreover, with governments providing incentives and tax breaks for environmentally friendly initiatives, which makes it a more compelling cause for investment. Another project that’s in the works is related to tyre recycling, which directly tackles improper methods of landfills in developing nations, in which Sun Global Investments has invested $500,000.
Social impact, which can be seen to yield tangible results, is also luring investors who have the intent and capital to spend. Garg explains, “For the longest time, clients were wary of CSR activities as they were unsure of the gains and proposed impact on the masses. There is still a lot of goodwill among wealthy investors, but they’re also equally savvy and smart to ask where their money is being spent.” He elaborated about a CSR activity that Sun Global is working on for one of their key clients, which involves supplying food to the homeless across London’s tube. Not only did Sun Global help carry this out, but the company’s management personally invested in the cause too. Garg says, “Putting your money where your mouth isn’t easy, but wealth managers personally chipping is a huge show of trust and investor maturity. What we do is to ensure this investment is profitable financially and personally.”
Financial services across the world is being taken over by technology, but what Garg does is something that thrives on the personal touch. “People come to us with their hardearned money, with the hope that we can manage it responsibly. We bring with us a wealth of real, tangible experience, which I don’t see machines or technology replicating anytime soon.”